Greetings, and welcome to the Altice USA Third Quarter 2024 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Sarah Freedman with Investor Relations. Thank you, Sarah. You may begin.

Thank you. Welcome to the Altice USA Q3 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 thank you to everyone for joining us today. As I reflect on my 2 years at Optimum, I'm incredibly proud of how far we've come in building the foundation we envisioned. Phase 1 of our transformation was to stabilize our operations, create a dynamic and innovative culture and focus on delivering superior products and services over our award-winning networks. We strengthened our leadership bench, broke down organizational silos and began to implement process tools and system improvements based on feedback from customers and employees. So it was a proud moment when we were certified as a great place to work this year because it marked a turning point in our culture, reflecting the revitalization and pride our people now feel to be part of team Optimum. Quality and value are paramount to the transformation of our customer experience, and so we prioritize both. To drive quality products, quality networks and quality service, we have made fundamental and comprehensive changes to our operations, which have led to a significant reduction in outages, more reliable products, a smoother fiber migration journey and strong cross-functional partnerships across our frontline organizations. This work has resulted in recognition from organizations like Ookla, PCMag, CNET, ACSI and others, acknowledging our progress in customer experience, network excellence and service leadership across our footprint. From a value perspective, we repositioned Optimum mobile and launched a true mobile strategy. We established simplified and transparent pricing and rightsized speeds for almost 1 million customers. This has allowed us to meaningfully stabilize churn in the face of increasing competition from fixed wireless and overbuilders. Simultaneously, we implemented a new level of financial discipline across every area of the business, which has enabled us to stabilize OpEx, capital intensity and ARPU erosion. Phase 1 included delivering over $500…

Thank you, Dennis. Turning to Slide 6. First, I'd like to spend a moment highlighting the value proposition of our fiber and mobile strategies and the benefits these services are delivering for our business. We have 9.8 million total passings in our footprint, including 2.9 million fiber passings primarily concentrated in the Northeast. Both our HFC and fiber networks are high-quality networks delivering 1 gig or higher speeds over 95% of our footprint. And when pairing Optimum Internet with Optimal mobile, we are seeing improved trends across the board. Customers on fiber have higher satisfaction scores, driven by improved network reliability, higher symmetrical speeds of up to 8 gigabits per second and lower latency. Fiber customers generate 10% higher gross add ARPU compared to HFC customers as they subscribe to faster speeds. Our fiber network is designed with robust capacity easily supporting these faster speeds and increased data usage. 45% of our new fiber customers take 1 gig or faster speeds, and 28% of our broadband-only fiber customers use over 1 terabyte of data per month. Our fiber network is even more powerful when bundled with mobile, driving deeper customer engagement and retention. Over the past year, we've increased the percentage of our base that takes a converged product of broadband plus mobile from approximately 3% to 5%, with more runway to grow. Converged customers also churn less. Notably in Q3, our converge HFC broadband plus mobile bundle had lower annualized churn compared to HFC customers without mobile service. And this story is even stronger with fiber. Our fiber base already has experiences 14% lower annualized churn than HFC. But when customers on fiber also adopt mobile, annualized churn improved by 32% compared to our HFC cohort that does not yet take mobile. In summary, whether on HFC or fiber,…

[Operator Instructions] And the first question comes from the line of Craig Moffett with MoffettNathanson.

So your larger peers saw some improvement in broadband and it seemed as though that maybe was driven by at least under -- if you set aside ACP. And it seemed like that was driven to some extent by a softening of the pressure from FWA. I'm wondering if you saw the same thing? And with your broadband ARPU growing sequentially, is that a sign that you think you've sort of repriced your broadband base to the point where it is now sort of competitively priced and you think you can sustainably grow broadband ARPU with sort of industry broadband growth rates?

