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The cable television company delivers TV, internet access, phone services, and original TV content to approximately 4.9 million residential and business customers in 21 states.

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This New York cable television provider operator delivers TV, Internet, telephone, and content services to about 5 million residential and business customers in 21 states.

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Founded in 2015, Altice USA is a telecommunications and media company offering broadband, video, mobile, and voice services under the Optimum brand. The company serves residential and business customers across the U.S., Canada, Puerto Rico, and the Virgin Islands. Altice provides a wide range of services, including high-speed internet, digital TV, mobile plans, and enterprise connectivity solutions. It also delivers local news and advertising services through its News 12 Networks and i24NEWS channels.

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Optimum Communications (OPTU): Company Profile, Stock Price, News, Rankings

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Optimum Communications

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and welcome to the Altice USA Second Quarter twenty twenty five Earnings Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sara Friedman, Vice President, Investor Relations. Thank you, ma'am. You may begin.

Thank you. Welcome to the Altice USA Q2 twenty twenty five earnings call. We are joined today by Altice USA's Chairman and CEO, Dennis Matthew and CFO, Mark Sarota, 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 two. Now turning over to Dennis to begin.

Thank you, Sarah. Good morning, and thank you all for joining us today. As we reach the midpoint of the year, our transformation journey continues to gain momentum. Our twenty twenty five priorities remain clear and firmly on track: unlocking revenue opportunities, driving greater operational efficiency, continuing to enhance our award winning networks and ensuring our capital structure supports our long term operating goals. These priorities are enabling us to enhance investment returns and operate with discipline as we drive toward approximately $3,400,000,000 of adjusted EBITDA in full year 2025.

Turning to the next slide, I will review key highlights from the quarter that demonstrate our progress against our 2025 priorities and reinforce our commitment to delivering long term shareholder value. First, we remain focused on capturing new growth opportunities through innovation, product expansion and tailored go to market strategies. Our goal has been to improve broadband subscriber trends. And in the second quarter, we delivered both sequential and year over year improvements to 35,000 broadband subscriber net losses. And we continue to grow broadband ARPU, which increased by 0.9% year over year.

We increased penetration of new and existing products and value added services, including fiber and mobile, each of which accelerated net additions year over year as we continue to reach more of our customer base. Additionally, we are optimizing our video business, which saw the best subscriber PSU trends in the last ten quarters with 58,000 video subscriber net losses, creating more choice and flexibility for our customers while also expanding video margin. Next, on operational efficiency. We continue to take deliberate, disciplined steps to streamline how we operate while maintaining our focus on quality and growth. This includes workforce optimization to ensure that our structure, resources and capabilities squarely support our business priorities.

Similarly, we continue to improve service call rates and are expanding our use of AI across key functions. We're building an AgenTeq AI ecosystem, a smarter, more adaptive way of using AI intended to support our teams, streamline operations and enhance the customer experience. In parallel, we're taking a smarter data driven approach to video content distribution through new programming agreements that provide us with more flexibility in our go to market efforts in packaging. Our third strategic priority is enhancing our networks. Once again, Optimum Fiber was awarded by Ookla for having the fastest and most reliable Internet speeds in New York and New Jersey and named the fastest ISP in New York, New Jersey and Pennsylvania by PCMag.

We are proud to be recognized for the enhancements we've made to our network to deliver a superior experience to our customers. Additionally, we've expanded our footprint by 1.5 year over year, enabling us to bring high speed connectivity to even more communities. And within our LightPath business, we continue to secure new contracts with both hyperscalers and large carriers, building a strong foundation for additional revenue growth over time. Finally, on delivering a sustainable capital structure, in July, we partnered with Goldman Sachs and TPG Angelo Gordon to raise an inaugural $1,000,000,000 asset backed loan, the first of its kind, securitized primarily by HFC assets. This innovative transaction marked a major industry milestone, unlocking significant asset value and expanding our access to additional sources of capital.

Most importantly, this new structure delivers improved pricing relative to our most recent high yield issuance, reflecting the market's recognition of the strength and stability of our HFC asset backed cash flows. Next on Slide five, we'll review our broadband subscriber performance in greater detail. In the second quarter, we reported broadband subscriber net losses of $35,000 a year over year improvement of $16,000 or 31%. The actions we've taken over the past twenty four months are beginning to show in our subscriber trends. We've strengthened churn reduction programs, expanded localized offers, improved sales channel performance and invested in our networks, all contributing to our continued progress in broadband performance.

