Charter Communications Inc (CHTR) — Q3 2024 Earnings Call Transcript

Thanks, operator, and welcome, everyone. The presentation that accompanies this call can be found on our website, ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, and 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, which 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. On today's call, we have Chris Winfrey, our President and CEO; and Jessica Fischer, our CFO. With that, I'll turn the call over to Chris.

Thanks, Stefan. We had a busy quarter, executing our operating strategy and building on the foundational investments of the past couple of years. We're also successfully managing the transition of customers previously on the government's Affordable Connectivity Program in a period of new competition. And while we expect some normalization of external factors as we head into 2025 and much lower capital intensity beyond 2025, we're not standing still, evidenced by the series of announcements we made in September. This includes a market-leading customer service commitment, new pricing and packaging that makes better use of our unique assets in the marketplace, encapsulated in a brand refresh through Spectrum's Life Unlimited promise. There was a lot of flattering press about the importance of wireline networks and convergence this past quarter. We remain the only true convergence pure planner footprint with a fully distributed gig-capable wireline and wireless network across a growing 58 million passings everywhere we operate, soon to be symmetrical and multi-gig in all of our communities. Our seamless connectivity capabilities are evidenced by our continued market-leading mobile growth. In just over a year, we completed a full cycle of programming renewals and the launch of Xumo to fundamentally reposition video again as an important part of the connectivity bundle, whether in full value hybrid DTC linear packages or smaller non-sports streaming packages or the addition of a la carte programmer apps to our broadband and video customers. We're well positioned to provide seamless connectivity and this new form of seamless entertainment to customers wherever they want to go. Before discussing the quarter, I want to express our sympathy and commitment to the communities across the Southeast impacted by hurricanes Helene and Milton. These were devastating storms. The initial impact was significant, mostly due to power outages, downed poles, and trees. All but approximately 10,000 of our customers, including homes and businesses, who fully lost service have had their service restored. We're particularly active in the Asheville, North Carolina area and some remaining pockets in Tampa Bay. I'd like to thank our frontline personnel for their dedication and effort in keeping our customers connected, including our employees who live in the area and were directly impacted and the teams of employees from across the country who volunteered to help in the restoration. During the third quarter, we lost 110,000 internet customers. We added 545,000 Spectrum mobile lines, and over 2.1 million lines year-over-year. Revenue grew by 1.6% during the quarter, while adjusted EBITDA grew by 3.6%. Were it not for the impact at the end of the ACP program in June, we would have grown our internet customers during the third quarter. Importantly, we've been successful in keeping low-income households connected. We continue to compete well against both wireline overbuild and cell phone internet, each with expanded footprints. We remain confident in our ability to return to healthy long-term growth. Our internet product is faster and more reliable. Our pricing is lower and similarly bundled with mobile. We expect market activity and selling opportunities to pick up over time. The cell phone companies will face challenges as customer bandwidth demands continue to grow. As I mentioned, in the meantime, we're not standing still. In mid-September, we made a series of important announcements, including the brand relaunch, a unique customer service commitment, and the new pricing and packaging structure. Our strategy has not changed. We offer high-quality products to customers in a package and at a price point that our customers can't replicate. We pair this with unmatched customer service. Our fully deployed high bandwidth network with ubiquitous and seamless connectivity and entertainment products creates opportunities and removes barriers to help customers in every aspect of their lives, which led us to our new brand platform, Life Unlimited. While part of that is a new look and feel for the Spectrum brand, it's also about our increasingly converged set of products and building more trust with our customers. Our new customer commitment is comprised of four key promises: Reliable connectivity—we're committed to keeping our customers connected 100% of the time and promptly resolving any issues. Transparency at every step—We're committed to clear and simple pricing and timely service updates. We will take responsibility when things go wrong. Exceptional service—We're committed to providing exceptional customer experiences. And finally, always improving, meaning we act on our customers' feedback to improve our products and customer service. We back up those commitments with guarantees. For example, to resolve any service disruptions quickly, we commit to dispatch a technician the same day if the customer requests prior to 5 PM. If a customer needs help with professional installation, a technician will be available the same or next day. We now back those commitments with proactive service credits if we miss the mark. We also don't have residential or SMB contracts. If a customer is not completely satisfied with any services within the first 30 days, we give them their money back. We're making these commitments because we can, because we've already made the investments in 100% US based sales and service with our own employees in frontline tenure through pay progression, market-leading benefits, and tools and systems to improve the job for the employee and our customers. Our Life Unlimited brand relaunch also includes new pricing and packaging that better utilizes our unique product assets, which work better together to provide lower promotional pricing and lower persistent bundle pricing. Our new pricing and packaging will drive more sales with higher selling of our best products, grow