Craig, on the gross add activity and net add and just competitive environment, across our footprint, we did see a decline in just gross add activity of about 11% across the industry. At the same time, we saw a little bit of a decline in disconnect activity as well. And as we look at the competitive landscape, we did see expansion of fixed wireless in the East, particularly as you think about Verizon, fixed wireless and T-Mo. And then in the West, we did see some expansion with AT&T and T-Mo. And we continue to see fiber overbuilder activity every month. That being said, we are happy with our win loss percentage continuing to improve as we are starting to compete a bit better with our hyper local go-to-market strategies, both in terms of fixed wireless and in terms of fiber overbuilders as they launch in our footprints. We are competing more effectively as we start to compete much earlier prior to these announcements and ensure that we can deliver a great portfolio of products. And so we are starting to stabilize across those markets that have already seen overbuilder launches. And so I would say we're continuing to see fixed wireless expand. We're continuing to see fiber overbuilders expand. That being said, I do believe we have the right portfolio of products and we're evolving our go-to-market strategies to compete more and more effectively. There's less jump balls. So I am very pleased with the team being able to keep churn stable even with these headwinds of increased competition. And I think that's really a testament to the improved quality that we're delivering quality products, quality service and quality network. From an ARPU perspective, this has been a journey for us. As you know, Craig, ARPU, we began this journey when I started, and we saw a pretty significant decline, 2%, a $3 step down. We've been able to stabilize that across the last 7 quarters that has included putting in place the right price value equation that has helped us tremendously by speed rightsizing customers and giving them the right value as well as launching products like mobile and Optimum Complete. But then also putting more science behind how we're managing promo roles and rate increases. Unfortunately, we didn't have that infrastructure in place, and now we're able to do that in a way that optimizes monetization and mitigates churn. And so we are confident that we are going to be able to continue to stabilize and ultimately grow broadband ARPUs and customer ARPUs as we further stabilize our promo roll rate event process and as we launch new products and new value-added services like Total Care, like Whole Home WiFi and others. And Phase 1 has been all about stabilization, and now we're going on the offensive to drive growth.

The next question comes from the line of Jonathan Chaplin with New Street Research.

Two related questions on margins. First, on mobile, can you give us a sense of how much of a drag this is creating for EBITDA at the moment? And then what mobile EBITDA would be by the time you get to 1 million customers at the end of 2026? And then relatedly on margins for 2026, the 40% target is obviously great. I guess my concern is that we saw the prior management team get quite aggressive on costs. And ultimately, that -- it looks like that cost the business in the medium term and costs had to increase to kind of repair some of that damage. And I'd love you to sort of just conceptualize the costs that will come out between now and 2026 in the context of the bigger reinvestments you've made in the business and like why we shouldn't be concerned that those cost-outs ultimately have a negative impact on revenue trends?

Jonathan, I'll start, and then, of course, Marc can chime in. No, we feel really bullish on this opportunity to continue to optimize efficiency and our operating model and ultimately drive down operating expense. As I've mentioned in previous calls, we've been on a journey to really ensure that we have the right level of quality across this organization in terms of products, network and service. And that's really allowed us to drive down contact rate, drive down service visit rates, as I've mentioned in the past, and we continue to see a marked improvement, 11% call-in rate decline year-over-year, 300,000 fewer service visits, a 28% decline year-over-year. And this is just the beginning. This is really just rolling up our sleeves, working hard, working smart, but a lot of hard work. And now as we move forward, we have an opportunity to drive digital, drive automation, drive true transformation into the organization. When we showed up there was the level of brokenness in terms of processes and capabilities was vest. And we began working hard on things that, quite frankly, Marc and I were working on in other organizations probably 10, 15 years ago. And we've implemented those changes over the last 2 years and have put a foundation in place to allow us now to drive accelerated growth. And this growth will come on the back of improved customer experience, which will ultimately drive efficiency and allow us to grow revenue. And so we're going to further drive down noise in the system. We're going to further drive down calls. We're going to further drive down truck rolls. We're going to become a digital-first company, so that you can buy products from us digitally. So that you can service your products digitally through our apps and online, so that you can pay your bills, so that you can resolve any issues that you have. And this will allow us to drive down noise in the system and ultimately lay the foundation for an optimized operating expense model that will fuel growth as we move forward. Marc, if you want to chime in on the mobile piece?