In our East footprint, we delivered our best net add trend in ten quarters, driven by stronger wind share performance against ILECs and fixed wireless along with lower churn. In the West, while competition remained strong, especially from fiber overbuilders and FWA, performance improved year over year, including fewer seasonal disconnects. This progress is especially notable given that the second quarter typically brings seasonal softness. However, despite this expected headwind, we delivered both sequential and year over year improvement, driven by improved churn and a moderation in gross add declines. Total churn across our footprint remains low, supported by operational improvements that have reduced voluntary, non pay and in footprint move churn.

For example, we've strengthened non pay retention through more personalized and timely outreach to proactively engage customers, and we are offering tailored support to those moving within our footprint to make staying with us a seamless experience. As a result, we achieved our lowest second quarter churn in the past three years. On the acquisition side, macroeconomic pressures, low move activity and increased competition from fiber and fixed wireless continue to weigh on gross additions. However, we're seeing encouraging signs of improvement. While gross adds remain below prior year levels, the pace of decline is slowing to the lowest quarterly year over year index in the last two years, reflecting improved sales channel performance and early traction in our go to market execution.

Our income constrained program and hyper local offers are resonating with customers. In income constrained markets, we saw over 10% lift in sales volume in our inbound and e com channels versus control markets. And in fiber competitive areas, where we've deployed tailored offers, sales were 12% higher. Our refreshed focus on our MDU footprint also resulted in positive broadband net adds of over 2,000 customers in the quarter within this footprint, which compared to almost 7,000 net losses in the prior year period. With enhanced tools and focused management, we've gained a deeper understanding of our MDU base and refined our go to market strategy to drive penetration across our more than 2,000,000 MDU passings, a key opportunity for us going forward.

Overall, our sales channel performance is improving, particularly in our inbound channels, where we're seeing higher yields. And as we continue to enhance our product portfolio with new value added services, we're increasing broadband customer stickiness and setting the stage to drive long term ARPU growth. Additionally, we're seeing meaningful progress in several historically underperforming markets, where subscriber trends have turned from negative to flat or positive year over year in Q2. For example, in several markets in Texas and parts of our Northeast footprint, we saw material improvements from subscriber losses to subscriber gains. We're also seeing stronger win per loss trends in areas with fiber overbuilder competition, particularly across the West.

These examples underscore the momentum building from our localized strategies and improved on the ground execution, especially in markets where we've previously lagged. In summary, our broadband performance is showing clear signs of stabilization. The initiatives we've put in place are gaining traction, and the results are just beginning to materialize. Turning to Slide six. We continue to expand our product portfolio and drive penetration of new and existing products and value added services to drive stickier customers, compete more effectively and drive additional revenue over time.

To begin on fiber, we added approximately 56,000 customers to our fiber network in the second quarter through a combination of new customer acquisitions and migrations of existing customers. We ended the quarter with 663,000 fiber customers, representing a penetration rate of 22% across our fiber network. On a year over year basis, the pace of fiber net additions accelerated to 1.4 times the rate we saw in the second quarter of last year. While there was a sequential slowdown compared to the first quarter, this was expected as we intentionally managed the pace of fiber migrations to maximize customer lifetime value and ensure a high quality seamless customer experience. Our mobile additions were approximately 38,000 in the second quarter, representing year over year acceleration in mobile line growth, but similarly a sequential slowdown.

This quarter's mobile performance reflected typical seasonal trends, ongoing macro and competitive pressures and a focus on customer quality. Specifically, we are prioritizing higher quality acquisitions, strengthening verification processes and emphasizing mobile offerings designed to support long term retention, such as primary number porting, unlimited plans and device financing. This strategy is delivering results. In the second quarter, 57% of mobile line gross additions ported their phone number compared to 34% a year ago, and 31% of mobile line additions purchased a finance device with us compared to 25% in the prior year period. At the end of the second quarter, 74% of total mobile lines were on unlimited or unlimited MAX plans, up from 65% last year.

Together, these improvements contributed to a stronger mobile churn profile, with annualized churn improving by nearly 600 basis points year over year. We remain focused on driving convergence and maximizing customer lifetime value through a disciplined and strategic approach. We anticipate the pace of mobile additions will continue to accelerate year over year as we turn to the 2025. In 2024, we introduced a simplified video offering with three new tiers: Entertainment TV, Extra TV and Everything TV. These packages deliver great value by including the most watched content, offering customers more flexibility and choice while also enhancing our video margin profile.

