Hello, and welcome to the Altice USA Q3 2022 Earnings Conference Call and Webcast. A question-and-answer session will follow the formal presentation. Operator provided instructions. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Nick Brown. Please go ahead.

Hello, everyone. Thanks for joining. Today, we're joined by Altice USA's Executive Chairman, Dexter Goei; and CFO, Mike Grau. And we're delighted to introduce our new CEO, Dennis Mathew, who together will take you through the presentation, and then we'll have time for Q&A. As today's presentation may contain forward-looking statements, please read the disclaimer on Slide 2. Dexter, please go ahead.

Hello, everyone. Kicking off with the summary of our third quarter performance on Slide 3. Revenue declined 7% year-over-year, mainly driven by pressure in our Residential and Advertising businesses as well as the loss of AirStrand revenue in the prior year after termination of our legacy Sprint contract. Excluding AirStrand revenue, the revenue decline would have been just 4.3% year-over-year. Q3 adjusted EBITDA declined 18.1% year-over-year with a margin of 39.9% or down 12.7%, excluding AirStrand revenue, reflecting both the revenue decline and higher operating expenses to drive future growth. Residential broadband customer net losses were 43,000 for Q3, which was relatively in line with the losses in Q2 as the lower market activity environment and current competitive pressures impacted the pace at which our growth initiatives are materializing. Free cash flow remains solid, even with our elevated fiber investments, generating $136 million in Q3 and $535 million to date. Our Optimum fiber network deployment continues to accelerate, rolling out at the fastest quarterly pace to date, adding 321,000 new fiber passings in the quarter. We also added 31,000 fiber customers in Q3 and expect to continue to grow at an accelerated pace through both gross additions and migration of existing customers to our fiber network. We continue to advance the pace of our new builds and expand our sales distribution channels, including the opening of several more Optimum stores across the country, both of which support future customer growth. And finally, I'd like to welcome our new CEO, Dennis Mathew, who formally joined us exactly one month ago today. Before I turn it over to Dennis, I want to share that leading Altice USA has been the most rewarding experience in my career, and I could not be prouder of what we accomplished together, thanks to leadership and the thousands of dedicated employees across the country who enthusiastically serve our customers and communities every day. The decision to step away from the CEO role at this time was a difficult one, but based on personal reasons as my family and I would like to move back to Europe. But having found Dennis to take the reins at Altice USA, I couldn't be more optimistic about the company's future, and I'm confident it is in good hands. Dennis is a great operator with a proven track record, an exceptional leader and team player, and in just a few short weeks, has acclimated incredibly well across the Altice leadership team, frontline workforce and broader organization. As we look ahead, following the transition period we're in now, I will remain involved with Altice USA as Executive Chairman with a focus on strategic opportunities for the company. With that, I'd like to hand this over to Dennis to say a few words about himself.

Thanks so much, Dexter. I'm very excited to join Altice in the role of CEO at this important juncture for the company. I see immense potential to further connect with and serve customers while elevating the company as the broadband provider of choice. By way of background, I have nearly 18 years of experience at Comcast, previously leading some of the company's largest regions on the East Coast. Most recently I led the Freedom region, which includes areas of Pennsylvania, New Jersey and Northern Delaware. My goal is to position Altice USA as a best-in-class broadband provider with a focus on operational excellence and customer experience. In my first 30 days, I've had the opportunity to spend time on the ground with frontline teammates, hold deep strategy sessions with the leadership team and meet employees throughout the organization, discussing areas where we can deliver a stronger employee and customer experience. I'm proud to lead such an innovative company that has the right vision and long-term strategy centered on investments in fiber infrastructure and a superior customer experience. I'll give you more of an update on where we are with fiber and the new build initiatives in a few moments. But first, I'd like to hand it back to Dexter to take you through the headline Q3 performance in a bit more detail.

