Hello, and welcome to the Altice USA Q2 2024 Results Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Sarah Freedman, Investor Relations. Please go ahead, Sarah.

Hello, and welcome to the Altice USA Q2 2024 Earnings Call. We are joined today by Altice USA's Chairman and CEO, Dennis Mathew; and CFO, Marc Sirota, who together will take you through the presentation and then be available for questions. As today's presentation may contain forward-looking statements, please carefully review the section titled Forward-Looking Statements on Slide 2. Now turning over to Dennis to begin.

Thank you, Sarah, and thanks, everyone, for joining today. As you've heard me say before, our mission at Optimum is to be the connectivity provider of choice in every community that we serve. To do that, we are putting the customer at the center of every decision providing the best customer experience, best networks, best customer relationships and best products, all supported by the best team here at Optimum. Our focus on the customer underpins our strategy of returning the business to sustainable subscriber revenue, EBITDA and cash flow growth over time. Q2 was another quarter of progress in our transformation journey. We continue to deliver improved operational metrics, increased customer satisfaction, growth in our fiber, mobile and B2B businesses, elevated product quality and refreshed go-to-market strategies. And we are continuing to use artificial intelligence and data to enhance our capabilities and improve the customer experience. We are executing with financial discipline across every area of the business, and we are just getting started. We have an exciting, innovative and robust road map of future product and experience enhancements that we cannot wait to bring to our current and prospective customers this year and beyond. Before we get into the details, I do want to say thank you. Thank you to our customers for choosing us as their provider for one of the most essential services in their lives. And thank you to our teammates across the country. It is your dedication to our customers that is driving the current and future success of our business. So now let's turn to Slide 3 to get into some of the specifics. We delivered $2.2 billion in revenue and $867 million in adjusted EBITDA in Q2 2024. Revenue and adjusted EBITDA declines continued to improve compared to the prior year-over-year trends. This…

Thank you, Dennis. Turning to Slide 7. Total revenue was $2.2 billion in Q2 and declined 3.6% year-over-year a notable improvement from the Q2 2023 trend, which was down 5.6%. Residential revenue declined 4.4% year-over-year driven by a smaller customer base and continued losses of video subscribers. Despite this volume pressure, the 4.4% decline is a marked improvement from the Q2 2023 trend of down 5.7% year-over-year. Of note, within our residential revenue trends, residential mobile service revenue saw its third consecutive quarter of over 50% year-over-year growth. As we continue to ramp up on mobile, this should contribute to more of our residential revenue trends over time. As we assess sales opportunities across our footprint, we have observed fewer shoppers across sales channels, especially among our low-income segments. Although we have improved our channel conversion rates. The top of the funnel opportunities are lower due to increased competition in recent quarters and a challenging macroeconomic backdrop. Despite these challenges, we see underlying strength and stable churn stable ARPU and growing customer satisfaction. However, the current market dynamics are limiting our ability to grow subscribers and consequently, top line growth in the near term. Over the long term, we are confident that our superior network, product suite and customer experience will outperform both fixed wireless and fiber overbuilders. We expect this competitive advantage will enable Optimum to achieve sustained growth over time. In Business Services, we grew revenue 1.3%, which was driven by growth in our lightpath enterprise business, and we continue to grow customer relationships and sell in ancillary services to our base. News and Advertising revenue declined 7.2% in the quarter, primarily tied to nonrecurring prior year onetime items. We expect political revenue to become more of a tailwind in the second half of this year and anticipate…

[Operator Instructions] Our first question today is coming from Frank Louthan from Raymond James.

Can you give us an idea of the current run rate savings from the truck rolls and the call center inbounds? And then as a follow-up, where do you think you are as far as integrating AI in your business for efficiencies and so forth? What kind of -- give us kind of what inning you're in or something like that?