These tiers have become our flagship video offerings for new customers and are actively offered to existing subscribers. In the second quarter, we added 68,000 video customers to these new tiers and ended the quarter with approximately 168,000 residential video customers on one of these new packages, which brings the penetration of residential video customers on new tiers to 10%. Our new tiers support improvements in our video attachment rates, which grew 40 basis points from Q1 to Q2 and drove improvement in video net losses, which was our best quarterly net loss in ten quarters. In addition, we continue to evolve our video offerings. Last quarter, we announced our collaboration with Disney to offer eligible customers the Disney plus Hulu bundle basic option.

And we have opportunities to expand other OTT streaming partnerships to bring additional video streaming service add ons to our offerings. We also continue to expand the availability of our Optimum Stream product to additional markets and enhance stream capabilities and offerings. Optimum Stream is currently available to all of our East footprint markets and is expected to be available to almost 70% of our West markets by year end. More broadly, we've launched other new value added services and products over the last few quarters, which are continuing to scale. Total Care is a premium support add on for residential broadband customers, which launched in 2024, priced at $15 per month.

In the second quarter, we launched additional tiers, Total Care Plus and Total Care Max, priced at $20 and $30 per month. At the end of the second quarter, we reached over 90,000 broadband subscribers taking a Total Care add on. Whole Home WiFi is another residential broadband service add on, which provides seamless in home coverage and ongoing tech support. Whole Home WiFi, which is priced at $10 per month, launched in the second quarter of this year and in just a few months has already reached approximately 31,000 broadband customers. Within our B2B business, as we committed in the past, we've launched a comprehensive suite of services to support small and medium sized businesses.

These include connection backup, a reliable automatic Internet backup designed specifically for point of sale systems. We also launched Secure Internet Plus, which offers built in customizable cybersecurity features tailored to business needs. At the end of the second quarter, we also brought our B2B fiber product up to parity relative to our HFC product offerings, enabling us to now sell a full suite of products on fiber, which will allow us to accelerate B2B fiber net adds. Together, our growing fiber and mobile bases and suite of value added services are strengthening our competitive position and enhancing the overall customer experience. As we scale and expand these services, we expect them to be accretive to ARPU and supportive of overall long term revenue performance.

We expect growth in value added services, inclusive of mobile, to contribute up to $500,000,000 of incremental revenue over time as we reach penetration targets. Turning to Slide seven. We're making solid progress on our transformation journey with disciplined execution driving improved operational efficiency. These efforts are key to enhancing our operations and customer experience to support our long term growth plans, while moderating other operating expenses by 4% to 6% in full year 2026 compared to full year 2024 with the outcome, reflecting our ability to negotiate on behalf of our customers for greater flexibility, choice and value. We continue to take a data driven analytical approach to these negotiations, ensuring that our content strategy aligns with customer preferences and viewing behavior.

This approach, combined with continued adoption of our new video tiers, supported video gross margin expansion of over 300 basis points year over year in the second quarter. Next, annualized service call rate decreased by almost 3%. And importantly, we've improved our ability to address customer concerns during calls with fewer calls requiring a subsequent truck roll. This has led to an annualized service visit rate improvement of almost 19% year over year in the second quarter. This also resulted in an improvement in our average service visit dispatch rate of approximately 22% year over year, reaching near record lows.

Supporting these trends is the ongoing infusion of AI into our business. Our AI Virtual Assistant, or AIVA tool, uses machine learning to help frontline agents make smarter customer offers and is designed to adapt over time with continuous data driven updates. This tool launched last year and continues to scale in our residential sales and customer care centers. We're also embedding AI into our network operations with Access Network Automation, or ANA, a new tool designed to automate detection and repair of hard to find service issues at scale. By ingesting network telemetry, customer interactions and operational data, ANA pinpoints where faults are likely expected to enable faster, more precise fixes.

Additionally, we're rolling out a next gen omnichannel customer experience platform toward the end of this year. This customer platform utilizes Google AI technology to unify bots, agents and AI insights into one seamless system to improve first contact resolution by creating more personalized and emotionally intelligent customer interactions. We're also strengthening our customer relationships through our first time right approach, Coupled with an enhanced network experience and product portfolio, we aim to deliver greater value at every touch point. As a result, our relationship net promoter score improved by eight points year over year in the second quarter. Finally, we have been focused on optimizing our workforce.

