Charter Communications Inc (CHTR) — Q1 2022 Earnings Call Transcript

Good morning and welcome to Charter's First Quarter 2022 Investor Call. The presentation that accompanies this call can be found on our website ir.charter.com under the Financial Information section. Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings including our most recent 10-K and also our 10-Q filed this morning. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future. During the course of today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures as defined by Charter may not be comparable to measures with similar titles used by other companies. Please also note that all growth rates noted on this call and in the presentation are calculated on a year-over-year basis unless otherwise specified. On today's call, we have Tom Rutledge, Chairman and CEO; Chris Winfrey, our COO; and Jessica Fischer, our CFO. With that, let's turn the call over to Tom.

Thank you, Stefan. We continue to grow our business by offering superior converged connectivity products. During the quarter, we added 129,000 customer relationships and 185,000 Internet customers. Customer relationship churn remains low due to current consumer behavior while connection activity opportunities also remain low as a result. We continue to see very strong mobile line growth with net additions of 373,000. Over the last year, we've grown our mobile lines by nearly 50%. We now have over 4 million total mobile lines. Financials were also strong in the first quarter. First quarter revenue and EBITDA each grew by 5.4%. When excluding a one-time payment, free cash flow grew by 9% year-over-year. As always, we remain focused on our primary goal of driving customer growth and market share, leading to higher free cash flow. We're doing that in a number of ways, including expanding our footprint with good returns on investment, upgrading our network to ensure that we're offering our latest and fastest high-quality connectivity services, and continuing to invest in high-quality customer service. Finally, investing in the mobile business to drive the convergence of fixed and mobile connectivity products and earn a higher share of monthly household communication spend by saving customers money. Our rural construction initiative is also progressing as planned and we've started to work in all 24 of the states where we won Rural Digital Opportunity Fund bids. Our multiyear multibillion-dollar rural construction project will deliver gigabit high-speed broadband access to more than 1 million unserved rural customer locations across the country. Through RDOF, we'll add over 100,000 miles of new network infrastructure to our approximately 800,000 existing miles over the next five or so years. Our construction is not limited to RDOF commitments. We continue to build in other rural areas and are pursuing opportunities to receive other broadband stimulus funds. We regularly expand our network to additional residential SMB and enterprise passing wherever it's economically attractive. Ultimately, our rural construction initiative is not only good for the millions of rural customers that will finally have access to fast and reliable Internet, but it's also good for Charter and its shareholders. The expansion of our footprint will help us drive additional customer growth by growing customers in unserved and underserved areas. Demand for our customers for greater connectivity speeds and data throughput continues to grow at a very fast pace. During the quarter, Internet customers who did not buy traditional video from us used approximately 700 gigabytes per month, more than 35% higher than pre-pandemic levels. Nearly 25% of those customers now use a terabyte or more of data per month. To meet that growing demand, we're expanding capacity and reallocating it within our network. The technology to both expand and reallocate plant bandwidth is developing rapidly. Today, we're implementing high splits of what we prefer to call spectrum splits, which allocate more plant capacity to the upstream, all using our DOCSIS 3.1 infrastructure. In turn, we're able to offer our customers higher symmetrical speeds and multi-gigabit speeds. Additionally, by expanding and reallocating plant capacity, we reduced our network augmentation capital spending, including no split spending going forward. The vast majority of our deployed modems are already spectrum split-capable, allowing us to provide faster service to our existing customers without swapping out their CPE. We've been increasing the number of spectrum split projects in our service areas and we'll continue to do so. As the technology develops further, we'll shift our strategy dynamically to further expand the capacity of our plant and reallocate bandwidth as necessary to meet customer needs by deploying additional technologies, including DOCSIS 4.0, which will allow us to deliver even greater capacity and offering consumers the fastest and lowest latency connectivity products in a highly capital-efficient way. In mobile, we continue to improve and enhance our products in a number of ways, differentiating our offering to help drive customer growth and improving mobile business economics. In April, we began the market rollout of mobile speed boost. Mobile speed boost allows Spectrum Mobile customers to receive speeds up to one gigabit per second on their Spectrum Mobile service devices, when inside their homes even when their provisioned wireline Internet speed is less than a gigabit. The rollout of our first trial of our CBS small cells in full market area continues to progress nicely. In the first quarter, we completed the build-out of our mobile core network for the upcoming trial, which we expect to begin in the middle of next year and to offer faster speeds and a better mobile experience, while saving us costs. Ultimately, with our mobile product, we're offering to consumers a unique and superior fully converged connectivity service package while saving customers hundreds or thousands of dollars per year. Our share of household connectivity spend, including mobile and fixed broadband, is still very low. In fact, we capture well less than 30% of household spend on wireline and mobile connectivity within our footprint. There's a large opportunity for us to increase market share by saving customers money. Through our latest offering, we can do that, which raises connects, reduces churn, and drives customer growth. Before turning the call over to Jessica, I wanted to make a few comments about the joint venture with Comcast that we announced earlier this week. Our joint venture will provide video delivered by apps, a competitive app store, on-TV applications, and is capable of aggregation, navigation, search and curation, billing, and content security. It will give consumers new devices and content providers new opportunities to create customer relationships on a platform designed to help them sell video effectively. Comcast has created excellent IP for this venture and we have high expectations that we can work together to continue its development and distribution. We have a history of success in our mobile JV operating systems, demonstrated by the fact that between our two respective mobile businesses we added more mobile lines in the first quarter of this year than the rest of the mobile industry added collectively. Now, I'll turn the call over to Jessica.