Thank you, Dennis. Moving to Slide 4, showing revenue trends in more detail. Total reported revenue in Q3 declined 7% year-over-year, mainly due to a decline in the Residential business of 4.4% and our News and Advertising business, which declined 16.1%, which I'll come back to in a moment. Total revenue was down 4.3%, excluding about $75 million of prior year AirStrand revenue. In Q4, we'll have another $36 million of lost AirStrand revenue year-over-year. Remember, we had approximately $120 million of AirStrand revenue for the full year in 2021, which we will not see in 2022. Business Services revenue in Q3 was down 16.8% year-over-year on a reported basis, but flat excluding this AirStrand revenue. Turning to Slide 5 on Q3 customer trends in our Residential business. We reported a net loss of 50,000 residential customer relationships and broadband net loss of 43,000. While we typically see seasonal return-to-school benefits in Q3 when comparing to Q2, we're still experiencing higher competition in parts of our footprint. It's clear that fixed wireless broadband has taken some of the growth in switchers out of the market in the past few quarters given the growth from these operators as well as some localized pressure from fiber overbuilders. This is on top of the observed general lower market and move activity and some households moving back to mobile-only solutions since the pandemic. We firmly believe that we're on track to improve these trends and return to broadband growth through our growth investments, inclusive of our fiber deployment and multi-gig speed launches, customer experience improvements, new build expansion and distribution channel investment. Separately, we continue to see positive trends in our mobile business, adding 5,000 mobile lines this quarter, which is a slowdown from the previous quarter as we discontinued some of our service promotions. Slide 6 is an overview of our Business segment revenue. Revenue declined 16.8% in Q3. Excluding AirStrand revenue, revenue was flat year-over-year. Similar to our residential business, the SMB market is also seeing some impact from incremental competition and revenue for the quarter was also impacted by a carrier price down in our entire enterprise business. Once we lap the AirStrand revenue impacts, we are still mindful that an economic slowdown may delay a more material pickup in growth here. SMB and other revenue was flat ex AirStrand in Q3 and Lightpath revenue grew 0.5%. Lightpath recently announced an additional footprint expansion with the entrance into the Miami market with a 135-mile fiber network build. Lightpath's entrance into Miami will kick off with a 55-mile subterranean network of brand-new high-count fiber that will be ready in early 2023. This comes as the second major East Coast market that Lightpath has entered into over the past 16 months following Boston in June of 2021. Slide 7 is a summary of our News and Advertising business performance. Revenue was down 16.1% in Q3 driven by a couple of factors. First, some of the expected revenue for this year will be more weighted to Q4 than Q3 for us. Second, we had a couple of larger nonpolitical campaigns contributing to revenue in the prior year, which did not occur this year. In addition, we continue to start seeing some campaign cancellations at the end of the quarter as the ad market retreated given the macroeconomic environment. As one of the bigger drivers, we are starting to see auto spend pick up, although it is slow in recovery. And now I'd like to pass it back to Dennis to update you on the fiber build and the new build expansion.

