Optimum Communications, Inc. Q1 FY2025 Earnings Call

Greetings, and welcome to the Altice USA Q1 2025 Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sarah Freedman, Vice President of Investor Relations.

Thank you. Welcome to the Altice USA Q1 2025 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, everyone, for joining us today. In the first quarter, I'm pleased to share that we made meaningful strides to stabilize our performance and solidify our foundation for long-term success here at Optimum. Our performance was driven by improvements in customer and network experience, the expansion of competitive and targeted go-to-market initiatives, and a focus on transforming our business. We also successfully navigated two significant programming negotiations, achieving favorable outcomes with minimal disruption to our customers. Our progress reflects the dedication of our Optimum teammates who continue to deliver for our customers and drive our strategic priorities. I'm incredibly proud that we were recertified as a great place to work, a testament to the culture driving our momentum. Thank you to the entire Optimum team for making it happen. I'd like to begin on Slide 3 with our quarterly performance highlights. Broadband subscriber net losses were 37,000, which improved sequentially from last quarter and reflect the investments and changes we have implemented in the last 18 months. When normalized for the impact of nearly two-month programming disputes, we would have seen approximately 35,000 broadband net losses in the quarter. Average Revenue Per User (ARPU) grew 4% year-over-year, supporting the progress we are making on stabilizing ARPU trends, which Marc will provide details on shortly. On fiber, we achieved an all-time high fiber performance of 69,000 fiber net additions. We ended the quarter with over 600,000 fiber customers, reaching 20% penetration of our fiber network. We continue to accelerate mobile growth with 49,000 mobile line net additions and surpassed the milestone of 500,000 mobile lines. Our transformation is gaining momentum as we sharpen execution and expand targeted go-to-market strategies in high opportunity markets. We are also working to optimize our programming and expense opportunities and achieved nearly 69% cost savings in the quarter. Additionally, quarterly churn reached the lowest levels in three years. Annualized broadband churn improved by 90 basis points year-over-year in Q1, especially within voluntary and non-pay churn, driven by stronger base management, enhanced value propositions, and better network performance. We also continue to make incredible progress in our customer experience, as evidenced by our recent recognition by the global Stevie Awards for excellence in customer service and customer service transformation, a testament to the ongoing dedication and commitment of Team Optimum. Turning to Slide 4, our 2025 priorities remain unchanged: to unlock revenue opportunities, drive greater operational efficiency, continue enhancing our award-winning networks, and ensure our capital structure is aligned with our long-term operating goals. I want to pause here and underscore that 2025 marks a pivotal milestone for Optimum, reflecting the culmination of our strategic investments, successful execution of our operational transformation, and delivery of financial discipline that has enabled us to slow the rate of adjusted EBITDA decline over the last three years. Looking ahead, in 2025, we expect to deliver approximately $3.4 billion of adjusted EBITDA, stabilized broadband subscriber trends in the full year, and improved investment returns. We will detail in the following slides the strategies that give us confidence that we can achieve this. Our top-line performance will continue to be closely tied to subscriber trends. We are taking purposeful actions to realize more revenue opportunities by addressing customer affordability challenges and competitive intensity and by delivering greater value through tailored offers, localized pricing, and enhanced product positioning and bundles. As we continue to drive transformation, we are executing a broad range of initiatives aimed at enhancing the customer experience while reducing our cost to serve, increasing the flexibility of our programming agreements, expanding the use of digital and AI tools to reduce service calls and visits, and driving stronger ROI across both operating costs and capital expenditures. Finally, we remain disciplined in managing our capital structure and continue to evaluate all options that support long-term sustainability and align with our operating goals. This week, we entered into an agreement to sell certain tower assets for gross proceeds of approximately $60 million. We expect this transaction to close by early Q3, subject to customary closing conditions. As previously disclosed, we also entered into an agreement to sell the i24 News business to a party or an affiliate thereof. This transaction is expected to close later this year following the satisfaction of closing conditions, including regulatory approvals. These transactions provide us with additional operational focus and financial flexibility. We will continue to evaluate our balance sheet and operational efficiencies to monetize non-core assets as opportunities arise. Turning to Slide 5, I'll walk through some of the key operational strategies we