Thanks, Tom. Let's now turn to our customer results on slide five. We grew total residential and SMB customer relationships by 129,000 in the first quarter. Including residential and SMB, we grew our Internet customer relationships by 185,000 in the quarter. We continue to see record low combined competitive and move churn, which has reduced our selling opportunities and very low non-pay churn across our footprint. Similar to the fourth quarter, we saw both lower Internet churn and lower Internet connects than in the first quarters of 2021, 2020, and 2019. This was true across our footprint regardless of computing technology. Turning to video. Video customers declined by 112,000 in the first quarter. Wireline voice declined by 150,000, and we added 373,000 mobile lines. Despite the lower number of selling opportunities from reduced activity levels, we continue to drive mobile growth with our high-quality, attractively priced service. Moving to financial results starting on slide six. Over the last year, we grew total residential customers by 674,000 or 2.3%. Residential revenue per customer relationship increased by 1% year-over-year, driven by promotional rate step-ups and video rate adjustments that pass through programmer rate increases. These effects were partially offset by the same bundle and mix trends we've seen over the past year, including a higher mix of non-video customers and a higher mix of low-priced video packages within our base. Additionally, this quarter's revenue was negatively impacted by $20 million in adjustments related to sports network rebates, which we intend to credit to qualified video consumers. These rebates are also reflected in lower programming expenses this quarter, with no impact on adjusted EBITDA. Excluding the impact of the sports network credit I just mentioned, our residential ARPU grew by 1.2% year-over-year. Also keep in mind that our residential ARPU does not reflect any mobile revenue or video programming pass-through increases announced late in the first quarter. As slide six shows, residential revenue grew by 3.7% year-over-year and by 3.9% year-over-year when excluding the sports network credit. Turning to commercial, SMB revenue grew by 4.6% year-over-year, reflecting SMB customer growth of 4.4%. Enterprise revenue was up by 3.7% year-over-year. Excluding all wholesale revenue, enterprise revenue grew by 6.5% and enterprise PSUs grew by 5.2% year-over-year. First quarter advertising revenue grew by 11.5% year-over-year or by 5.1%, excluding political revenue, primarily due to our growing advanced advertising capabilities. Mobile revenue totaled $690 million with $292 million of that revenue being device revenue. Other revenue increased by 5.2% year-over-year and includes two months of rural construction initiative subsidies totaling $19 million. In total, consolidated first quarter revenue was up 5.4% year-over-year. Moving to operating expenses and EBITDA on Slide 7. In the first quarter, total operating expenses grew by $410 million or 5.4% year-over-year. Programming costs declined by 0.4% year-over-year, due to a decline in video customers of 2.1%, a higher mix of lighter video packages, a $20 million benefit related to sports network rebates that I mentioned, and $34 million of other favorable adjustments, much of which was not unique year-over-year. All of that was mostly offset by higher programming rates. Excluding both of the adjustments I just mentioned, programming costs grew by 1.4%. Looking at the full year 2022, we now expect programming costs per video customer to grow in the low to mid single-digit percentage range versus mid single-digits previously. Regulatory connectivity and produced content declined by 7.4%, primarily driven by lower Lakers RSN costs, lower video CPE sold to customers, and lower regulatory and franchise fees. The decline in Lakers costs was primarily driven by the delayed start to the NBA season in 2020, which drove more Lakers games charges into Q1 of 2021, making for an easier comparison this year. Excluding the RSN costs from both years, regulatory, connectivity, and produced content declined by 5.6%. For the full year 2022, we expect regulatory connectivity and produced content expense to decline in the mid single-digit percentage range versus 2021, primarily due to lower video CPE sold to customers and lower RSN costs given the abnormal Lakers game scheduled last year. Cost to service customers increased by 5.3% year-over-year. The increase was primarily driven by higher bad debt given unusually low bad debt in the first quarter of 2021 when bad debt was down by $100 