Thanks so much, Dexter. I'm a big believer in fiber as the best broadband technology that exists today. So that's a key tenet of the Altice strategy, which I'm very optimistic about. With that in mind, I'm very pleased on Slide 8 to present a current snapshot of our progress with our fiber build and customer trends. We've released an incremental 321,000 fiber passings during Q3, reaching a total of 1.9 million passings. This is the highest ever number of additional quarterly fiber passings Altice USA has ever achieved. We expect fiber passings in the fourth quarter will be at a slower pace as we experience colder weather, which tends to slow down construction, but we'll end the year well over 2 million cumulative fiber passings. At the bottom of the slide, you'll see our quarterly fiber customer net additions, which also accelerated to 31,000 in Q3 as we've been marketing the fiber product across a wider footprint, supporting gross adds, as well as doing voluntary migrations of existing customers. At the end of September, we had a total of 135,000 customers on the fiber network. To support our fiber strategy, Optimum recently introduced symmetrical 2-gig and 5-gig fiber Internet speed tiers for the first time, which are significantly faster speeds than our main residential competitors. Multi-gig speeds are now offered across all of Long Island and Connecticut and will be available everywhere we have fiber by Q1 2023. Importantly, let me highlight some stats that underscore the long-term benefit of fiber. Fiber trends indicate a significantly better experience for broadband customers on our fiber network compared to our customers on our HFC network. Specifically, we're seeing meaningful NPS improvements, 12% higher ARPU, and about 5 to 6 percentage points of annualized improved churn benefits. This makes us even more optimistic and confident in our fiber play and expectations for growth. On Slide 9, you can see the company added 52,000 new build passings in Q3 and 152,000 passings year-to-date, putting us well on track to add approximately 175,000 passings organically this year. We're mostly edging out the legacy Suddenlink footprint, and we're consistently achieving over 40% penetration after the first year of expanding our network into new areas, which is a key driver for new customer growth. Additionally, broadband subsidy programs will enable us to accelerate new builds even faster in the coming quarters. We've received awards for 35,000 new homes year-to-date, totaling $44 million. And in Q3, we were awarded 9,000 passings in West Virginia and 2,000 passings in North Carolina. We'll continue to actively apply to additional grant programs, and we're excited for the opportunity to be a trusted partner to local governments to bring broadband to unserved and underserved communities. Slide 10 illustrates the long runway we have to sell faster and faster broadband services that can support high levels of future data usage. The average download speeds customers take across our total base was 391 megabits per second as of Q3, but our fiber customers are taking twice these speeds on average. Our 1-gig customer penetration increased to 19% in Q3, which continues to grow every quarter. Around 42% of our customer base have speeds of 200 megabits per second or lower which represents a big opportunity to keep selling customers to higher speeds, especially as we market multi-gig speeds on our fiber network more broadly. Average monthly data usage for broadband-only customers was 576 gigabytes in Q3, mostly driven by video streaming. In Q3, about 15% of our base of broadband-only customers are using more than 1 terabyte of data per month. Within our fiber base, about one-quarter of our customers are using more than 1 terabyte of data each month. Fiber is the best technology to support this growth trend toward increasing data usage demands, which positions us really well. And with that, I'll hand it over to Mike to review the financials in more detail.

Thank you, Dennis, and I do want to add to the warm welcome. So we're certainly very happy to have you join us here at Altice USA. Good afternoon, everybody. I'm going to pick it up on Slide 13 with a summary of our financials for the quarter. Our revenue declined 7% year-over-year in Q3, with adjusted EBITDA declining 18.1%. Excluding AirStrand revenue from the prior year period, total revenue was down 4.3% and adjusted EBITDA down 12.7%. On a year-to-date basis, excluding AirStrand, revenue was down 2.8% and adjusted EBITDA down 9.5%. Our adjusted EBITDA margin was just under 40% in Q3, which reflects higher operating costs as part of our investment plan to drive better customer growth and higher medium to long-term revenue and cash flow growth. Our cash CapEx was up approximately 60% year-over-year, driven by increased fiber investment. This all contributed to a 46% reduction in our EBITDA less CapEx or operating free cash flow. Slide 14 is an overview of our CapEx. Capital intensity was 20.6% in Q3, up from 12% in the prior year quarter. Without fiber and new home build growth investment, capital intensity would have been 10.5%. Year-to-date, we've spent about $1.4 billion of cash CapEx. Our full year target remains between $1.7 billion and $1.8 billion on a cash basis. Remember that after a couple of years of elevated CapEx to support our accelerated fiber rollout, we do expect to start seeing significantly reduced CapEx once we start scaling back the build. Turning next to Slide 15, which shows the bridge of free cash flow in the third quarter. Free cash flow for the quarter was $136 million and was $535 million year-to-date, which is lower year-over-year given all of our accelerated growth investments. Note that excluding our investment in FTTH, free cash flow would have been over $1 billion year-to-date. Our cash interest payments were $348 million in the third quarter, which is slightly higher than previous quarters given recent rate increases, although 77% of our current debt is at a fixed rate. Cash taxes were $30 million in Q3, and we do not expect any material cash tax payments in Q4. Lastly, other financing activities reflects continued debt paydown amounting to about $114 million for the quarter. We repaid the $650 million 5 7/8% notes in September with our revolving credit facility and have been subsequently paying down the revolver with excess free cash flow. Finally, on Slide 16, I want to highlight again that our debt maturity profile is well positioned with termed out maturities following prior refinancing activities. We have no annual bond or term loan maturities greater than $1 billion before 2025, all of which can be covered by either free cash flow generation or capacity from CSC Holdings revolving credit facility without any need to access the credit markets. If you recall last quarter, we entered into an amendment to our main CSC Holdings revolving credit facility, extending the approximately $2.5 billion maturity to July 2027 at a rate equal to SOFR plus 2.35% per annum. At the end of Q3, we had liquidity of approximately $1.4 billion on top of maintaining a healthy level of free cash flow generation. The weighted average life of our debt is currently 5.8 years and our weighted average cost of debt is 5.1%. Again, we remain very well positioned in our debt maturity schedule and we will continue to proactively and opportunistically manage our liabilities as and when we think it is appropriate to do so. And with that, we will now take any questions.