Over the last two years, we have made meaningful investments in our employee experience and technology, transitioning from legacy systems to digital platforms. These efforts, along with leadership development, automation and AI tools, have enabled us to work faster, more strategically and with greater discipline. Building on this foundation, we've identified opportunities to streamline our organizational structure, eliminate redundancies and better align our resources with our key priorities, all while enhancing the customer experience. As a result, we've infused a high performance culture while rightsizing our workforce by approximately 5%, which will help improve our operating expense trajectory in the second half of this year and into 2026. Electively, these initiatives reflect our disciplined focus on execution, enabling a more agile, efficient organization while delivering a better experience for our customers.

We are seeing the impact of this work take hold, and we remain confident in our ability to deliver continued operational and financial improvements over time. I'd now like to turn it over to Mark to review our financials in more detail.

Thank you, Dennis. Let's begin on Slide eight with a review of our financial performance. Total revenue declined 4.2% year over year and was relatively flat quarter over quarter. Year over year revenue declines continue to be impacted primarily from video cord cutting, accounting for about 85% of total revenue declines. However, as noted, we have slowed the rate of video declines as we drive incremental video units onto our new tiers.

News and advertising revenue growth of 12.8% was driven by continued momentum in our ad agency services business, along with incremental political revenue from the New York mayoral race. While full year 2025 faces a headwind from lower political advertising compared to a presidential election year, the second quarter was less effective given the heavier weighting of political ad revenue in the back half of 2024. Video also remains the main driver of our residential ARPU pressure. ARPU declined 1.7% or by $2.28 to $133.68 with video contributing a $3.74 decline or a 2.8% decline year over year. This was primarily driven by lower video penetration within our customer base, partially offset by higher video rate.

Video remains an important part of our business, helping to create stickier broadband relationships and delivering value to the customers who choose it. We remain focused on evolving our video offerings to meet changing customer needs, while optimizing performance and margins to ensure video remains a profitable and attractive add on to our broadband service. Turning to broadband ARPU, we continue to see year over year growth in the second quarter. Broadband ARPU grew 0.9% to 74.77 reflecting the continued strength of our broadband product. Gross margin expanded by 120 basis points to 69.1%, reaching our highest level in recent history, driven by a continued shift in product mix towards broadband and our focus on optimizing video margins.

Adjusted EBITDA of $8.00 $4,000,000 declined 7.3% year over year, but grew slightly sequentially, reflecting continued operating discipline and efficiency. Adjusted EBITDA margin of 37.4% declined 130 basis points, but notably improved sequentially 30 basis points. Adjusted EBITDA trends are driven by lower revenue, which is partially offset by lower programming and direct costs and higher OpEx year over year. Year over year, other operating expenses increased approximately 4%, primarily driven by an increase in consulting and professional fees of almost $13,000,000 year over year, largely related to our transformation strategy. The growth in these costs are noncore to our base run rate OpEx and are expected to moderate in the second half of the year.

In addition, we saw increased investment in sales and marketing, including the integration of new AI tools in our sales channels as well as additional media spend on advertising campaigns. The quarter also reflected an increase in employee health and wellness expense of approximately $12,000,000 year over year in the quarter and an increase of almost $23,000,000 in the first half of the year. These impacts are partially offset by lower bad debt expense, a decrease in certain managed service costs primarily due to a onetime credit as well as lower truck roll costs. As Dennis highlighted, we anticipate other operating expenses to moderate in the 2025 and into 2026 through our operational efficiency efforts, specifically the impact of workforce transformation, lower service visits and call rates and reduced third party transformation costs. Adjusted EBITDA is expected to improve sequentially over the next two quarters, with the most significant impact of our transformation reflected in the fourth quarter.

We expect this to be supported by seasonally stronger subscriber performance, incremental revenue opportunities in our LightPath and News and Advertising businesses despite lower political revenue as well as continued operating expense efficiencies towards year end. Together, these reinforce our goal of delivering approximately 3,400,000,000 in adjusted EBITDA in full year 2025. Next, turning to Slide nine, I'll walk through our network investments and how we're driving greater efficiency across our capital envelope. In the second quarter, we added 35,000 total passings and 28,000 fiber passings. We added 61,000 passings in the first half of the year and continue to target 175,000 total new passings in the full year.

As we've discussed on previous calls, the majority of our passing growth in 2025 will come from new fiber deployments. Cash capital expenditures in the second quarter were $384,000,000 up approximately 10% year over year. This increase reflects the timing of lower CapEx in the prior year as well as front weighted investments in 2025. We continue to expect approximately $1,200,000,000 of cash capital expenditures for the full year, with additional build and network maintenance efficiencies expected to take hold in the second half. In addition, the capital we invested in the first half of the year reflects construction activity that is expected to translate into additional serviceable passings and lower capital spend in the second half.