million versus the first quarter of 2020, benefiting from government stimulus packages. In fact, payment trends in the first quarter continue to be very good. Excluding bad debt from both years, cost to service customers grew by 1.8%, primarily due to a larger customer base, previously planned wage increases to $20 per hour starting wage for hourly field operations and call center employees, and higher health benefit and fuel costs. As the year progresses, prior year bad debt expense normalizes and should drive meaningfully slower growth in the cost to service expense line during the second half of the year. Marketing expenses grew by 10.1% year-over-year due to higher labor costs, driven by previously planned wage increases and temporarily greater staffing levels, as Charter completes the insourcing of its inbound sales and retention call centers with a focus on providing better service to new and existing customers. For the full year 2022, we expect marketing expenses to grow in the mid single-digit percentage range versus 2021, although marketing expense growth is likely to remain at elevated levels in the second quarter. Mobile expense totaled $760 million and was comprised of mobile device costs tied to device revenue, customer acquisition, service, and operating costs. Other expenses increased by 12.5%, primarily driven by a favorable non-recurring adjustment in the prior year period making for a challenging comparison this year and higher labor costs. Adjusted EBITDA grew by 5.4% year-over-year in the quarter. A quick note about inflation before moving on to net income. Certain costs of operating our business like labor and fuel costs are currently subject to inflationary pressure. But given our previously planned move to a $20 per hour starting wage and our long-term relationships and contracts for goods and services, we haven't yet seen a significant impact of inflation on our P&L. I would also note that our consumers are experiencing inflationary pressure but given the availability of subsidies for broadband and our focus on saving customers hundreds of dollars per year by switching to our converged connectivity product, we believe we are well positioned for the changing market. Turning to net income on Slide 8. We generated $1.2 billion of net income attributable to Charter shareholders in the first quarter versus $800 million last year. The year-over-year increase was driven by a non-recurring litigation settlement charge in other operating expenses for the first quarter of 2021 and higher adjusted EBITDA. Turning to Slide 9. Capital expenditures totaled $1.9 billion in the first quarter, just above last year's first-quarter spend of $1.8 billion. We spent a total of $232 million on our rural construction initiative in the quarter. Most of that spend relates to design, walk out and make ready, and as expected has not yet resulted in significant passings growth. The vast majority of that spend is accounted for in line extension. We spent $74 million on mobile-related CapEx, which is mostly accounted for in support capital and was driven by investments in back-office systems. As Slide 10 shows, we generated $1.8 billion of consolidated free cash flow this quarter, a decrease of $55 million or 3% year-over-year. Excluding a one-time litigation payment of $220 million made in the first quarter, free cash flow grew by $165 million or 8.9% year-over-year. Please note that in the second quarter we'll begin making quarterly cash tax payments for fiscal year 2022. These payments are consistent with the cash tax outlook that we provided in our fourth quarter investor call. We finished the quarter with $94.9 billion in debt principal. Our current run rate annualized cash interest is $4.4 billion. As of the end of the first quarter, our ratio of net debt to last twelve-month adjusted EBITDA was 4.43 times. We intend to stay at or just below the high end of our four to 4.5 times target leverage range. During the quarter, we repurchased six million Charter shares and Charter Holdings common units totaling about $3.6 billion at an average purchase price of $600 per share. Since September of 2016, we've repurchased $60.4 billion or nearly 42% of Charter's equity. Our path to continue to grow our business remains strong and we will do that by furthering convergence in our connectivity business, allowing us to capture additional share, focusing on expanding our footprint, and continuing to improve the customer experience and extending customer lives. By executing on those items, we will drive customer and share growth, free cash flow growth, and shareholder value.