are deploying and scaling to position us to deliver approximately $3.4 billion of adjusted EBITDA in the full year 2025. First, on our competitive go-to-market efforts, we're enhancing marketing effectiveness through AI and digital tactics and refining our packaging and offers based on data-driven insights. Specifically, over the past few quarters, we've seen increased pressure in income-constrained segments, particularly with gross additions as some customers opt for lower-cost alternatives. We see firsthand how customers are being impacted by inflation, unmet and broader economic pressures, which is why we're committed to evolving our packages to ensure there are solutions for every budget. At the end of April, we launched a new everyday low-price offer designed to support families facing economic hardship. Later this year, we will enhance this product with lifestyle brand partnerships to enhance our value to families as they manage overall expenses. We're actively working to increase awareness and accessibility of these services through direct outreach and by lowering qualification hurdles for a simplified sign-up experience. This leads me to our hyperlocal playbook, an approach we can uniquely deploy given our ability to move quickly in local markets. In Q1, we scaled this strategy across highly competitive areas in our footprint, offering attractive pricing paired with compelling features like price locks and free installation to lower barriers to switching. This strategy is highly targeted, data-driven, and driving strong results. In these markets, we're already seeing over a 10% lift in revenue driven by higher sales and penetration growth. We're also sharpening our focus on our multi-dwelling unit footprint, which represents over 2 million serviceable passings across our footprint. MDUs are a valuable customer segment, as a portion are secured through long-term agreements and have a better churn profile. We've deployed new reporting and analytics tools to identify where we are underpenetrated and then track, monitor, and optimize performance led by a focused leadership team to drive our go-to-market for this segment. And we are enhancing our managed Wi-Fi offerings to deliver a stronger experience tailored to MDU customers. Overall, our go-to-market approach is to deepen our connection across the communities we serve by optimizing our offers and customer engagement to reflect what matters most at the neighborhood level, and we're already seeing positive momentum in several markets. Next, we are enhancing and expanding our products and services to strengthen our competitive profile. On broadband, in April, we launched whole-home Wi-Fi, a value-added service that provides more powerful and seamless coverage throughout the home, along with ongoing tech support for total peace of mind. Priced at $10 per month, this product eliminates connectivity pain points, such as dead zones and drop signals, especially as the number of connected devices in the home continues to grow. Later this year, we will roll out more next-generation Wi-Fi solutions to further enhance the in-home experience. If you recall, last year we launched Total Care, another premium support add-on priced at $15 per month. Together, we expect to achieve 30% penetration of our broadband base as we scale whole-home Wi-Fi and Total Care over time. As I shared earlier, we also achieved over 20% penetration on our award-winning fiber network and continue to target 30% penetration by year-end 2026. On video, we are evolving our portfolio to ensure our entertainment offerings bring our customers what they want, how they want it. We announced our collaboration with Disney to offer eligible customers the Disney+ Hulu bundle basic option for six months on us. After six months, customers will continue to manage their subscription directly through Optimum. This is the beginning of our new approach to enable customers to build their own curated content selection through us, with more OTT streaming partners and other services to become available for purchase through Optimum in the quarters to come. In addition, we are scaling the availability of the three new video packages we launched in late 2024, entertainment, Xtra, and everything TV with existing and new customers while improving our video margin profile. In Q1, over 25% of new video customers chose entertainment TV, our $30 entry-level package without sports and news, highlighting strong demand for affordable skinny bundles. Turning to B2B, we recently unified our B2B and Optimum Media divisions under one leader to capitalize on new growth opportunities while delivering greater value to Optimum's business customers. This uniquely opens the door to more opportunities for cross-selling and driving innovative advertising and connectivity offers. On the B2B side, we're expanding product availability of fiber broadband to drive higher fiber penetration. We recently launched secure fiber Internet at no extra cost and secure Internet Plus at $20 per month, which allows for security feature customization. These new cybersecurity solutions are in high demand and built on our cloud-based high-capacity infrastructure, designed to provide powerful, reliable protection. In Q4, we launched connection backup at $30 per month for B2B customers, which provides a reliable, automatic backup Internet connection specifically designed for