Operator provided instructions. Our first question today is coming from Philip Cusick from JPMorgan.

Dennis, welcome aboard. Dexter, thanks for your help. Dennis, I thought maybe it would make sense to start, first of all, with what do you see in the first month, opportunities and threats in the Optimum versus Suddenlink markets. I can't help but follow up on your comment about fiber being the greatest technology, given your recent history at Comcast where the company is very wedded to the DOCSIS path. What do you think out loud about how the companies maybe are in a different situation? Or do you think this is sort of an inevitable move towards fiber over time?

Thank you so much for the question. Over the last 30 days, I've been deeply focused on strategy and budget sessions with Mike and the executive leadership team here and meeting the various teams and employees across the whole business. What's clear to me is that the company has made a lot of progress in setting a strong foundation for best quality broadband through the deployment of its fiber strategy, the launch of multi-gig speeds and the rebrands of one brand. I'm a big believer that fiber is the best technology that exists today. As I look ahead, I think we need to focus on disciplined execution and customer experience in order to maximize our investments and to return to broadband growth. There are areas where we can accelerate such as with our go-to-market strategy, aligning our product portfolio. I'm looking deeply at our packaging and our offers and how we can continue to ramp up sales and marketing machines to get us back to sustainable growth. I'm looking forward to working with the team to make that happen.

Any further questions from Philip Cusick?

Yes. I guess if I can follow up there. As you look strategically at the business, any thoughts of your own on the process of selling Suddenlink, which was out there for a little while? I know the credit markets are a little tougher. Is that still in process?

I'm going to pass that to Dexter who's involved in our strategic initiatives. So I'll let him address that.

Yes. Phil, we've been pretty consistent on these calls and saying that we'll update the market when we have something to update the market on. I think it's fair to say that we're getting to a place where a decision is pretty imminent as to whether or not we're going to do something on that. But I won't comment any further than that, and we'll update the market appropriately.

The next question is coming from Craig Moffett from MoffettNathanson.

And Dennis, let me add my congratulations. And Dexter, let me add my thanks for working with you over the past few years. Two questions, if I could, and I'm going to stay with some of the same themes. First, Dennis, I guess, what's your early thinking about broadband pricing? Dexter, you said a while back that you were taking a strategic look at your pricing strategies. I wonder as you come in, Dennis, how you think about the broadband pricing situation at Altice and what you think the prospects are to continue to grow ARPU, which sequentially was down this quarter fairly significantly. And then second, I know you can't comment too much on possible Suddenlink transaction. But can you at least discuss the thinking behind potentially selling it in parts rather than all of it? Is that driven by where the demand side of the market is? Or was that something you saw about pieces that you wanted to hang on to?

On pricing, this is part of my assessment as I go through the budget process with the team. I'm looking at our rate card, our offers in the marketplace and how we can evolve our go-to-market strategy. That's a critical area of focus for me. I'm looking at pricing opportunities with fiber as we continue to deploy fiber. As we solidify our budget, we'll be taking a deep look and making some decisions quickly.