Hi. Thank you. Well, I have a few questions, if I could. First, with respect to broadband, the pace of homes passed excluding RDOF decelerated a little bit. I'm wondering if you can just talk about the rate at which you expect homes passed for broadband to grow and how you think about that as a floor for broadband growth rate going forward? And then with respect to the JV that you announced with Comcast, is there a vision where you take the Flex box and actually make it your primary video delivery platform, where all your video is IP and that you sort of reclaim that capacity? And then finally, one related question Tom. I sort of – I can't resist asking if you just want to comment on password sharing, and a little bit of an I told you so.

Yeah. Well, I did tell you so. So yeah, Craig, the pace of broadband homes passed, I think is an interesting driver of potential growth. You're right to point it out. Over the last five years or so we've added about one million passings a year. That's comprised of new construction of housing developments plus fill-in, plus plant expansion into areas where it's economic to serve passings that are contiguous to some of that development. That's a driver of future growth. There are really four drivers that drive the future growth of our broadband business, and that's a significant one. Another one is the household growth. The growth in households using broadband, which is today in the mid-80s, but I think that will continue to increase as digital literacy increases and people continue to want to be part of the connected world. I think that moves up to the vacancy rate over time. We also have the RDOF opportunity, which we've just begun to develop. We've started to activate the subsidized plant expansion through RDOF. We've won quite a few bids at the state level. There's $42 billion of additional funding that's going to be distributed probably next year for additional expansion into rural areas, and that's an opportunity for growth for us. Finally, we have the opportunity to increase our share of the market of existing broadband customers. We can do that by packaging, which we've always done successfully, our products into a value proposition that's better than the individual component pieces that they're currently buying from various providers. The current mobile growth is a key factor in that opportunity. Construction issues and supply chain issues are currently affecting activations of housing developments and that kind of thing. Over the longer term, I think that pace that we've experienced over the last five years continues. For the second part of your question about the JV and IP, the answer is yes. I expect that incrementally most of our customer base will be all IP and that Spectrum will be recaptured. There are various ways of compressing that Spectrum as you market your way into the IP space. The plant capacity being realized will be available to increase broadband speeds and/or handle broadband capacity that's required as a result of overall data use. Lastly on password sharing, we knew it's a problem. It affects supply and demand of all content, not just the provider selling the content, which diminishes the value of content for everybody, which is the point we have been trying to make for years. So, next question?

We will take our next question. Thanks.

Hi, good morning, guys. Thanks for taking the question. I know traditionally you prefer not to give context around a forward-looking view of the broadband market. But given that we're just in an environment of heightened uncertainty, I'm wondering if you'd stray from your normal policy and at least give us some more context for what you're seeing in the market generally in terms of the move activity as we came out of 1Q into 2Q. Competition, are you seeing an impact now that's more discernible from fixed wireless broadband? Has that changed over the course of the quarter, going into 2Q? And then how should we think about seasonality off of the results that you guys just produced in 1Q? Should we think of seasonality through the year as being the normal trend? Thanks.

Look Chris why don't you take that?