point-of-sale systems and other critical business devices. We continue to scale this product and are already seeing meaningful take rates in the first quarter. We estimate that these types of products and add-on services can achieve over 30% penetration over time. It's worth noting that these B2B solutions are in addition to other new products we have launched over the last year, such as device protection and insurance, as well as pro Wi-Fi Internet with marketing solutions, which we continue to enhance and drive greater penetration. Turning to mobile, we continue to build momentum and drive convergence. We are seeing demand from both new and existing customers who want the simplicity and value that come from combining broadband and mobile in one seamless experience. Our mobile service revenue grew 47% year-over-year in Q1 and we reached over 6% of our broadband base converged with mobile, representing a meaningful growth opportunity to continue to drive convergence. In addition to delivering top-line revenue growth, our mobile and value-added services portfolio enhance customer lifetime value by creating stickier, higher ARPU customers and help us to compete more effectively. We estimate that new revenue from mobile and value-added services will exceed $0.5 billion of incremental revenue over time. Finally, we are focused on advancing our transformation and driving greater efficiencies across the business. One key area is through the optimization of our programming agreements. Our negotiations are guided by a customer-first mindset supported by advanced data and analytics that helps us to understand viewing habits and advocate for the best possible value and flexibility. In early Q1, this approach led to the temporary drop of two networks for approximately 1.8 million customers while we negotiated for more flexible terms for our customers and our business. Throughout this period, we proactively engaged directly with our customers, offering alternative viewing options and solutions tailored to their individual needs. While this caused some impacts in the quarter, which we have detailed in the presentation, our thoughtful approach significantly minimized customer inconvenience and churn, and we retained 99.8% of those impacted. I am extremely pleased with the positive response from our customers, how our team proactively managed the situation, the outcomes we reached with our partners, and how we've strengthened our playbook for future programming negotiations and deal optimization. Next, we have made significant investments in people and technology over the last two years. As a result, we have transitioned from legacy systems to digital platforms, and our continued investment in automation and AI tools allows us to work faster and is becoming embedded in how we operate. As we enter this next phase of transformation and evolve into a digital-first company leveraging AI and automation, we are continually optimizing organizational structure and staffing models to increase efficiency, eliminate redundancies, and strengthen our performance-driven culture. I am pleased to welcome Colin Cohn as our new Chief Human Resources Officer. The team and I look forward to partnering with her to build a resilient high-performing organization aligned with the needs of our evolving business. Our digital and AI tools are already delivering impact, reducing service calls by over 1 million and truck rolls by $280,000 in the last 12 months while improving the customer experience. We're excited to continue advancing our systems to drive further efficiencies and value. To support this evolution, Optimum is proud to announce an expanded partnership with Google Cloud to build an intelligent and personalized customer experience across web interactions, mobile apps, call centers, and in-person kiosks. Optimum will use Google Cloud's generative AI technology, including Google's Customer Engagement Suite, Vertex AI platform, and Gemini models to improve customer service, provide more robust tools to our frontline teammates, build stronger, more resilient relationships with our customers, and unlock meaningful workforce efficiencies. Today, we're resolving over 50% of customer inquiries with our in-house AI virtual agent called AIVA. We're excited to add Google Cloud's AI technologies to our toolbox and further improve the customer experience. Our digital transformation has also allowed us to take a more proactive approach to network maintenance by leveraging data in new ways to deliver best-in-class service quality at the street and neighborhood levels. We are preemptively resolving issues before they lead to service visits, minimizing calls to the call center, ultimately helping more customers with fewer resources and lower costs for us. At the same time, we're enhancing our telemetry systems to give agents better diagnostics and clearer guidance, enabling faster and more effective resolution when customer issues do arise. In Q1, our average monthly service dispatch rates approached recent lows, driven by our proactive approach and enhanced maintenance efforts. In summary, these strategies are helping to strengthen our competitive position, stabilize our customer base, and drive greater efficiency across the business to deliver meaningful results. I will now turn it over to Marc to walk through our financial outlook shaped by these strategic initiatives.