customer ARPU despite lower product pricing, and reduce billing, service, and retention calls, while reducing churn. For example, we now offer our gig internet product at $40 per month when bundled with two unlimited mobile lines and/or video. Customers that take the new double play will receive a two-year price lock, and customers that take our new triple play will receive a three-year price lock. In that package, customers also get our top mobile tier, Xumo, and Cloud DVR at no additional charge. For customers who want our popular Spectrum One offering, that remains available now with a higher starting speed of 500 megabits per second with one free unlimited mobile line included for a year. Existing customers can also opt into our new bundles at persistent bundled pricing. We have also increased internet speeds for existing flagship and ultra-customers. It's still very early, but so far, our new pricing and packaging is showing promising results, including more video sell-in, more mobile lines per sale, and more gig sell-in. I expect those results and broadband sales to accelerate as we season our marketing and sales approach over time. Our operating strategy remains simple: sell more products to more customers, driving higher penetration with our large fixed asset, reducing the operating capital cost per product with lower churn, to ultimately drive more cash flow capacity. We're making investments in that large fixed asset through our network evolution initiative, which brings multi-gigabit speeds to 100% of our customers. We launched symmetrical internet service in our step one markets, including Reno, St. Louis, Cincinnati, Dallas Fort Worth, Louisville, Lexington, Rochester, Minnesota, and Rochester, New York. We're now broadly marketing our symmetrical speeds in seven of these eight markets. The high split upgrade process should be largely complete in all of our step one markets by the end of this year. We're making progress on Step 2 DAA and Remote PHY markets, and we've deliberately slowed these markets to get the software fully certified to our specifications. This has pushed back equipment purchasing and operational deployment— we now expect our network evolution initiative project to be completed in 2027. Excluding the benefit of future capital and operating cost savings, our network evolution has and will cost a low incremental $100 per passing. We have full visibility to that outcome. We'll update our multiyear capital expenditures outlook, including the new phasing of our network evolution spend, when we report our fourth quarter results in January. In video, over the past year, we transformed all of our major programming agreements in a way that works for our customers and for Charter, including a recent early renewal of Warner Bros. Discovery and then NBCU. These agreements give customers greater overall package flexibility and the ability to include all the key streaming apps from programmers within our Spectrum TV Select packages. This enables us to offer what we now call seamless entertainment— the first for the industry at no extra cost. We also have paths for customers to upgrade to the ad-free version of these apps and we will sell programmer apps a la carte to broadband and skinny package video customers. We've also had the renewed support from our programming partners to support each other's products and distribution for a healthier video ecosystem and better choice and value for customers. More to come on this, but the inclusion of Max with its HBO content and TV Select and how we plan to promote Max to our broadband customers and vice versa will show how we and the programmers more broadly can support one another with our customers front and center. By early 2025, we'll be providing our TV Select customers up to $80 per month of retail streaming app value at no additional cost, including the ad-supported versions of Max, Disney+, Peacock Premium, Paramount+, ESPN+, AMC+, Discovery+, BET+, and ViX. Seamless entertainment will be even easier with Xumo, which provides unified search and discovery with a market-leading voice remote and the highest-rated pay TV streaming app in the US. Over the last couple of years, we've moved away from bundling video in our offers because the value proposition to customers had fallen. We still have some work to do to operationalize the new customer proposition, including the customer front end for programmer app authentication and programmer credentials, but we're proud of what we can offer customers, existing and new, in terms of value and utility. And that breakthrough is why we're including video in the new bundles we launched in September. Fundamentally, we believe that maintaining and evolving the video business, even if it isn't growing, helps customer acquisition and retention by making use of our scale and capabilities and adding more value into our unique seamless connectivity relationship. Video still has positive cash flow and provides us with option value. So a lot of exciting things happened in the third quarter. Our continued success in mobile is certainly one of them. Our mobile offering continues to evolve, driving strong results and supporting our new pricing and packaging efforts. We had our highest port ends quarter ever, our highest mix of ads on unlimited plus driving higher customer value and ARPU. Our lines per customer continue to grow nicely. Today, approximately 8% of our total passings take our converged offering of internet and mobile. So we remain underpenetrated despite having a differentiated and superior offering with market-leading pricing at promotion and retail. As we work through the one-time impacts of ACP this year, new competition with expanded footprints, and our unique non-recurring subsidized network expansion investment, we remain confident in our ability to drive healthy, long-term connectivity customer growth. Now in the future, we have the best fully deployed network uniquely capable of delivering seamless connectivity or convergence everywhere we operate, with pricing and packaging that saves customers money with the best products, and a service capability investment that has yet to be fully realized as a competitive advantage. Our team is executing well on these multiyear initiatives, a team that's hungry with a tremendous drive to win for our customers, the communities we serve, our fellow employees, and for our shareholders.