Craig, I think on the Suddenlink side, that was being responsive to inquiries we have received in terms of the size of the overall operation and the disparate nature of the geographies. We had some inquiries along pieces of it as opposed to the whole thing across multiple players. We were being responsive that way to a piecemeal versus a whole company solution.

Our next question is coming from Douglas Mitchelson from Credit Suisse.

And sorry for harping on the M&A side. But I'm just curious, Dennis, if you have a perspective on the strategic importance of smaller markets versus larger markets, not necessarily the Suddenlink process itself. Over time, a lot of experience at Comcast; they had all sizes of markets. Typically, you think about cable as a scale business. But in the New York footprint, you have super scale, and the economics can be different. Do you find larger markets more attractive than smaller markets, or anything interesting there? And then separately, Dexter, I know you focused on strategy. I think what we've been hearing in the last couple of quarters is focus on debt paydown. You're obviously still free cash flow positive. Is there any flexibility for tuck-ins? Or should we continue to think that while you're going through the fiber overbuild, you're hunkering down and focused on debt paydown?

Ladies and gentlemen, please stand by. Our speakers will be rejoining us momentarily. Now, rejoining the speaker line. Technical difficulty.

Sorry about that. It didn't have anything to do with the question, it was a technical issue. Our apologies.

Well, that gives me a chance to add, Dexter, hope you enjoy the stronger U.S. dollar as you move to London soon.

It clearly has not escaped me that the timing may be good.

And I'll add my welcome to the rest for you, Dennis. Look forward to working with you. So did you guys catch my questions? Or should I repeat that?

No, we didn't. I'm sorry. So please just give it to us again, that'd be great.

Yes. I'll give you the short version just for the audience. I was curious, Dennis, your view on strategic importance of small markets versus large markets. Cable is a scale business and in the Optimum footprint you have super scale. So not Suddenlink specifically, but I'd like your view on the economics of small markets versus larger markets and where you might focus over time. And then Dexter, as you think about strategy, I think the last couple of quarters the discussion has been focused on debt paydown and having flexibility for tuck-ins or small deals. Is that how we should think about it going forward? You're still free cash flow positive. So just curious where your M&A focus will be.

I've got experience in both small and large markets. My footprints have included very small markets as well as large markets. My focus right now is looking at our go-to-market strategy and how we address the needs of those disparate markets in the right way. I think we have the right strategy and I'm excited about where we're headed. As I go through the budget process and build our strategy for 2023, I'll be taking a close look at how we are addressing both and how we can continue to have a customer experience lens as we move forward.

On M&A strategy, I don't think there's much to comment. We've been pretty reactive on certain things, whether there are assets like tuck-ins that are available or additions to some of our other verticals that we would look at. There's a whole host of things that we would look at that are on our plate, some that may be expected and some that may not. At this point in time, there's no need for us to talk about the art of the possible, but there are things that we probably will talk about in the near future in terms of things we're thinking about.

The next question is coming from John Hodulik from UBS.

Great. And again, welcome to Dennis, and congrats to Dexter. Maybe we can talk about the broadband market. You talked about a couple of things driving the current trends. Could you talk about the difference you're seeing in terms of competition in the Suddenlink markets versus the old Cablevision markets? And then Dexter, you said that you saw the typical back-to-school benefit. Are you suggesting that without the back-to-school benefit that the trends would be worse as we look into fourth quarter? Lastly, as you look out to 2023 based on the trends you're seeing on the fiber side, do you think we can get back to growth sometime during 2023? Or is that something we'd expect more in 2024?