Frank, we're really excited about the improvements that we're seeing in our operations. As I mentioned, 1.7 million fewer calls, 235,000 fewer truck rolls, and there's more opportunity. We're leading into self-install. We're leaning into just more proactively communicating with our customers, a 56% increase in self-installed this past quarter, and we're sending messages proactively when folks are having outages or service interruptions, service visits, installs. And this is all driving savings. This is all driving fewer calls, fewer truck rolls, just less noise in the system and that's translating into improved customer experience. We are taking those savings and optimizing our OpEx structure, and I'll let Marc talk to that a bit in a second, but then we're investing as well, and we're being disciplined about that investment. We talked a bit about AI and our first step in that direction was launching a tool in our retention queues to help our agents more effectively manage call volumes coming in based on the customer's lifetime value, the product set and really provide them offers that were accustomed to their needs. And it also takes into consideration the competitive intensity in the market so that it's not a 1 size fits all when we're taking those calls. And that is allowing us to have drive better save rates and drive ARPU -- drive improvements in ARPU erosion. And so we're continuing on this journey. We're running pilots in our care centers. We're running pilots with our field teams, and we're seeing real opportunity to just help us elevate our customer experience, make it simpler for our employees to have easier tools, find the solutions faster, solve the issues faster to ultimately deliver a more effective experience and drive even further efficiency as we go into the second half of the year and into '25. Marc?

Yes, Frank, I would just add. You see it in our OpEx costs. We've been able to make these investments that Dennis has mentioned and keep our operational costs flat. We were down sequentially quarter-over-quarter, which we were pleased about. And so while we drive out the truck rolls and the phone calls, we're able to reinvest in this type of technology. I would characterize it, Frank, as early innings, with AI. As Dennis mentioned, we have it in front of all of our retention agents to date. By the end of the third quarter, we'll have it in front of all of our care agents. Again, tailored actions at the individual customer level. So really excited about where AI is going to take this company and it's really helping us guide the operations, and you see it in the stable ARPU despite the video pressures that we see, we're able to maintain our video ARPU. So really pleased on our progress but still early innings.

Next question today is coming from Kutgun Maral from Evercore ISI.

One on the outlook for EBITDA and one on the strategic value of legacy Optimum. First on EBITDA. I appreciate that you don't provide explicit guidance and that there are a number of moving pieces across what you can and cannot control. But can you talk to some of the moving pieces we should be mindful of for the back half and how we should think about the full year? And second, on the strategic value of the legacy Optimum footprint, there have been some headlines recently around fiber assets and various partnerships. I know the focus for the management team and the Board has perhaps shifted over the years more towards improving underlying operations of the business as opposed to asset monetization. But given legacy, Optimum is in the top DMA with meaningful progress on the fiber build, are you now at a point where maybe there's any interest or willingness to engage in monetizing it in some capacity?

Thanks, Kutgun. I'll take the second question first, and then I'll throw it over to Marc. But we are continuing to be laser focused on transforming this organization, and we're really excited about the progress that we're making and the legacy Cablevision or the East footprint is one that we're laser-focused on. We've launched our new hyper-local go-to-market playbooks in the past quarter, and we are seeing incredible stabilization across our footprint in over 100 of the markets that we've launched, which includes the East. And we're seeing improved performance, particularly in our fiber footprint and particularly where we overlap with Verizon. We are seeing our ability to compete, improve, and we're going to continue to lean into that. We're still in the early innings. I'm really proud of what the team has accomplished. We have won award after award by third-party independent organizations. As I mentioned, Ookla named us the fastest and most reliable in New York and in New Jersey in that DMA that you're discussing. PCMag named us the top ISP in the Mid-Atlantic, which includes New York and New Jersey. But there's more work to do. And we know that the competitive pressures continue to ramp up, but we have the products, we have the service, we have the tools to compete effectively in the East, and we want to continue to drive improvements and continue to accelerate our transformation. So that's what we're focused on today. Marc, do you want to talk about the EBITDA piece?

Yes, Kutgun. On a full year basis, we expect our year-over-year EBITDA declines to moderate versus the prior year. This is really driven by all the operational improvements that we've talked about, that we've made over the past year. This includes all the investments we made in our customers, such as the speed rightsizing activities, all the investments in our network, and you see that really transforming our truck rolls and our service calls, which we just talked about. And then just really pleased on the stabilization of ARPU, and we do see a path for growth there. And again, that's mainly tied to discipline and use of AI to drive each conversation with our customers. So these investments that give us confidence that we will drive EBITDA improvements over this year and then in the long term, and that's really what we're focused on is long-term sustainable EBITDA growth. And so that's where we feel things are heading and feel good about it.