Thank you, Dennis. Let's begin on Slide 6. Adjusted EBITDA has declined in recent years, but notably, we have steadily improved the rate of decline as our transformation gains momentum. Because of our investments and focus, we expect full-year adjusted EBITDA of approximately $3.4 billion in 2025 and full-year revenue between $8.6 billion and $8.7 billion. Our revenue outlook reflects subscriber trends and the anticipated decline in political advertising during this non-presidential election year. Revenue outlook trends for 2025, excluding political advertising, reflect a smaller decline compared to full year 2024, which demonstrates our confidence in stabilizing subscriber and ARPU trends and growing attachment rates. We continue to see programming cost savings driven by video subscriber volume, with programming costs moderating by 12% year-over-year in Q1, excluding benefits from content savings during the non-carriage periods. In the full year 2025, we expect total direct costs of approximately $2.6 billion, inclusive of other direct costs, which should increase as our mobile business continues to grow. We remain focused on driving stronger returns on both operating expenses and capital expenditures. As we streamline operations, simplify our organizational structure, and improve marketing effectiveness, we expect approximately $2.6 billion of other operating expenses in the full year 2025. This is a slight moderation compared to the full year 2024. As more of these initiatives take hold, we expect further moderation in 2026. On CapEx, we're prioritizing the highest return capital projects and further implementing cost efficiencies across network maintenance. We now expect full year 2025 capital spend of approximately $1.2 billion, while still achieving our goals related to network upgrades, expanded passings, and new product launches. I'm extremely pleased with the progress we're making and the steps we're taking to sharpen our execution. I'm confident these actions will drive stronger performance and improved results in full year 2025. Next, on Slide 7, you'll see an overview of our broadband, fiber, and mobile subscriber performance over the last few quarters. While Dennis reviewed most of these results earlier, I want to highlight a few points. As mentioned, broadband subscriber net losses in Q1 were 37,000. The impact of the aforementioned content interruptions for almost two months in the quarter resulted in approximately 2,700 fewer broadband net additions. Our broadband performance in the quarter was supported by churn stabilization across our footprint, and our performance in the East footprint improved year-over-year in Q1 despite programming non-carriage periods. In the West, gross additions remained challenged as we saw continued elevated competition from fiber overbuilders and less market activity. However, churn in the West also improved year-over-year in Q1, and we remain confident that our new go-to-market strategies will help stabilize broadband subscriber trends in these markets. Furthermore, mobile and fiber remain significant growth opportunities for us, and we continue to expand participation across all channels. This quarter, we accelerated momentum in both areas, and we continue to expect 1 million fiber customers by year-end 2026 and 1 million mobile lines by year-end 2027. We are very encouraged by the early traction from our strategic initiatives, which are resulting in strong broadband, fiber, and mobile trends. Turning to Slide 8, I'll review our financial performance in Q1. Total revenue of approximately $2.2 billion declined 4.4% year-over-year and was driven by residential declines of 5.7%. Business Services declined 0.4%, supported by LightPath revenue growth of 7.3%, news and advertising decreased by 3.1%, offset by growth in other of 52%, primarily driven by growth in mobile equipment revenue. In Q1, we saw revenue impacts from customer credits issued in connection with the two programming interruptions. Excluding these impacts, revenue would have declined approximately 3.9% in the quarter. Q1 adjusted EBITDA of $799 million declined 5.6% year-over-year, driven by revenue decline, offset by programming savings and an increase in other operating expenses, excluding share-based compensation. The increases in other operating expenses were driven by higher one-time customer care sales and marketing expenses related to the temporary programming interruptions, as well as a net increase in labor-related costs and benefits, primarily due to higher employee health and wellness expenses. These impacts were partially offset by lower truck roll costs. Excluding the revenue programming and operating expense impacts from non-carriage periods, adjusted EBITDA would have declined approximately 4.8%. Total gross margin expanded by 180 basis points year-over-year to 68.8% in Q1, driven in part by nonrecurring cost savings, which were partially offset by customer credits. Excluding these one-time items, gross margin would have been approximately 68.2%. While a portion of the benefits this quarter was nonrecurring, the underlying trends remain positive, with gross margins reaching an all-time high. This reflects a continued mix shift away from video as