Thanks, Chris. Before discussing our third quarter results, I want to mention that today's results do not include any impact related to hurricanes Helene and Milton, which hit the Southeast in late September and early October. Our fourth quarter results will include some lost customers and passings related to the storm from both suppressed gross additions and the damaged or destroyed plant that Chris mentioned. We're still assessing the impacted areas and we expect to rebuild lost passings over time as our customers rebuild. We currently expect to incur approximately $100 million in incremental capital expenditures, the vast majority of which will be captured in our rebuild capital expenditures line. We have been providing bill credits to customers in impacted areas and those one-time credits will offset some fourth quarter revenue. We may also have some incremental operating expense, although we expect that to be relatively small. And we'll isolate the storm impacts when we report our fourth quarter results. Let's please turn to our customer results on Slide 8. Including residential and SMB, we lost 110,000 internet customers in the third quarter, while in mobile, we added 545,000 lines. Video customers declined by 294,000 and wireline voice customers declined by 288,000. The end of the ACP program drove higher third quarter non-pay and voluntary churn among former ACP customers for a total estimated third quarter impact of approximately 200,000 internet losses. Incremental non-pay disconnects drove more than half of those losses, and the rest of the impact was primarily driven by voluntary churn with a small impact from lower connects. We continued to do a very good job in managing the end of the program, and we've retained the vast majority of our customers who were previously receiving an ACP benefit. Beyond ACP, we competed well across our footprint, but note that our third quarter internet net additions benefitted from seasonal back-to-school connects and a work stoppage at one of our competitors, while fourth quarter customer results will include impacts from the storms and about 100,000 incremental non-pay disconnects and some lagging voluntary disconnects, both related to the end of ACP. After those effects in the fourth quarter, we expect the one-time impacts from ACP to be behind us. Turning to rural, we ended the quarter with 696,000 subsidized rural passings. We grew those passings by 114,000 in the third quarter and by 381,000 over the last 12 months. We had 41,000 net customer additions in our subsidized rural footprint in the quarter. We now expect to activate close to 400,000 new subsidized rural passings in 2024—about 35% more than in 2023, but lower than our original 2024 plan of 450,000 due to shifting construction labor to rebuild activity in storm impacted markets. We expect our subsidized rural construction activity to recover by the end of the fourth quarter and that reacceleration of activity to put us on a higher pace in 2025 as planned. Our RDOF build should still be completed by the end of 2026, two years ahead of schedule. Moving to third quarter revenue on Slide 9. Over the last year, residential customers declined by 1.8%, while residential revenue per customer relationship grew by 1.8% year-over-year given promotional rate step-ups, rate adjustments, the growth of Spectrum Mobile and $63 million of residential customer credits in the prior year period related to the temporary loss of Disney programming in September 2023. These factors were partly offset by a higher mix of non-video customers, growth of lower-priced video packages within our base, and $25 million of costs allocated to programmer streaming apps, which are netted within video revenue. As Slide 9 shows, in total, residential revenue grew by 0.3% year-over-year. Turning to commercial, total commercial revenue grew by 2% year-over-year with SMB revenue growth of 1% year-over-year, reflecting higher monthly SMB revenue per SMB customer due primarily to rate adjustments. Enterprise revenue grew by 3.7% year-over-year, driven by enterprise PSU growth of 5.7% year-over-year. When excluding all wholesale revenue, enterprise revenue grew by 5.9%. Third quarter advertising revenue grew by 18% year-over-year, given political revenue growth. Excluding political, advertising revenue decreased by 6.3% year-over-year due to higher levels of inventory in the market, partly offset by higher advanced advertising revenue. Other revenue grew by 11.6% year-over-year, primarily driven by higher mobile device sales. In total, consolidated third quarter revenue was up 1.6% year-over-year, which is 0.6% year-over-year when excluding advertising revenue and $68 million of customer credits in the prior year period related to the temporary loss of Disney programming in September 2023. Moving to operating expenses and adjusted EBITDA on Slide 10. In the third quarter, total operating expenses grew by 0.2% year-over-year. Programming costs declined by 10% year-over-year due to a 9.5% decline in video customers year-over-year, a higher mix of lighter video packages, and costs allocated to programmer streaming apps, which are now netted within video revenue, partly offset by higher programming rates and a $61 million benefit in the prior year period related to the temporary loss of Disney programming in September 2023. Other costs of revenue increased by 15.8%, primarily driven by higher mobile device sales and higher mobile service direct costs. Costs-to-service customers declined 0.5% year-over-year, given productivity from our 10-year investments, including lower labor costs, partly offset by modest year-over-year growth in bad debt expense. Sales and marketing costs grew by 4.4% as we remained focused on driving customer acquisition and given our Life Unlimited brand relaunch in September. Finally, other expense grew by 2.3%. Adjusted EBITDA grew by 3.6% year-over-year in the quarter. When excluding advertising, EBITDA grew by 2.7% year-over-year.