As Dennis mentioned, we've implemented new AI powered network monitoring tools and help reduce service calls and visits by proactively addressing potential problems and efficiently serving multiple homes at once. And we continue to deploy mid split upgrades across our portion of our HFC network, which will enable multi gig speeds on HFC in 2026. Our multiyear network strategy is focused on building future proof infrastructure to meet growing customer data demands across both our HFC and fiber footprints. We're investing in expanding passings, primarily through new fiber builds, while also enhancing our HFC network to support faster speeds and improve performance. Our LightPath business continues to expand within the hyperscaler community with additional contracts secured and a strong pipeline in place.

We expect additional LightPath capital spend in the second half of the year, which will be offset by network build and maintenance efficiencies in our broader CapEx envelope. In summary, our networks are stronger and more capable than ever, consistently recognized with industry awards and purpose built to meet accelerating customer demand. Average monthly data usage per broadband only customer has grown to seven eighty two gigabytes, up nearly 30% in the past three years. And our network is well equipped to support increased customer demand in the years ahead. Turning to Slide 10, I'd like to highlight our recently completed $1,000,000,000 asset backed receivables facility loan.

This first of its kind securitized transaction is backed primarily by our HFC assets and represents a new innovative approach to capitalizing on the strength of our broadband networks in the industry. The asset backed loan is secured by receivables and network assets from our Bronx and Brooklyn service areas. The perimeter has additional debt capacity and most importantly, the structure is scalable and may offer us paths to address our 2027 and 2028 maturities. The loan transaction was completed in July 2025, matures in January 2031 and carries an interest rate of 8.8. We are pleased to have partnered with Goldman Sachs and TPG Angelo Gordon on this transaction, which diversifies funding sources, offers improved pricing compared to our last high yield notes offering and provides an opportunity to unlock leverage value in our HFC assets.

Turning to Slide 11, we'll review our debt maturity profile pro form a for the new asset backed loan. At the end of Q2, our pro form a weighted average cost of debt is 6.9%. Our weighted average life of debt is three point six years and 73% of our total debt stack is fixed. Pro form a for our recent transaction, liquidity is approximately $1,500,000,000 and our leverage ratio is 7.8 times the last two quarters annualized adjusted EBITDA. And we remain focused on exploring all opportunities to ensure our capital structure supports our long term operating goals.

Before we close, I would like to provide an update on our tax outlook. The recent tax reform has enabled benefits from both bonus depreciation, interest deductibility and R and E deductions. We estimate $250,000,000 to $350,000,000 of savings over the period of 2025 to 2027, with full year 2025 cash tax of under $200,000,000 As we continue to enhance our capital efficiency, we expect to realize less relative tax reform benefits. In closing, we remain confident in our strategic direction and committed to disciplined execution as we build towards sustainable long term growth and enhanced value for our shareholders. With that, we will now take any questions.

Thank you. We will now conduct a question and answer session. The first question comes from Kit Gun with Morale from Evercore ISI. Please proceed.

Great. Good morning and thanks for taking the questions. You have a lot of initiatives underway, but I wanted to specifically ask about mobile. LINE net adds continue to improve year over year, though your penetration still remains relatively low, suggesting a healthy runway ahead. So I was hoping you could expand on the trajectory and opportunity that you see ahead.

And relatedly, of your peers have expanded their MVNO partnerships. So I wanted to see if there's anything you can share about how you're viewing your wholesale partnership and if there's scope or an appetite for a potential change? Thank you.

Hey, Kakun. We are very excited about mobile and the trajectory. We did some incredible work this past quarter to really improve the quality of every sale and every net add. This is a machine that we're still continuing to evolve. And so as we went into Q2, we had laser focus on really just elevating that quality.

So you'll see that our ported phone numbers have increased meaningfully. A year ago, we were in the 34% range. Now we're at 57%. Devices that are being financed have gone from 25 to 31%. Unlimited has gone from 65% to 74%.

And so this is all translated into a 600 basis point improvement in churn. We've also are evolving our credit strategies so that we can just make it even easier for existing customers in good standing to buy more lines and be able to buy even more from us. And so this is something that we feel confident we can continue to drive and accelerate. We have a huge opportunity, as you mentioned, 7% base penetration. We are still on the path for a million customers or million lines by '27 and we're very happy with our MVNO partnership with T Mobile.