well as ongoing efforts to optimize both video and product gross margins. We continue to target 70% gross margins by year-end 2026. Q1 total adjusted EBITDA margin was 37.1%. Excluding the impacts I just mentioned, adjusted EBITDA margin would have been approximately 37.2%, and we continue to target a 40% normalized adjusted EBITDA margin over time. Turning to Slide 9, residential ARPU of $133.93 declined 1.3% in Q1 year-over-year. This is driven by a lower volume of video customers and customer credits related to programming interruptions, partially offset by rate actions taken at the end of Q4, as well as stronger gross add ARPU, which is up 1.8% year-over-year. Excluding impacts related to temporary programming non-carriage residential ARPU would have declined just 0.6%. Broadband ARPU grew 2.4% to $75.31, driven by rate actions, rate discipline, and upgrade activity. We continue to make progress on stabilizing our ARPU trends in several ways. First, we are minimizing ARPU impact from retention efforts with customer lifetime value-based models and AI analytics tactics. Second, our streamlined pricing approach is delivering better value for our customers and shifting demand towards higher-speed packages, with almost 6% of new customers taking 1 gig or higher speeds. By the end of Q1, 35% of our customer base was on 1 gig or higher speed tiers. Third, we are driving mobile penetration and selling our value-added services portfolio, as Dennis referenced earlier. And finally, through improved go-to-market execution and targeted rate actions, we're preserving ARPU better while remaining competitive at the hyperlocal level. Turning to Slide 10, I'll walk through our network investments and how we're driving greater efficiency across our capital envelope to support long-term growth and enhanced service delivery. We added 25,000 total new passings in Q1, reaching 9.9 million total passings. We grew our fiber footprint by 33,000 passings, primarily through fiber new builds, ending the quarter with 3 million fiber passings. We continue to expand our footprint in a fiber-rich manner, with the majority of fiber passings in 2025, contributing to total new passings. We see strong trends in both our Hybrid Fiber-Coaxial (HFC) and fiber networks, with similar take rates of 1 gig or higher speeds across both footprints of almost 60%. We continue to invest in our networks, prioritizing the highest return opportunities and implementing tools and processes to enhance efficiencies. We have begun our mid-split upgrades on our DOCSIS 3.1 network, expanding and reallocating spectrum to enable download speeds over 1 gig. Our Lightpath business continues to expand in the hyperscaler community, with the recent announcement of its entrance into the Columbus, Ohio market with a new 102 route mile underground high fiber count network anchored by a major hyperscaler partner. Over the last few years, we have moderated our capital spend, stepping down by approximately $210 million in the full year 2023 and by $270 million in the full year 2024. As we continue to drive more efficient investments, we now expect cash capital for the full year 2025 of approximately $1.2 billion. Importantly, we're maintaining our investment discipline without sacrificing progress and continue to target 175,000 total additional passings in the full year 2025. Next, on Slide 11, I'll review our free cash flow performance in the quarter. Free cash flow in Q1 is negative $169 million, primarily driven by cash interest of $547 million, which increased by $145 million year-over-year. The year-over-year increase in cash interest was largely driven by the additional semiannual bond payment related to the 11.75% senior guaranteed notes issued in January of 2024, which were used to refinance a portion of our term loans. Compared to 2024, we only had one cash interest payment related to this issuance. Additionally, in September 2024, we executed a six-month synthetic LIBOR contract on the incremental term loan B5 to mitigate the end of LIBOR. This resulted in a six-month interest payment being made in March of 2025 compared to monthly cash interest payments prior to September. As a result, we paid $52 million of interest related to prior years in Q1 of 2025. Beginning in April, the term Loan B5 will bear interest at an alternative base rate currently defined as the prime rate plus 1.5% per annum. Lastly, on Slide 12, I'll review our debt maturity profile. We remain well positioned with no maturities until 2027. At the end of Q1, our weighted average cost of debt is 6.8%. Our weighted average life of debt is 3.8 years, and 73% of our total debt stack is fixed. At the end of the quarter, we have liquidity of approximately $700 million, which includes undrawn revolver capacity and ending cash balances. Our leverage ratio was 7.6x the last two quarters of annualized adjusted EBITDA. We remain focused on exploring opportunities to ensure our capital structure supports our long-term operating goals. In conclusion, we have the right strategy in place; we remain focused on executing with discipline and rigor to create sustainable long-term growth and enhance value for our shareholders. With that, we will now take any questions. Thank you.