Hey, Jonathan, we expected a question along these lines and I have some thoughts. We expected the market to return to normal last year, including seasonality. It's difficult to say. As Jessica mentioned, transaction volume in the market remains low, particularly move returns, which is a key source of net subscriber acquisition for us. Our churn rates of all kinds and across all footprint types remains at record lows. The pace of gigabit overlap increases within our footprint has remained consistent with the past few years, despite commentary about acceleration. We have competition everywhere we operate. Our largest wireline competitor had negative residential wireline net additions in the quarter while we continue to grow. Compared to last year's first quarter with already low market activity, our gross addition rate in the first quarter of this year was lower in both overbuild and our non-overbuild footprint by the same amount. Together with record low churn, this illustrates the biggest driver remains lower selling opportunities from overall market activity and churn. There are additional factors which could contribute to lower gross addition rates. First, lower household growth rates, which we along with others have seen. There's still a lingering pull-forward effect from the shift to our higher-quality broadband during the pandemic. Finally, we do not see direct impacts from fixed wireless access in our churn or our gross additions. The overall activity levels remain low, and we will trial different tactics to stimulate more competitive churn, but market activity and move return will return. When it does, we expect our Internet net addition rate to normalize. Our already very strong mobile line growth should get even better with higher attach and upgrade rates to the fastest and really the only real converged Internet product in our footprint. As Tom mentioned, our various construction initiatives should provide a larger recurring footprint expansion for customer acquisition as we get to the end of this year. So, overall activity levels remain low, and I hope that helps answer your question.

That's really helpful. I appreciate it, Chris.

Yes.

Thanks Jonathan. Peter, we’ll take our next question, please.

Yes. Thanks for taking the question. You've obviously continued to show great traction with the wireless net adds even as your selling opportunity against customer gross adds has gone down. So it looks like the recent adjustments you've made to pricing and packaging resonate with the base. You're still going to market differently than the big three; they increasingly are looking at things like handset promotions and they tack a lot of value into their higher tiers, whether it's tethering or true unlimited video. So I guess I'm just wondering, how are you thinking about whether it makes sense to start going after the wireless consumer who values those things and the assessment you're doing as to whether the additional costs you incur would ultimately be worth it? And does that math start to change if you were at the point where you actually were putting a more significant amount of their macro traffic onto a CBRS network? Thank you.

Yes. Brett, the answer to your question is we will use those tactics that make economic sense to us to drive our business and to drive our relationship growth in this mobile broadband space. As I said in my comments, we have very good growth and we have greater growth than the rest of the mobile industry currently. So, we're on track and doing the right things from a marketing perspective, and we think we can accelerate that growth. Various tactics that you see people use to sell wireless are all related to trying to create a value proposition for customers, and some of them cost more than others. We think that our CBRS and our WiFi offload continue to allow us to have low-cost mobile products with high capacity available to our customers, which gives us the ability to sell those products at value propositions for consumers. I don’t put any marketing tactic aside and say we won't do it or because we're not doing it today we won’t do it in the future. Our fundamental strategy is to use our network effectively and provide a high-quality best-in-class service better than anyone else in fact right now in terms of speed capability and sell that for a lower price. We think that value is what consumers will ultimately recognize. How we package that up in various marketing tactics is open to what is successful.

Brett, a good example of that is we do have a premium plus $10 package in our mobile. At $39.99, the impact on take-up is very low. The reason it's very low is that customers already get the fastest mobile product in the country through the standard limited offer we have at $29.99. Therefore, there hasn't been much of a need or a desire even at that attractive price point to take what you might call a premium product.

Thank you.

Peter, we'll take our next question please.

Hi guys. Thanks. I have a couple of questions. First, Tom, did you mention that the mobile network trial is now set for mid-2023? Is that correct? And is that a delay? What impact does that have on this year's mobile capital expenditures?

No, it’s mid this year. If I said that, I didn't mean it. It's mid-2022.

All right. That makes sense. Maybe I misheard. And then second of all, have you started to book RDOF revenue? How quickly should we see that revenue come in from here?

Yes, we did start booking RDOF revenue in Q1, Phil. There are two months in for a total of $19 million. The run rate on the RDOF booking will be that, so it gets booked in over the 10-year period that we receive the funds. We'll have it at just over $9 million a month from now until 10 years from now.