And so we just continue also to integrate it across all of our sales channels. And so this is also a new muscle. A year ago, we weren't selling this at all in our care and retention and now care and retention has become one of the biggest channels. And yet we're still only at 40% participation in care and that's one of our biggest call center queues as you can imagine. And so we're on a path to driving that to 65% over the next couple of quarters and that's only going to increase our velocity in terms of driving mobile.

And so mobile is critical. The convergence is critical. It really delivers an even improved churn benefit when we look at folks that are taking mobile. And so we have some exciting offers coming up over the next couple of months as we get ready for the new iPhone launch. We have new family plans.

We have just new offers, even buy one, get one free and free we're going to be testing free in different demographics and different base management strategies. And so we're going to hit the accelerator and keep driving mobile and we're excited to do it.

The next question comes from Frank Louthan with Raymond James. Please proceed.

Sorry about that. Great. Thank you. Can you talk to us about the typical profile of a new mobility subscriber? Are they new to Altice?

And is there any difference in the fiber subscribers versus those in the coax? And then as a follow-up, are you how are you are there any limitations with what you can sell to larger customers? Is LightPath able to sell mobility? I'm just curious how that works. Thanks.

Sure. From a mobility perspective, we have 50% coming as new customers, 50% of our sales are coming from the base. We've implemented this in all of our acquisition channels. But as I mentioned, we are rolling this out in all of our call centers, care, retention, retail, which really have the most at bats with our existing customers. And so we're excited to continue to expand the offerings and continue to grow the portfolio and make these offerings available.

From a fiber perspective, we're excited about fiber. We continue to drive it because we see better NPS, we see improved churn profile, we see strong ARPUs. And so we're going to continue to drive fiber. We've been seeing from a new connect and migration perspective, we have about 80% in this past quarter were through migrations. We've embedded migration activity in our call centers and retail and making that available.

We're really focused on customer lifetime value here. So we want to be smart about when we offer a migration, how we offer migration. I've talked about in the past that we've done incredible work to make that a more efficient and smooth process. And so now we have the levers to be able to accelerate in different channels when we think it makes sense to maximize customer lifetime value. Mark, do you want

to talk a little bit about LightPath? Yes. Just regarding the limitations around mobility selling, we're again, we're pleased with our MVNO relationship that we have with T Mobile. And so we do have flexibility there, and we see that as a path forward as well.

The next question comes from Jim Schneider with Goldman Sachs. Please proceed.

Hi, this is Josh on for Jim. Thanks for taking the questions. Just on the broadband side of the business, can you give us some incremental detail on how some of your bigger more well capitalized competition is treating competition versus more of the upstart overbuilders? And secondly, as you think about your subscriber trajectory, are you willing to spend incremental capital on advertising and promotion and retention offers to drive even better sub trends even if it slows some of your profitability ambitions? Thanks.

Thanks, Josh. We're really excited about our go to market strategies and whether the competition is the larger telcos or the fiber overbuilders or fixed wireless, we're seeing improvements in win share across all of these cohorts, particularly as we've implemented our hyper local strategies. We've deployed that across almost 600,000 homes and we're already seeing a 13% connect lift. And we're seeing improvements in win share of 20%, 3040% across the footprint. For the first time, we're seeing actual sub growth in areas of Texas and the Northeast as well, where we have a combination of fiber overbuilders and mature telcos competition.

We've made meaningful progress where we're also seeing that in certain markets where we were losing customers, we're now flat or positive. And so we are willing to invest where we need to invest, but we're doing that in a very surgical fashion. And that's in our acquisition channels, that's in our retention channels and we're using our hyper local strategies, our income constrained strategies as well. We're seeing really great results there, 10% lift. We know that some of the fiber overbuilders have become very aggressive in pricing across the West and income constrained as a demographic that they're going after and we're seeing that our products are resonating and that we're able to see a lift in connects, but we're able to balance the ARPU impact as well.

We are seeing a higher take rate of the lower end packages, but we saw an improved take rate in our 500 meg packages, which is offsetting that ARPU decline. And so as we build this muscle, we're just getting stronger and stronger in terms of how we balance rate and volume. And I have full confidence that we're going to be able to do that even more effectively going forward. In terms of investing in marketing, we're very happy with our investments in marketing. We actually have a new marketing team that we put in place towards the end of last year.

We have more command of marketing than we've ever had before. We are evolving our media mix model. We're driving efficiency in the way that we're delivering across digital and social. We're leveraging AI. We were not leveraging AI or not even fully effectively leveraging our partners like and so now we're able to leverage AI, leverage these tools to be able to drive efficiency and effectiveness of our marketing dollars.

The next question comes from Craig Moffett with MoffettNathanson. Please proceed.