Yes. Just again on operating efficiency, I'm really pleased with the power of AI and how we deployed that across the footprint and our sales channels upwards of 6,000 agents are now leveraging AI to guide every single conversation we have with our customers. We're about to launch new AI platforms on why did my bill change. And so simple things like that, we're going to be able to answer in seconds versus minutes today. So excited about where we're heading with AI. We're going to be able to deflect noise out of our network operations using AI technology. From a mobile perspective, again, very optimistic about what convergence does for our company. We've seen expansion in direct mobile margins over the year. Very pleased with that, and we think it will continue to serve as a linchpin as far as driving down broadband churn and accelerating lifetime value for our customers. So we're just getting started. When you couple mobile with the fiber, as you heard, 32% reduction in churn. And we're really just starting to get going on these platforms and excited for where it's going to go.

The next question comes from the line of Kutgun Maral with Evercore ISI.

Two, if I could. First, you highlighted a fairly attractive set of opportunities across revenue, fiber, margins and CapEx. Historically meeting multiyear targets for, not all to specifically, but for the industry overall has been difficult for various companies in large part because of the volatility in broadband unit growth. I know you're not providing explicit multiyear broadband subscriber guidance today. But as we think about some of these margin targets and the free cash flow improvement opportunities you laid out, can you share perhaps what's embedded from a subscriber perspective? And second, on mobile, you outlined, again, a compelling case for the benefits of scaling the mobile subscriber base. You talked about a path to growing mobile to over 1 million lines by the end of 2017. Not to get too in the weeds here, but this would imply about an average 45,000 net adds a quarter. You just achieved a high watermark for the last 4 years at 36,000. So Dennis, I know you hit on a few initiatives, but can you expand a bit more about how you expect to accelerate that pace and what that cadence looks like over the coming years?

Thank you, Kutgun. I'll start with mobile because we're really starting to see an acceleration here. This has been a journey for us as we relaunched mobile about 18 months ago. New pricing, new packaging. We launched in our sales channels, of course. We were able to build out retail and transformed them into mobile sales centers. We were also able to pull together acquisition offers like Optimum Complete that are now gaining really nice traction in inbound sales and door-to-door and across the board. We're really on the -- in the early innings in terms of the balance of our channels. And when you think of our peers, they do an incredible job. Selling in retention, selling in care, selling across every touch point, and we're just getting started. We've just started to sell in care and retention. We are a little less than 30% participation. And so we have a really meaningful opportunity now to really start to scale across the balance of our internal channels and really start to accelerate into that type of pacing. I ultimately believe that we can get to the pacing of our peers. If you look at what our peers are doing and you normalize for size, I think we should be right in line with them closer to 60,000 a quarter. But we're going to take it one step at a time and really start to scale out the balance of our channels and roll out some new advanced base management strategies that will help us drive our customers into retail and ultimately do a better job of raising awareness and consideration amongst our base. Similarly, if you look at the broader set of opportunities, we have exactly the same opportunity. We are launching new products that are very much industry-standard…

Yes. Just from a broadband perspective, as Dennis mentioned, very pleased with our churn profile. We're hitting all-time lows around churn. And so continuing to drive the right products. We talked about mobile and fiber and how that impacts churn will continue to drive that. So that gives us optimism around where we had from a broadband perspective. We feel like there is still an opportunity on the gross add side, especially on the low income side where we see most pressure. We're going to work to solve that, and we will in the upcoming quarters. And then just back on mobile. We feel strong about how our new offers are taking shape over a 60% increase in line penetration from our old offers. So we're feeling optimistic around our trajectory around unit growth.

Yes. On unit growth, in particular, we've seen improvements in our sales channels in terms of productivity and yield. We're seeing strong improvement in our field organization as we talk about completion rate. And now we're laser-focused on continuing to drive top-of-the-funnel activity. And we're controlling everything that we can control. And we're confident that as the macro environment continues to evolve, we'll be in a good position to take advantage of it as we build the operational execution muscles that we need to, to be able to drive activity and performance.

The next question comes from the line of Jim Schneider with Goldman Sachs.