Great. Thanks very much guys.

Peter, we'll take our next question please.

Okay. Thank you. I have two questions. A follow-up on the Comcast JV. I think the press release said that you guys are investing $900 million. Over what time period is that? How do you expect to monetize the offer? I think it starts next year. Is it mostly advertising or revenue split? And then your margins on the cable side are over 42%. Where do you think peak cable margins will be?

Well, the opportunity, Jessica, is to create advertising revenue and to create transaction revenue on the product. Those are the primary drivers, which requires having a full set of content opportunities and using your IP and marketing skills in the digital space to drive consumer activity and viewing. Our capital commitment, we haven't disclosed that. It's in the grand scheme of things from a development point of view relatively minor, especially when you consider the CPE business we’ve always been in where we've had to buy CPE. It's mostly a retail product. So, with regard to margins, it's hard to comment on margins in the context of our business because your mix of video product makes such a difference. We're trying to sell the right mix of products to the consumer that drives the most cash flow per customer, which doesn't necessarily drive the most margin. It's hard to speculate on where exactly margins would go as a percentage. Ultimately, we think that capturing additional share in the mobile market and broadband market drives the most cash flow off of our assets and other services.

You can have a really high margin by not growing at all.

Okay. Thank you.

Thanks, Jessica. Peter, we’ll take our next question, please.

Thanks so much. I think a few more questions around broadband if you don't mind. First is how many DSL customers are left in your footprint? What do you think broadband penetration is overall in your footprint? How much is left to go from just more folks getting broadband? A couple of follow-ups.

Hey, Doug, this is Chris. Look for competitive reasons I don't want to go deep into the remaining broadband penetration. People have statistics. They know what's out there. There's still a sizable opportunity for us to grow the market which Tom talked about. In terms of DSL, it's declining but there's still a decent base. You really need to think about not just DSL but really VDSL. That's really the new DSL. To the extent that fixed wireless access is building up potentially in areas we are moving into from a rural perspective, that's in the future DSL pile or parking lot of subscribers we can go acquire.

And Chris, you mentioned in terms of gross additions there is no difference in competitive fiber footprints versus non-competitive. Is it the same for churn as well?

Yes, we see churn down in both types of footprints at a similar amount and we see the almost the exact same reduction in gross addition rates in both overbuild and non-overbuild footprint. This illustrates that this isn't a competitive phenomenon in the marketplace; it's the market activity at a low-mover churn environment. The overall activity levels remain low, and we will trial different tactics to stimulate more competitive churn, but the market activity and move return will return.

But another part of your question was what's the overall broadband penetration. If you take all the smaller speed slow speed products, it's in the mid-80s, and as I said earlier I think that goes up towards the vacancy rate.

Great. Thank you. And the last question I wanted to get to and I appreciate you taking the questions. Competitors have a variety of pricing and go-to-market strategies for broadband and mobile. You actually have a difference yourself on how you would build a broadband customer versus a wireless customer. Some wireless plans have no contracts and no taxes or fees. How are you thinking about evolving your pricing strategies?

Like I was speaking about marketing earlier, that's a form of price. We have lots of opportunity to mix and match various tactics to create perceived value for customers. Fundamental value is what we’re really trying to drive our product, which is having superior products at lower prices than our competitors by doing smart investments and good technologies that allow us to have a lower cost structure and lower cost per bit available to consumers.

Understood. Thank you, all.

Thanks, Doug. Peter, we'll take our next question, please.

Thanks. I had one sort of big question about the video business. Obviously, your video losses seem to buck the trend relative to some of your peers. Can you just talk about how much flex is left on these lower-tier offers that you can still put out to customers? Any changes to sort of carriage minimums as you renegotiate programming deals? For Jessica, you called out a lot of trends on the cost side. I just wanted to ask some questions on them. On bad debt, are we back to the pre-pandemic levels? Just on CapEx, should we assume RDOF CapEx sort of trend similar to this quarter in the low 200s a quarter just for modeling purposes? Thanks.

Jessica, do you want to answer the bad debt question?