Hi. Thank you. Dennis, wonder if you and Mark could just comment a little bit about the 2027 maturities wall. As you get a little closer and as some of the trends in your business change, when is the right time to think about trying to term some of that out? Is the window open for terming that out? Or do you think there are specific things you kind of have to prove to the credit markets before you're able to do that? And then how does the recent ABS transaction change that calculus? Or does it?

Hi, Craig. I'll take it. This is Mark. Yes, I guess first it's holistically, we're really pleased with our partnership with TPG and Goldman Sachs on this first of a kind HFC asset backed securitization. As we discussed previously, we're focused on managing our capital structure to ensure more sustainable costs, leverage, maturity profile.

We're excited that this new structure provides additional capacity and flexibility to do just that. We're excited about the diversity this brings to the capital structure. Very pleased to see the cost of debt coming in significantly better than our last high yield issuance. Ultimately, we're going to continue to explore all options that help deliver sustainable capital structure that aligns to these objectives. We have the runway.

We've cleared that out, and we feel like we can operate. Really beyond that, we're not going to comment at this point. Certainly, as we have more information to share, we will. But we feel like we're well positioned. We have significant flexibility in our capital structure to pursue the right range of transactions.

We intend to use this flexibility to achieve our capital structure goals.

Our next question comes from Vikash Harlock with New Street Research. Please proceed.

Hi. Thanks so much for taking the question. Two, if I can. It looks like you did better on broadband subs, but your ARPU growth sort of slowed sequentially. How do we sort of think about subscriber growth in the back half and ARPU growth the back half as well?

And then two, on the ABS debt raise, how much more capacity do you have on the HFC side? And are you planning to raise the ABS satellite path and sort of move the proceeds over to the parent company?

Thanks, Nikesh. From a broadband perspective, of course, we all know that there's tremendous headwinds that remain. The competition continues to be fierce. The macroeconomic environment moves are still at all time lows and new housing formation, particularly SFU formation, is continues to remain at all time lows. That being said, we're going to continue to control what we can control.

We've shown year over year improvement in Q2 and we continue to drive towards year over year improvement in the back half of the year. And I believe that these strategies that I just mentioned in terms of our hyper local strategy that's delivering Connect Lift, our income constrained strategy that's delivering Connect Lift. We are just getting started in terms of evolving our MDU strategy. We put in a new team. We have more visibility and more data than ever to help us focus on those buildings that are underpenetrated.

This is a big opportunity for us. We have 2,000,000 MDU passings in our footprint and we're growing the passings in 2025. And last year at this time, we lost 2,000 we were net 2,000 loss in our MDU footprint. And this year, we grew by 7,000. And so I'm confident that these strategies will help us continue to stabilize broadband as we move forward.

But we there are a lot of headwinds, and so we're striving towards year over year growth as year over year improvements as we move forward. From an ARPU perspective, the good news is that we have launched and continue to launch a whole host of new products. We launched Total Care, as I mentioned, just a few quarters ago, and now we have 90,000 subs. They're providing us a blended ARPU of over $11 60% margin. We just recently, a couple of months ago, Whole Home WiFi.

We have 31,000 subs on there paying us $10 a month. We just launched on our B2B side of the house, connection backup and security solutions. And so these are all solutions that are we're just getting started with that will continue to help us drive ARPU as we move forward. Additionally, we have more command of ARPU than we ever have in terms of the ability to monetize most effectively from an acquisition perspective to control the offers that we have in retention, to be able to maximize our promo roles and the lifts that we're doing in the back half of the year. And so with all of this coming together, we'll continue to be disciplined around driving subscribers while managing ARPU most effectively.

I don't know, Mark, if you have anything you'd like to add on ARPU.

No, I think you captured it. On your ABS questions around capacity, again, pleased with the offering that we launched. We think it's industry setting launch there. We have incremental capacity within the perimeter. Just holistically, just a reminder, the Brooks and Bronklin system represents around just 700,000 customers, 1,500,000 passings.

We have 10,000,000 passings in our ecosystem. So we feel like there is more flexibility and capacity in that regard. And certainly, with our Lightpath business, we'll continue to explore all options on that side to make sure we have the most effective cost structure and capital structure for them as well. But certainly, more to come at the appropriate time.

The next question comes from Sam McHugh with BNP Paribas. Please proceed.

Hi, guys. Thanks for the question. Some of your peers have talked about having higher market share than fiber providers even in long tenured fiber overbuilt places. The way you competed with Fios and other fiber builders for long term, where do you see kind of stable market share? Like as investors think about the medium to long run, where can we expect share to stabilize to?