Turning to net income. We generated $1.3 billion of net income attributable to Charter shareholders in the third quarter, in line with last year, as higher adjusted EBITDA was mostly offset by higher other expenses, primarily due to non-cash changes in the value of financial instruments. Turning to Slide 11. Capital expenditures totaled $2.6 billion in the third quarter, down about $400 million from last year's third quarter. Line extension spend totaled $1.1 billion, $16 million higher than last year driven by our subsidized Rural Construction initiative and continued network expansion across residential and commercial greenfield and market billing opportunities. Third quarter capital expenditures excluding line extensions totaled $1.5 billion, which was lower than the prior year period by about $400 million. The decline was driven by core CapEx items, including CPE timing and lower than originally expected spend on network evolution, given what we discussed earlier with respect to our Step 2 software certification. We now expect total 2024 capital expenditures to reach approximately $11.5 billion, down from approximately $12 billion previously. That update reflects full-year 2024 line extension spend of approximately $4.3 billion, down from $4.5 billion, partly offset by slightly higher core CapEx primarily due to the shift of some of our construction labor from rural efforts to hurricane rebuild activity. The update also includes 2024 network evolution estimated spend of approximately $1.1 billion, down from the previous estimate of $1.6 billion. Much of that originally planned 2024 spend is being pushed into 2026 and 2027. As I mentioned, we will update our multiyear capital expenditures outlook when we complete our 2025 operating plan and report our fourth quarter results in January. We now expect our total BEAD spend will be substantially less than our spend in RDOF, in each case net of subsidies. That lower outlook reflects the most recent broadband map updates in terms of available unserved passings near our network and a little less favorable rules framework in BEAD when compared to RDOF and state grants. We have been in regular communication with the states in which we operate, and we are generally the largest rural builder in our states through RDOF, ARPA, and other grants. While we're still finishing the 2025 operating plan, it's clear that 2025 capital expenditures will not exceed the range of capital spend that we outlined in January of this year, even inclusive of a small amount of initial BEAD pending. Looking beyond 2025, we expect total capital spending in dollar terms to be on a meaningful downward trajectory, even inclusive of BEAD spending. Total capital intensity is now poised to decline significantly after 2025, even including the unique one-time opportunity that subsidized rural spend and network evolution has presented us. While we always prioritize our cash flow for organic opportunities first and then accretive M&A and buybacks, there are no organic capital expenditure opportunities on the horizon that give us concern with that capital intensity outlook. Free cash flow in the third quarter totaled $1.6 billion, an increase of approximately $520 million compared to last year's third quarter. The year-over-year increase was primarily driven by higher adjusted EBITDA and lower CapEx. We finished the quarter with $95.1 billion in debt principal. Our current run rate annualized cash interest is $5.0 billion. We repurchased just under 850,000 Charter shares and Charter Holdings common units totaling $260 million at an average price of $311 per share, less than we originally expected as we became restricted as a result of our negotiations with Liberty Broadband. As of the end of the third quarter, our ratio of net debt to last 12-month adjusted EBITDA moved down to 4.22 times. We remain committed to our levered equity strategy and to share repurchases as a component of that strategy. Our leverage ratio may decline further given our pause in buybacks, but we look forward to resuming our program when we are able, and we have not changed our target leverage. And with that, I will turn it over to the operator for Q&A.