Your next question is coming from Michael Rollins from Citibank.

Just curious if you can provide more specifics on how ACP impacted broadband performance in the second quarter and your expectations for how it may specifically impact the performance in the second half? And then just taking a step back, can you share where you are today on the percent of the broadband base that now has that simplified rate card and the timing to get to the rest of the customers?

Thanks, Michael. On ACP, as Marc mentioned, just broadly, as we look at the low income segment, we did see a bit of slowdown and some headwinds as it relates to that segment in particular, both from a gross add and from a disconnect perspective. ACP specifically, we're really happy with our performance. We saw a very nominal increased churn from our baseline. And I think that's really attributable again to the incredible work the team did to prepare and to be able to offer our customers options. We leveraged our tools and leveraged offers and packages to help rightsize people in terms of their needs, getting them into packages that rightsize their speeds, rightsize their package with Optimum mobile and really making sure that they had the right products that they needed. So incredible performance on the disconnect side. But we have seen that the subsidy and just generally a bit of a slowdown in terms of gross adds. And when I look at our general performance, that is where I see our headwinds that occurred in the second quarter. But we feel that we do have the right products and the right services to compete long term. We have incredible value. Our focus remains quality and value. And when we look at value and we look at Optimum Complete, we now have Optimum Stream that is launching across the footprint. Entertainment TV is an incredible value. As I mentioned, a new video package, we believe that long term, we do have now the right products and the capabilities to be able to compete across every segment. In terms of our broadband retail pricing, I'll throw that over to Marc to just provide a little bit more color.

Yes, Michael, we're pleased with overall ARPU trajectory and our stabilization that we've talked about from a rate card perspective, all of our fiber rate card is now fixed and reset. And then we'll, over time, and this will be a multiyear journey, we will set the HFC rate cards. So it's still fairly early days on that side of the house. Again, we did not see any material impact from the change here, and we'll continue to manage ARPU on an individual customer basis, and feel that there's a path for real growth as we continue to accelerate selling in more products like fiber, like mobile and other ancillary services?

Yes, I'll just continue to reiterate that our -- the philosophy or strategy around our pricing strategy has been providing transparency, predictability and just eliminating a bit of the confusion that existed with the old rate cards and promo roll strategy, and we're seeing real benefits from that. We're seeing that we're able to continue to implement that strategy and provide the clarity that our customers are looking for.

Next question today is coming from Craig Moffett from MoffettNathanson.

Let me ask about some of the green shoots that you've pointed to. Can you quantify for us a real change in the trajectory of, in particular, broadband, I guess, broadband retention and net adds. In any of these kind of green shoot cohorts, whether it's the customers who've had the pricing right size that you just talked about, the customers who are in your fiber markets, the customers who are in your mobile converged bundles or even just in your hyper-local segmented markets so that we can kind of do something a little more tangible so that we can see once this is done and as it rolls out, that we can have more confidence in the trajectory of broadband in particular?

Yes. Craig, what I'll say is that we're really excited about the stabilization of churn. We believe we were really -- prior to me joining and launching these playbooks. We were really struggling as fiber overbuilders came into our footprint, the impact that those folks were having was fairly outsized in terms of taking share. And these local playbooks have stabilized that. And when I look at our performance in Q2, we saw a meaningful stabilization and improvement in churn. And really, the headwinds when we look at the performance was on the gross add side and really tied to the low-income segment. And so when I look at the speed rightsizing and I'll let Marc add a bit of color across these tactics, we are seeing improvements in churn. 50% of those folks are just being moved off of legacy speeds, and we're seeing their satisfaction improve. We're seeing call volumes decrease, and we're seeing a level of loyalty and stickiness tied to that improvement. Similarly, for those customers that are taking mobile, their churn profile is also better. And then as we go market by market, and we're able to compete and we're able to drive our base management strategies, we're seeing that we are able to stabilize and even see a record level of improvement in churn. And so now our job is to continue to drive that go-to-market in a more meaningful way across every town, across every market, both in terms of base stabilization as well as driving our acquisition and go-to-market, and we're seeing some improvements there as well. When we look at our win share and our ability to drive win share and bend the curve town by town, we are seeing our ability to do that particularly as I look at some of these towns where we're competing against these fiber overbuilders. Marc, anything you'd like to add?