And what do think is the floor in your business? Thanks.

Thanks, Sam. Yes, for us, we're really working on just continuing to evolve our go to market so that we maximize market share. There are markets that when some of these fiber overbuilders came in for the first time, we just unfortunately did not have a go to market that would allow us to compete. And now we have strategies that are allowing us to win back market share. We are improving our win share against these competitors across the West by 20%, 3040%.

And so I really do believe that we'll be able to elevate our strategies and be able to drive. The great news is that we had in Q2 the best churn in three years. And also from a gross add indexing perspective, the best gross add indexing in two years. And so it's really all about how do we bring these new products to market and continue to drive our value proposition. From a Verizon perspective, we've been competing with them for a long time, but there was a period where, unfortunately, we were not delivering quality, we were not delivering value, and now we have regained that the quality that we believe our customers deserve as evidenced through the awards from Ookla and PCMag that have stated that our networks are best in class in New York and New Jersey and Pennsylvania.

And so this is a journey that we're on. As I mentioned earlier, we're now for the first time growing subs again in some of these markets where we were just losing for years and years. And so I'm confident over the long term, we're going to get back to subscriber growth as well as revenue and EBITDA growth.

Well, guess, if I can ask one small follow-up on mobile as well. You talked about improving kind of handset equipment attach rates, higher premium unlimited plans. How do we square that with the kind of implied ARPU trends in wireless, which they weakened quite a little bit in this quarter?

Mark, do you want to talk a little bit about the ARPU trends?

Yes. I mean, we're going to take, Sam, a balanced approach to driving mobile ARPU on a per line basis, again, trying we have a lot of runway left with only 7% of our base penetrated. There's still opportunity there. You'll see us pulse in and out different strategies around that. So we'll take a balanced and measured approach as we're trying to ultimately drive maximize revenue trajectory while improving margins in that space as well.

Our next question comes from Steven Cahall with Wells Fargo. Please proceed.

Yes, thank you. Good morning. So first, just looking at the EBITDA growth guide for the back half of the year, it sounds like you've got really good line of sight on costs. Revenues have been a bit more pressured. You've talked about some of the drivers of that and some green shoots.

So I'm just wondering what kind of subscriber or ARPU results you need to see in the back half of the year to get you comfortable with the guide and what kind of line of sight on that? And maybe I missed it because I joined the call late, but did you reaffirm the revenue guide that you gave last quarter for the year? Thank you.

Yes, Steven, I'll take that. Just overall, yes, we are reconfirming our outlook from what we provided in the first quarter and that's both on revenue, direct costs and OpEx costs. So we feel like we do have good line of sight on where this is heading. Certainly, we're going to see most of that improvement really step up in the fourth quarter. So just as you guys are building your models, again, but we reiterate those components.

And really the drivers of improvement is really going to be the impact of the subscriber performance year over year, the improved revenue trends we talked about, stability in ARPU, the incremental selling of mobile and our value added services, in addition to acceleration we anticipate from our LightPath and our News and Advertising businesses. Certainly from an OpEx perspective, we feel like the workforce transformation and transformation efforts will really start to kick in, in the back half of the year. A lot of the third party costs we've incurred tied to that in launching AI, those are really front half loaded. So we'll see the benefits of those. And then we just continue to operate the network much more efficiently.

And so we do anticipate lower service calls and lower truck rolls with these new AI tools fully established. So again, a lot of the benefit will be seen in the fourth quarter. Again, an ARPU perspective, as we think about broadband, we are lapping the rack rate reset we did in early twenty twenty four. As we think about full year guidance around broadband ARPUs, we do think there'll be improvements year over year slightly. And so we feel like we have the right balanced approach to continue to drive improved revenue trends as well as moderating our cost profile.

Great. And then just a quick follow-up. So the ABS deal, it's above your weighted cost of debt, but definitely lower than some of the refis you've done the last couple of years. As you look at the towers over the next couple of years, do you think there's scope to bring your weighted cost of debt down through those activities? Or should we expect some upward pressure on cash interest over time? Thank you.

We're excited about the loan that we just did. And as you mentioned, the improvement we saw versus what we previously did in our high yield issuance. Again, we have significant flexibility. Our objective, again, is still, we believe, 4.5 to five times is the right sustainable leverage levels to operate this business over time. We feel like there's a path to deliver on that. Certainly more to come at the appropriate time.

Optimum Communications (OPTU) Q2 2025 Earnings Call Transcript

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