Good morning and thanks for taking the question. Just one on broadband. Net adds in the quarter were very encouraging with a return to quite meaningful sub growth, excluding ACP. Is there any color you can provide on the competitive backdrop and perhaps any early reads on the underlying broadband trends in the fourth quarter, excluding the incremental ACP net losses you called out? Thank you.

Sure. A very much anticipated question. So maybe I tried to talk about the market more generally, both inside of the third quarter. What we're—what we think about the fourth quarter and where that does or doesn't position us for next year. I think as you mentioned, there's a lot of puts and takes inside the third quarter. Underlying all that is that we are competing very well in a marketplace that still has lots of competition, lots of new competition with expanded footprint. In the third quarter, we did have some benefits that are unique to the third quarter, seasonality, which is typical. We also had some, not large, but some positive impact from a competitor who had a work stoppage. I think that's well understood. And then we had obviously the downside of significant ACP primarily through non-pay disconnects and voluntary churn, but we're managing that well. In the fourth quarter, when you think about the seasonality and the work stoppage benefits, we won't have those inside the fourth quarter. We'll still have approximately 100,000 non-pay to deal with from ACP that we expect to see early in the quarter, and we also have some hurricane impacts. That will impact subscribers, credits, and, as Jessica mentioned, some capital and rebuild. The bigger question is, as you look out, where does that leave us? We're not about managing for short-term quarters. We're really about thinking about the long-term for the business. In 2025, there won't be ACP and we'll still have the continued tailwind of newly built passings, both organic as well as rural footprint. I think there are big questions or variables that will exist. Does a lower interest rate environment impact mortgages in a way that drives higher move rates? Have we seen the peak cell phone Internet impact? It appears that's the case. Can we drive even higher Internet sales as well as additional bundling and higher product value packaging? Then finally, one variable we wouldn't bet on, but is a potential option, can video—a reconstituted video—provide broadband acquisition and retention support? It’s too early to declare victory or even plateau but certainly a better unit growth setup for 2024 for 2025 than in 2024 both for us and probably for the rest of the cable industry.

Thanks, Kutgun. Operator, we'll take our next question.

Thanks. Can you hear me?

Yes.

Great. Hey, Chris. Chris, as we look beyond cell phone internet to fiber—not that fiber is new—but as we think about the footprint expansion within Charter's footprint, can you talk a little bit about where that sits today, your sort of gig markets, where you see that going over the next three-plus years? And kind of how you think your market share shakes out as you analyze your historical performance in fiber markets and think about sort of what's happening in the marketplace and all the things you're doing at Charter to compete? And I don't know if you'll be able to answer this, but could you talk about why the Liberty Broadband opportunity is interesting to Charter? And if you do come to an agreement, are you able to buy back stock pre-close? Is there a way to put a mechanism in place to get back in the market or does that have to close before you're able to get back in? Thank you so much.

Sure. Let me start with the easy one, which is the last question you asked about Liberty Broadband. We've said what we can say for the time being through Liberty's 8-K and what there is very much public. I think we're going to have to stay quiet until there's something more to talk about in the meantime, at which point, of course, we'll discuss everything you just asked. If you step back to gig overlap, which includes all types of gig overlap in our footprint, it's roughly 55% today. Where it goes depends on people's access to capital and what happens in the M&A environment. I think there are probably some competing notions of that overlap footprint and where it may not be mutually exclusive. When you have duplicative plans of multiple overbuilders, it really makes it worse, which I think leads to the realization that many may want to back off, just because they're not going to be able to make returns. Historically, I've thought that wireline overbuild has very poor, if not negative, returns. So depending on the rational nature of our competitors and where they want to deploy capital, we can continue to make the investments we're making today to ensure we have a symmetrical multi-gig wireline network across our entire footprint, alongside a seamless connectivity product through convergence that none of our competitors can ubiquitously use to compete. We also offer valuable savings to customers relative to mobile, and in some rural footprints, we can enable customers to save considerable amounts on their wireline phone relative to what they pay. Overall, we believe we have a great set of assets and a superior product offering that allows us to compete well in the marketplace.