Our first question comes from Michael Rollins with Citi.

So just curious if you could provide some additional context on the competitive landscape for your broadband business with respect to the impacts of fiber and fixed wireless competition. And within that context, are you seeing any change in customer behavior, including an incremental leaning towards value products in the market? And then just finally to wrap that all together, as you described some of the improvements in the business that you're seeing, is there an opportunity over the next few quarters to start reducing the broadband losses on a year-over-year basis?

Thank you, Michael. The competitive landscape remains intense. When we think about the East, we continue to see competition from mature telcos like Verizon, as well as fixed wireless from T-Mobile and pockets of other fixed wireless solutions in the West. We remain 45% overbuilt based on the latest BDC data, but we are seeing continued growth of overbuilders into our markets, and we're continuing to see fixed wireless throughout the West as well. As we've done our consumer research and continue to talk to our customers, we know that the macroeconomic headwinds are weighing heavily on folks. About 75% of the people we spoke to mentioned that they are challenged with their monthly expenses. I'm really excited about some of the new solutions that we are rolling out and have been rolling out. As I mentioned on the last call, we just recently launched a new income-constrained product specifically targeting that demographic. These are folks that are looking for transparency, value, predictability, and price. I'm excited to say that we launched that product last week. It’s still very early days, but as I look at our footprint, about 38% of our West footprint falls into this demographic and 18% in the East. This will allow us to compete very effectively, I believe, going forward to provide the right value, the right products, and the right solutions for this consumer segment. We also see that there are intense competitive elements in MDUs, where fixed wireless is competing effectively as well. I'm excited to say that we are rolling out new strategies for MDUs. We have 2 million MDU passings. Historically, we have had very little visibility and reporting tools to drive our go-to-market approach in MDUs. We've recently brought in some new leadership and established new tools, and we're already seeing the benefits of those tools and new processes to help us drive penetration in underpenetrated areas. We're adding 32,000 new MDU passings this year. So this will allow us, as we continue to expand in MDUs, to compete even more effectively as we move forward. The competitive landscape across the East and the West remains intense, but we're continuing to evolve our go-to-market strategies and product set to drive value. The good news is that our churn is at an all-time best in the past three years, with a 90 basis point improvement, both in the East and the West. When I look at the West, particularly in areas with mature fiber overbuilders, we're actually competing more effectively year-over-year. We're seeing better gross add improvements and better churn in areas where there’s new fiber overbuilders; we do see an initial impact, and we have strategies now to help us mitigate that impact and really ensure that we're competing effectively for every customer.

The next question comes from the line of Frank Walton with Raymond James.

This is Rob in for Frank. So curious, if you touched on both of these earlier, I'm just curious to know more about the lower-end product and when it's beginning and when you expect that could ramp up. And also, if you're able to give us any updates on the insurance statistics for the wireless subscribers, that would be great.

Thanks, Rob. We just launched our income-constrained product, and we're expanding it to 500,000 homes this year. We're excited to begin and continue a phased rollout of that product. We're looking very closely at the data to understand what's working and how we can continue to evolve that product as we move forward. So it's still early days, but more information is likely to come on the next call in terms of the impact and velocity of our ability to drive our gross additions. Regarding the insurance product, I'm really excited to share that we launched our mobile device protection six months ago, and we've already achieved 10% penetration into our mobile base. This really shows that we are controlling what we can control. Our teams are excited. It's a great value, and we're able to deliver and grow residential ARPU as we launch these types of new products and services and drive them into customer acquisition and existing base.

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

Dennis, you guys paused discussions with bondholders during the course of the quarter. I'm wondering if you can give us some perspective on what drove the pause? Are you at an impasse or is there potential for the discussions to come back? And to the extent that you can give any context on how far apart the discussions are would be really helpful.