On competitive dynamics and KPIs in our markets, we're seeing effects from fixed wireless access that's been out there, fiber overbuilders primarily in the West, and Frontier has grown in parts of the East in Connecticut. The geographic dynamics remain the same: on the east side, we have lower gross add activity; on the west side, higher churn activity than historically. Q2 to Q3 was pretty much flat sequentially in terms of performance. I will say we've seen some stabilization in October relative to the run rates that we saw earlier in the year that are more attractive. The work has been fast and furious for the past 12 to 18 months. We continue to invest in fiber build, new build, distribution and care. It's a question of time relative to your 2023 question, but Dennis will go through the budget process and comment further at the Q4 earnings call.

From my perspective, in the first 30 days, I've seen the investments that have been made and I see the impacts. I'm bringing my operational experience and customer experience lens now. I've talked to hundreds of our teammates and spent time on the front lines. I don't think it's necessarily a significant change in strategy or require further investment, but we do need to focus on process improvements and operational efficiencies. I'm getting great feedback from our teammates on the front lines, and I'm spending time understanding end-to-end where there may be opportunities to evolve our customer experience and deliver great service.

The next question is coming from Jonathan Chaplin from New Street.

Thanks. I'm going to follow up on that question. Can you give us a little context for what the trends look like in Suddenlink versus Optimum, whether you're losing subscribers in both markets at the moment? One is a function of churn and the other is a function of lower gross adds. Are the trajectories equally challenged? And then what's going to get the business back to subscriber, revenue and EBITDA growth from here? Is it just playing out the strategy that's been put in place already? Or do you see big changes that you'll implement as a function of your strategic review to get back to growth?

On the trend side, trends are improving. The macro commentary of lower gross add activity in the east and higher churn in the west remains. We are losing subscribers in both east and west on a year-to-date basis, but we are seeing some rays of sunshine coming in due to the investments we've made throughout the year in care, distribution, rebrand and technology. The trends are moving in the right direction.

In the first 30 days, I've seen the investments and their impact. I'm bringing my operational lens and customer experience focus. I see opportunities to improve processes and operational efficiencies rather than a wholesale strategy change. We need to execute on the investments and the strategy while improving execution and customer experience.

The next question is coming from Brett Feldman from Goldman Sachs.

Welcome to Dennis. As some of your cable peers have seen their broadband trends soften considerably, they leaned into mobile and are increasingly talking about mobile as a mechanism for pulling through broadband, advertising mobile as a great way to save money but you have to buy their broadband to do it. You've restructured your opportunity to use mobile more significantly through the new T-Mobile deal, but you've actually eased off a bit recently. Could you give us your latest thoughts on the role that mobile can play in helping to get the broadband business back to growth? And a quick one for Mike: you talked about using some cash to pay down debt. Your bonds are trading at significant discounts to par. Are you buying back bonds or how do you think about that opportunity?

Mobile is a great product, especially paired with broadband. We are continuing to expand our retail presence and I'm having deep strategy conversations with the team on where we've been with mobile. I do think there's opportunity, and I'm excited about it. We will be reviewing current offers and evolving bundles and our offer strategy to drive broadband and mobile.

Brett, we are very aware of how our debt is trading in the marketplace. We have not to date engaged in open market repurchases of our bonds. Our debt paydowns to date have been via the revolver. It's a little easier from a logistical standpoint and provides enhanced liquidity benefits. But it's on our radar screen and something we'll continue to contemplate. Historically we haven't gone down that road yet, but we're very mindful of it.

Your next question is coming from Michael Rollins from Citi.

Thanks, and congrats to Dexter and welcome to Dennis. Stepping back on the future of Altice, how are you thinking about the merits of Altice USA being a public company versus a privately held company? And second, following on the customer experience discussion, what are the opportunities for Altice to partner to accelerate customer experience, whether it's licensing technology, accelerating distribution, or enhancing bundles?

I'd miss speaking to all of you if we were a private company, so that's one consideration. Being private affords more flexibility, but these decisions are at the board and shareholder level and not on the table today. It's an analysis that's been looked at and may be revisited in the future as we go through budget processes. Both public and private structures have merits in terms of incentives and capital availability versus operational flexibility.

And on the opportunity to partner to accelerate customer experience?