I was wondering if you could maybe address the CapEx reduction for this year and also the out years? Is that entirely due to efficiencies and the existing footprint of spend? Or are you seeing the opportunity for reduction or maybe just less strong returns than you did before? Does this in any way sort of -- how are you thinking about the relative prioritization of your free cash flow goals versus your subscriber growth goals?

Jim, I'm really proud of the team and the work they've done in terms of driving CapEx efficiency. The team has developed a multiyear network strategy to really ensure that we're making the right investments across the network in the most effective way. Just simple examples. Historically, coming into 2024, the only solution for congestion was doing very costly node splits that costs tens of thousands of dollars. The team is now -- the network team and the CTIO organization have identified ways using OFDM and OFDMA to be able to address these congestion issues for a fraction of the cost. And so when you start to look at those types of efficiencies, it really allows us to deploy capital in a way that is much more efficient, much more effective. We're able to continue to drive our new build activities and ensure that we can achieve our new build goals in this coming year, and we're continuing to drive our fiber strategy. We have an incredible fiber network and our priority is now to drive migrations and penetration of that fiber network. And so we're prioritizing CapEx to help us drive maximum return. And the team is doing this in a much more efficient fashion than we've been able to do in the past. Marc, if you'd like to add?

Just, Jim, on free cash flow. So again, we're trying to take a balanced approach to maximize free cash flow growth. And Phase 1, as we've talked about, and back in 2022 before Dennis joined and I joined, free cash flow declined $1.2 billion year-over-year with revenues declining expenses, accelerating and capital accelerating. In 2023, we slowed that rate of decline to about $300 million. And now we're in a position in 2024 to actually grow free cash flow for the first time. So all of these things ladder up to generating free cash flow. We're really pleased on the capital efficiency. I think we have a laser focus around return on investment. And we see a lot of opportunities to still drive strong return on investments, and we'll continue to do so. But we can do this in a more efficient manner. We talked about our procurement team and our partnership with our network services team and our CTIO team, or just finding opportunities to work with our vendors to accelerate every dollar we have to spend. So really pleased on the trajectory.

And the next question comes from the line of Frank Louthan with Raymond James.

Great. So in getting to your target of 1 million mobility subs like '27, it's a pretty steep ramp from the current run rate. Walk us through kind of what you expect to change there in your approach or to reach that level? And then secondly, do you expect any uptick in Q4 from the political spend as that's wound up or is most of that just incremental spending going to digital?

Thanks, Frank. On mobile, again, I'm really bullish on our trajectory. We had to relaunch mobile 18 months ago. We've really started to find a nice pacing in our sales channels like retail, inbound sales, door-to-door. And that's been supported by launching new packages like Optimum Complete and really just ensuring that we have a full portfolio, a strong portfolio of mobile products. Now that we have that, we're continuing to expand our sales channel activities across channels like Care, retention and really ensuring that we are driving mobile across every touch point that we have with our customers. And so this is where I know some of our peers excel, and we're still in the early innings of that. And I'm confident that we're going to be able to get to the pacing of our peers in short order. So we're going to have our best mobile quarter. We just had our best mobile quarter. We're going to continue to build on that and have another great quarter in Q4. We're on track for that. And as we expand into these new channels like Care and retention, as I mentioned earlier, we are only at about 1/3 of the launch so far, and that happened late in Q3. And so we're going to continue to expand that across these channels in the next couple of quarters, and that will support our growth quarterly. And on the political spend, Marc, do you want to -- political, do you want to chime in on that?

Yes, we're seeing robust political advertising coming out of the presidential campaign. So we're still feeling optimistic. It drove the strong quarterly results. I feel optimistic for full year where we'll have a near double-digit growth rate on our News and Advertising business. So we feel positive about that.

The next question comes from the line of Jessica Reif Ehrlich with Bank of America.

I guess one on the video, the new video packages. It seems like streaming is in a separate package. I'm just wondering, have you -- was there any consideration of including it within one of your video packages similar to Charter, which seems like really a true value add for subscribers? And on the separate streaming package, do you participate in any of the advertising revenue streamers? And then just a follow-up as there's been such a big focus regarding fiber. It seems like, obviously, you focus on the efficiencies and customer lifetime value. Are there any revenue differences you see from a fiber sub and traditional HFC sub?