Thanks, Jonathan. My friend, Marc is closest to those conversations, so I'll let him jump in here.

Jonathan, yes, we did update the market last month in the 8-K that our negotiations with the co-op concluded. We did not reach an agreement with respect to a potential transaction. There's nothing more to share at this point. Certainly, while we have information to share, we will. But nothing to add at this point related to that. But as we've said before, we are proactively managing our debt maturities. We feel good about the runway we have through 2027, and we'll continue to explore all options to manage the debt portfolio.

The next question comes from the line of Craig Moffett with Moffett Nathanson.

You talked a little bit about your low-end offering a couple of times. I wonder if you could just zoom out a bit and talk about the competitiveness of your pricing. Do you feel like you've fully gone through the process of rightsizing your broadband pricing and the bundles that you have with wireless, and that you are now in the position you want to be in? Or is there still work to be done there?

Thanks, Craig. It's remarkable the amount of progress the team has made in terms of pricing and our ability to control pricing. When I joined, it was really one size fits all across from Connecticut all the way to Flagstaff, Arizona. There was little ability to compete at a local level. There was a lot more art than science that went into rate events and promotional roles. I feel great that the team has put much more science into this. We're leveraging AI to maximize the monetization of these activities, both in the base and in our acquisition efforts. As I think about our rate events and promotional roles, the team has done a remarkable job to minimize churn, minimize call volumes, and maximize the monetization of those events as they occur. In the face of increasing competition, we've absolutely needed the ability to compete at that local level, especially against fixed wireless and new fiber overbuilders that can enter with low pricing. Our new hyper-local playbooks, as well as our income-constrained products, are allowing us to compete more effectively there. In well-less competitive areas, we've been able to moderate rates and compete in line with the market, rather than needing to aggressively pursue lower pricing across our entire geography. I'm also very pleased that we're driving ARPU growth overall, especially since we've launched a wide range of new products. Since I joined, we've been able to double the number of mobile customers and triple the number of fiber customers. This progress shows that the team has more command of the business than ever, and we're going to continue to drive these exceptional products that will enable us to drive overall value for our customers, build loyalty, and push the business forward. Our goal is to drive top-line revenue, subscriber, and EBITDA growth. I feel confident that we have the strategies in place to achieve that.

The only thing I would add is that I'm really pleased we managed to drive gross add ARPU up almost 2% year-over-year. Much of that growth is coming through the value-added services, as well as the acceptance of higher-tier packages; we're now seeing 60% of customers subscribing to 1 gig services. We're excited about the potential revenue opportunity of these value-added services, which represents a $0.5 billion revenue potential over time that is just starting to manifest. As we reach industry-level penetration, this should provide significant fuel for future top-line revenue growth.

The last question comes from the line of Sam McHugh with BNP Paribas.

Just two questions, please. Thanks for the details on the low-income offers. Of the percentage of people who qualify, how many are already customers of yours? And how do you balance the risk of cannibalization versus driving new gross additions? That's question one. And then secondly, you talked about improving trends in the East year-over-year. However, given the acceleration in losses, I guess the implication is that the West is getting quite a bit worse. When do we expect trends in the West to start improving year-over-year and helping to improve that broadband net add trend?

Yes, regarding cannibalization, our income-constrained product is being very carefully deployed in terms of which sales channels and how we are using it in acquisition and retention; we have a disciplined approach to mitigate the risks of cannibalization or eroding ARPU. We've launched tools like AIVA, our new AI assistant across our channels including sales and retention, and we're seeing remarkable results in providing offers to customers that maximize customer lifetime value based on the competitive landscape and the products they're consuming. As for the West, the good news is that in markets where we have what I call mature overbuilders, we are actually competing better year-over-year. We’ve seen improvements in gross additions and churn in those markets. Yet we are still facing challenges in markets with newer entrants. However, I truly believe our strategies, which leverage the income-constrained product, improvements in MDUs, and hyper-local initiatives, give us the tools we need to compete effectively as we move forward. I don't know if Marc has anything to add?

I think you said it well.

Great. I think that concludes the call over to you.

This concludes today's conference. Thank you for your participation. You may now disconnect.