We do partner with vendors and service partners across the ecosystem whether we're talking about call centers, installation or repair. We're continually assessing the right mix of partners to deliver the quality we expect. That review is part of the budget and strategy sessions to figure out the right mix to deliver the best experience.

Your next question is coming from James Ratcliffe from Evercore ISI.

Congrats to Dexter and welcome to Dennis. Dennis, interested in your thoughts on fixed wireless and how you combat that. You've been building out fiber which gives advantages, and you talked about NPS improvements. Your HFC product is already materially better than fixed wireless. If fixed wireless is stealing customers, how do you combat that competitive force?

That's a great question. It's part of what I'm reviewing as I evaluate pricing, packaging, offers and sales channels. We have a strong portfolio of services, especially with bundles that we can create with mobile. We'll pull together these tools and assets to compete effectively. Fiber, as we continue to roll out, will give us the best technology in the marketplace, and we're excited about driving that.

Your next question is coming from Peter Supino from Wolfe Research.

I wanted to ask a couple. One on churn in the west. You mentioned local fiber builds and fixed wireless. Is the churn problem specifically happening primarily in places where fiber arrives? Or is there really a fixed wireless churn problem as well? Then on the finance side, could you discuss your visibility on 2023 and 2024 fiber build costs per home? I know you had a lot forward contracted and wondered when that visibility might roll off.

You're spot on: we're seeing higher churn primarily in markets where we see increased competition from fiber overbuilders. In markets where we're not seeing that activity, we're not seeing the same trends.

On unit cost per household for the fiber rollout, we have pretty good visibility. There may be some inflationary pressure, but nothing dramatic in labor or materials. We have locked in certain longer-term contracts to procure labor and materials. Variability in unit cost will be driven by the mix between east and west builds. West builds will be a little more expensive due to lower household density per mile and more underground exposure. But our visibility is pretty good on these instances.

Our next question is coming from Steven Cahall from Wells Fargo.

On the fiber passings, you continue to accelerate those. Is anything constraining that growth, whether it's labor or permitting? I imagine you'd want to pull it forward as much as possible. Can you talk about the cost per passing you're currently seeing excluding CPE? As a follow-up, when fiber comes into the market, does it put price pressure into the marketplace or is it really competition for net adds?

We are going as fast as we can. We've been doing this in the East for about three years and have been accelerating throughout the year. We'll see a little slowdown due to weather in Q4, but we'll continue to accelerate into 2023 as we're largely finished in the East by 2024. The West involves more disparate geographies, so scaling there takes more organization and planning. The primary limitation in the East has been permitting—New York state has been somewhat of a bottleneck; we probably have 200,000 to 300,000 permits pending in New York. We've redirected efforts into New Jersey and Connecticut as we await permits in New York. We have access to labor and raw materials. Installation processes have improved week over week. In terms of fiber ARPU, our fiber gross adds tend to generate over 10% higher gross add ARPUs than HFC. When we are fiber versus fiber in offense-defense scenarios, the defensive side materially improves churn and gross add profile. That kind of competition is more even-handed, and it's less about gross add ARPU and more about the customer. We're thoughtful about pricing, and Dennis and the team are focused on go-to-market strategy and pricing levers.

Your next question is coming from Robert Palmisano on behalf of Frank Louthan from Raymond James.

Rob on for Frank. Can you give a quick update on how you would rank your capital allocation priorities currently? And would you say you've gotten through most of the supply chain issues that were keeping you from selling into the fiber build previously?

On capital allocation, we are focused on the investment cycle in fiber and new build. Excess free cash flow has been used for deleveraging; we've been paying down the revolver. On raw materials and CPEs related to fiber, we're well underway with the right inventory levels and are comfortable with the rollout for both gross adds and migrations. The installation process continues to improve and repeat rates are improving as technicians gain experience. New York installations are further along than New Jersey and Connecticut due to time served, and those will continue to improve into 2023.

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

Thanks, everyone, for joining. Do let us know if you have any follow-up questions. Otherwise, we'll catch up with you in the next few weeks. Thank you.

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