Yes, just around speed, rightsizing and fiber, in particular, we're seeing that these tactics are working. We see combined double-digit churn improvements coming out of customers that take their fiber product or speed rightsized. So we feel that these types of tactics in addition to our individual customer treatments that we're doing are stabilizing the base. And again, as Dennis mentioned, we do see acceleration in our non-low-income segments around gross add performance. And so that gives us optimism around more of the businesses from a core basis heading, coupled with the investments we've made on customer experience, and driving churn to all-time lows, we feel like there's a real path to sustainable growth over time.

Yes. The other piece that we're leaning into, as I mentioned, was -- is the value-added services where we have an opportunity, a real opportunity to further drive services into the base. We launched our new total care solution and within a few weeks without any marketing, we've already added several thousand customers. And so just having a much more proactive strategic base management strategy as we launch these new services and sell that into the base. We believe that, that will further accelerate our transformation.

Your next question is coming from Sebastiano Petti from JPMorgan.

If I could just maybe ask a quick follow-up to Mike's question earlier. Just thinking about the second quarter, you talked about the majority of the decline, right, it could be attributed to the low income segment. But help us perhaps think about -- in light of that, you talked about in June, there was some stabilization there. As we think about the ACP impact, thinking about what your peers have messaged in terms of nonpaid disconnect as well pressure coming through. And would the expectation be, considering June was "stable" on a year-on-year basis, do you expect to see additional nonpay disconnects, should we be thinking about the third quarter of 2024 looking something like 2023 in terms of losses whereas perhaps maybe nonpay disconnect pressure from an ACP could be offset by some of the base management and other strategies you just kind of articulated. Just trying to get a better sense on how we should think about the impact flowing through because messaging from peers and competitors have been -- there's probably still more to come in the back half of the year in terms of ACP headwind.

Yes. Sebastiano, the comment on stabilization was in July. We are seeing stabilization in July, and we anticipate further stabilization in the second half of the year. We've launched our new local -- hyper-local playbooks in the second quarter. And we do believe that they're going to continue to provide us meaningful acceleration as we look at implementing them town by town, offers at the town level and having marketing tactics at the town level and being able to compete more effectively head on with these fiber overbuilders and fixed wireless. We're still in the early innings, and we're seeing some benefit. We started to see some of those benefits, particularly in stabilizing churn and now it's helping us compete more effectively from an acquisition perspective. But I'll throw it over to Marc to add any color he'd like on ACP and the low-income segment.

Yes. In addition to some of the conversations we've already had this morning, we are launching AI tools within our [ non-PEG ] segment as well. It's too early to tell exactly what's going to happen with the ACP population, but we feel confident that we have the right offers and the right strategy to manage these customers through that conversation. Again, too early to say, but we feel like we have the playbook in place to manage through it.

I was going to ask a quick follow-up on a different topic, but go ahead.

Yes, please go ahead.

Okay. Sorry about that. So just thinking about the migration rate on the fiber side. Can you perhaps help us think about what -- or give us the migration rate this quarter and how we should perhaps think about how that could change as you perhaps accelerate migrations in the back half of the year?

Yes. In our fiber performance, we had 60% migrations, we had an all-time high in Q1, and that really helped us understand some of the challenges that we were dealing with in terms of operational and technical issues tied to the migration. As I had mentioned in earlier calls, we have purposely took a little bit of a slowdown so that we could solve those technical issues. And I'm pleased to report those technical issues have been solved. And so our goal is to integrate this now into all of our channels to drive a much more meaningful pace of migration in the second half of the year. Now that we have a much more seamless process to migrate customers, we're integrating strategies and tactics into our care channels, into our retail centers, into our retention channels. Every time we have an opportunity to interact with these with our customers, we will now be able to confidently present them with a migration option and get them into the best products. And we also feel very comfortable now that we have the right video solutions to pair along with our broadband fiber product. As I mentioned, we've launched Stream across the entire tri-state. That was also a critical element of being able to accelerate. As you know, in the East footprint, we do have customers that take both broadband and video and have broadband and video. And so we needed to make sure we had a full solution set that we could confidently present to our existing customers. And we do have that now. And so our pace will accelerate. The goal is to accelerate our pace meaningfully in the second half.