Yeah. So if I start on the expense items, Vijay, the bad debt is we’re not back to pre-pandemic levels. I don't expect us to go all the way back to pre-pandemic levels. The subsidies for broadband available have eased the impact on consumers of what happens in the economy, just making it easier to pay for services overall. Non-pay churn continues to be at near-record lows. We haven’t seen yet moves back towards pre-pandemic levels. On the RDOF side, I wouldn't expect spend in the rural construction initiative to trend at a very steady level over time. There will be opportunities to accelerate spend at points in time and as we have those opportunities, we likely will take them. We think that continuing the build is important.

Regarding video, we try hard and we put value where we can for the consumer and believe there's still opportunity in video. We've had success creating additional packaging and a mix of video products that we successfully sell to consumers. It's been difficult as video has been packaged in the past in a very fat expensive bundle driven by sports rights costs, and as we've been able to get some content out of that ecosystem, we can build a nice video business.

Great. Thanks so much.

Thanks, Vijay. Peter, we’ll take our last question, please.

Thanks. Good morning. Tom and Chris, I have a couple of related questions about competition in broadband. Investor sentiment regarding cable seems to be as negative as it has been since the mid-2000s when Fios and U-verse were expanding, particularly impacting Cablevision. Tom, do you see similarities today to that time when you were at Cablevision while Verizon was building its network across much of the region? How do you compete and manage that level of competition? One trend I'm sure you're aware of is the numerous Tier 2 fiber overbuilds occurring across the country, including possibly in your area. While these aren't on a large scale, there are many privately-funded initiatives. I'm curious about your thoughts on whether this trend will have long-term implications.

In terms of sentiment, yes, there have been periods in my business career in cable where sentiment has gone up and down. My sentiment remains the same. I think it's a great business and we have great opportunity to continue to grow the business successfully. When everybody's euphoric, it's odd, and when everybody is pessimistic, it's also odd, and I'm unchanged. My experiences with Cablevision and managing competition have been very positive. There's nothing unusual about what's going on now, and actually, from a competitive environment, it's pretty much unchanged. The pace of what's been going on hasn't increased. We do well regardless of whether we're in physical competition with a wireline builder or whether we're in competition with satellites or fixed wireless assets. We're comfortable that we can continue to drive our value proposition and grow customer relationships. My sentiment is unchanged, and there probably is some opportunity for us to buy some infrastructure companies that would help us make our network better.

You've seen it as well for a while. The history of these tertiary overbuilders is pretty demonstrated. My experience is they all start out with a rosy story and they get a lot of capital going in. The early penetration is because there's something new and the environment looks good. As long as you can sell fast enough, you can do okay as a return. The history shows that they go bankrupt and recapitalize. Our job is to keep our head down and be competitive.

Great. Thank you.

Thanks Ben. Peter, we’ll take our last question, please.

Thanks and good morning. Just to follow-up on a couple of things. First, just curious if you could share more of the timetable on the pace of broadband network upgrades for certain percentages of your coverage footprint, when you think of the opportunity to increase upload speeds as well as to expand download speeds? As you consider a number of factors, rate environment, stock price, the company’s view of forward growth, under what circumstances would you revise the current capital allocation plan and take net debt leverage targets higher or lower? Thanks.

If I think about where we are right now, rates have obviously increased versus where they've been in the recent past. In historical context, rates are still quite low. From a growth perspective, we continue to be quite optimistic about our growth opportunity. Our stock is trading at a multiple to free cash flow that's pretty low compared to where we've been. We're happy with where we're sitting targeting the high end of our four to 4.5 times leverage ratio. It's hard to pinpoint exactly what would cause us to shift from that space. We're happy with where we are and will continue to target that level.

We're actually doing multiple upgrades in various parts of the country right now. The interesting thing about our capacity to do these upgrades is that they're quite simple electronic upgrades, relatively inexpensive, and we can do them rapidly across much of our footprint. We're positioning ourselves to execute at a pace required for demand for that kind of capacity. We haven't really forecasted that publicly in terms of speed.

Thanks, Mike. And Peter, we're going to pass it back to you. That concludes our call. Thank you very much.