Jessica, I'll start with fiber, and Marc, you'll keep you honest on hitting all these points here. But we have an incredible asset in fiber. We see that every day in the market that fiber is an incredibly valuable asset. We have 2.9 million growing to 3 million homes. The capacity and performance of the fiber network is really something we're incredibly excited about. We are seeing the benefits of fiber as we look at our customer base, those that are migrating, we are finding better churn, better customer satisfaction and we are able to drive ARPU growth as we move customers over to fiber. These customers are taking 40% plus in terms of gig and multi-gig services. And so we're excited about fiber and continuing to drive fiber and accelerate fiber. We've had one of our strongest fiber quarters, and we're going to continue to accelerate as we go into Q4 and into 2025. When you talk about streaming and our new video packages, we are excited about our new video packages. Entertainment TV has 80 great channels, Extra has 125, Everything has all of that and regional sports. And this is all about providing customers the right content, curating the content and getting them the right content at the right price. And in early next year, we're also going to be launching our billing on behalf of capabilities where we'll be able to more seamlessly bundle in streaming services. This is why we're so bullish on launching and driving our stream set-top box. It's an Android-based set-top box that we launched across the East. We're going to be launching that across the West. We're at 30% today. We're going to complete that launch in next year. And so we're going to drive the launch of that box so that we can launch these packages and bundle in have the options to bundle in streaming as we move forward. Marc anything you'd add?

I think it does -- it provides an opportunity for future advertising upside. We currently don't have that now. And so that's an opportunity for us.

And our final question comes from the line of Sebastiano Petti with JPMorgan.

Just wanted to see if perhaps you can update us on what your future plans are for the fiber passings from the 3.0 million that you're at today? Just any color on there and how you're thinking about that relative to HSC, particularly against the backdrop of the updated CapEx envelope that you outlined today? And then particularly within that, how should we think about migrations and what that might mean from a margin perspective as you ramp the level of fiber migrations within the base here?

Sebastiano. Yes, we're very bullish on our fiber network, and we've built out 2.9 growing to 3 million and our major focus now is driving penetration. We've solved a number of the operational and technical issues. And so we're ramping this past quarter. About 70% of our net adds were driven by fiber migrations. And so as we embed the process into all of our channels like Care, like retention, like retail, we're confident that we're going to be able to continue to drive the growth of fiber. We're looking at our CapEx spend and our multiyear strategy. We want to have the right balance in terms of growing new passings, building fiber and then driving fiber migration. And so that's -- there will be a balance there. As we think about the near term, we do think that we want to focus on driving fiber penetration and continuing to drive new build. Four of the fastest-growing cities in the country out of the top 16 are in our footprint. And so we want to be able to invest there, and we're doing that in a fiber-rich fashion. And so that's our near-term focus, and we'll continue to build out fiber opportunistically where we think we need it to be able to compete effectively.

And if I could ask one follow-up question. Just as the backdrop of what we're seeing across the ecosystem, particularly on your competitor side, the M&A angle, how is Altice perhaps thinking about that as either a buyer or a seller or particularly depending upon the outcome of maybe the election and maybe a pro-business climate? Is that anything to update or how you see the landscape unfolding over the next several years as perhaps convergence and consolidation becomes more pronounced?

Sure. We're always open to value accretive transactions, but there's nothing to announce today. Our focus is to continue to drive our go-to-market strategy and drive growth of our broadband business, both on HFC and fiber, and that's what we're living and breathing every day. So nothing to announce today.

I would just add, it just further supports the value of our fiber assets and shows how powerful that is. So pleased to be able to continue to drive more and more customers on to this incredible network. Thank you.

At this time, we have reached the end of the question-and-answer session. And I would now like to turn the call back over to management for any closing comments.

Thank you all for joining. Please reach out to Investor Relations with any additional questions.

And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Have a great rest of the day.