Our next question is coming from Jessica Reif Ehrlich from Bank of America.

I guess 2 questions. One on advertising. Second quarter was disappointing, down 7%, but you sound super optimistic about second half. Can you give us some color on expectations if you can parse out political, which clearly should be strong versus what you're seeing in the underlying advertising market? And then secondly, it didn't really come up on the call, but you are overbuilding a couple of markets. Can you give us an update on what you're seeing both in your efforts to overbuild and then others who are also coming into your markets, what you're seeing?

Jessica, I'll cover the overbuilding, and then I'll throw it over to Marc to talk about the advertising trends. We are building out in New Jersey in Montclair and West Orange, and we're on track to launch later in Q3. We have -- when we look at that opportunity, in particular, we look at the overall return on investment, and we look at the cost. And given our footprint, it was an opportunity for us to continue to build out our plants and offer incredible -- our incredible fiber network and fiber products to these customers and in these towns in a cost-effective way, which we're excited about. We'll be launching broadband and mobile and the full product portfolio. We have teams and go-to-market strategies ready and the teams are actively working to prepare us for launch later in the quarter. We're continuing to see overbuild activities and build activities throughout the footprint. And we know that the competitive intensity is only going to continue to increase and that's why we have to control what we can control. We are looking at how we want to deploy capital in the most effective way to provide the most meaningful return on investment. When we look at our opportunity, we're continuing to focus on new build particularly within our footprint. We're on pace to deliver 175,000 passing. A lot of that is going to come in the West. When we look at -- we're privileged to be in some of the fastest-growing towns in the west, and so we're laser-focused on driving our new build strategy and making sure that we're doing that effectively and monetizing it more effectively as well. We've stood up a team to really ensure that, that end-to-end process is working seamlessly. Marc, do you want to talk about advertising?

Yes, Jessica, for the quarter, certainly, as we talked about, we were hampered by onetime items from the prior year that really do not recur, excluding those onetime items, we're actually growing just over 2% in the segment. And we do feel bullish. We see our national sales teams really operating at a high level, we have seen some pressure on our local sales teams. And I think that's really tied to the interest rate environment that we still find ourselves in. But from a political perspective, based on what we see coming in and the orders that have been placed today, we feel bullish about the strength of political this season and gives us confidence on a full year basis that the news and advertising group will be growing over double digit this full year.

Our final question today is coming from Maryanne Zhao from Morgan Stanley. Maryanne would you mind speaking louder, I cannot hear you.

I think, she's having technical difficulty. Here we go.

Sorry. Are you able to hear me now?

Yes.

Yes.

Okay. Sorry about the technical difficulty. Just on the competitive landscape, can you please update us perhaps on what you're seeing on the pace of incremental fiber overbuilt in both your Eastern and Western footprint and then on fixed wireless. Any difference in the competitive impact between your 2 footprints.

Thanks, Maryanne. We continue to see in the East a little under 70% overbuilt by our fiber competitors, Verizon being the bulk of that and Frontier being a small portion of that as well. When we look at the West, we have seen an uptick over the last 6 months. We're now revising our approach, leveraging the BDC data, which has been very helpful. And so we do see about a 40% overbuilt by fiber overbuilders, AT&T and others. We think about 1/3 of that is AT&T and 2/3 of that are other fiber overbuilders that grew about -- by about 5 percentage points in the last 6 months. And so we know that, that is going to continue to grow, continue to increase. And so we need to have the best quality, the best value, the best products so that we can compete most effectively town by town. Fixed wireless, we continue to see across the footprint. Availability varies again based on their network availability and capacity. We see T-Mo primarily in the East, as we think about the primary fiber competitor there, we are starting to see pockets of AT&T. We're not seeing as much Verizon given their presence with fiber. And then in the West, depending on the town, depending on where we are in the country, we see pockets of T-Mo, AT&T and Verizon.

We reach end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you all for joining. Please reach out to Investor Relations if you have any follow-up questions.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.