Thanks so much, Chris.

Thanks, Ben. Operator, we'll take our next question, please.

Morning, guys. First, I'd like to just touch on the brand repositioning. From our perspective, I think it's a pretty profound change in the strategy and would love to get some context for—it’s probably too early—but are you starting to see any impact on gross adds or churn? Yes. And when do you think—how long does it take to really start to be felt in the business? And then from the bill credits that come with the commitments that you're making, would we be expecting any impact on ARPU and costs from those, or have you gotten your internal systems to the point where you're happy to give the bill credits because you know you're not going to have to give any?

Sure. It's a lot in that. Okay. I appreciate that you recognize the brand repositioning and the commitments we're making are significant. It’s exciting for us. It really comes about because we had invested significantly in our own employees and in frontline tenure, which promotes progression and the ability for employees to see their positions as careers. This gives us a higher quality of service compared to contractors or offshore personnel. However, we haven't gotten the credit in the marketplace from customer satisfaction or NPS as we thought. Thus, it is crucial to improve management and avoid the small issues in customer service. We also want to remind customers of our commitment to them through our service guarantees. Most of these costs won’t be significant to ARPU since it focuses on enhancing our service quality, making sure our investments are recognized. Our primary focus is on managing the small issues that exist. This change isn’t something we’re expecting to see immediate return from. It might take until late next year or early the year after that for us to see meaningful impacts on customer acquisition and retention.

Maybe the one early item to point out is that the bundled strategy we rolled out in new pricing is driving the results we hoped for. This should collectively drive higher customer ARPU by encouraging customers to take higher-tiered packages and more products.

It's the old strategy that you can lower your product pricing and have higher customer ARPU, both at the sale and over time, resulting in longer customer lives and lower operating costs, which drives better returns.

Thanks, guys.

Thanks, Jonathan. Operator, we'll take our next question, please.

Hi. Thank you. I'm going to try to squeeze in two if I can. First, this is an interesting question we've been pondering a bit, that you've been building out FTTH networks yourselves in your edge-out and expansion areas. How much of your plant today is FTTH rather than HFC? What kind of differences do you notice competitively in places? I know a lot of those are non-competitive markets, but what kind of differences do you see competitively when you do have fiber to compete with rather than relying on your HFC network? And then if I could squeeze in one extra, Chris, you talked about lower participation in the BEAD program. Does that open the door, perhaps to say, if you can't expand your footprint through subsidized building, there may be opportunities for small-scale M&A, sort of rural cable operators, for example, that might be attractive and could be acquired for less than the cost of building yourself in a lot of cases?

Sure. On the Fiber-to-the-Home expansion, I don't have that number in front of me. I know when we started our rural build, we had roughly 750,000 passings or 750,000 miles planned. We're now well over 900,000. When we were at 750,000 miles planned, we had about 50-50 in terms of construction that was between HFC and FTTH. Now we're close to 90% of the new build being Fiber-to-the-Home. We do that because it makes sense. From a competitive standpoint and service standpoint, we see no difference. In fact, in our Fiber-to-the-Home footprint, we strangely have a slightly higher troubled call rate compared to our HFC plant, based on a 10-year adjusted basis for customers and plant construction. That will normalize over time. Some of that's more software-driven, but the main point is we see no real difference regarding service quality or competitiveness between the two. Regarding small-scale M&A, we always say we like cable businesses and believe we operate them well. When there are small-scale opportunities that fit well with our footprint, we go after those. They typically remain small in scale, so you may not see the impact right away. We pursue both opportunities wherever they make sense and can drive returns for the company.

Yes. We always like to look at both BEAD and small-scale M&A opportunities. I don't foresee a trade-off between the two; we will pursue both where it makes sense economically.

I agree.

Thanks, Craig. Operator, we'll take our next question, please.

Great. Thanks. And two sort of related questions. One, actually, Jessica, you may have—you sort of touched on. I was just wondering, are there any margin implications for the new pricing and packaging? It sounds like you're going to—you expect to have better sell-in, which should lead to better margins. But sort of any—when should we expect to see the benefits of that, both in terms of margins and maybe changes in subscriber trends on the data side and video side? And then, obviously, you've seen some nice EBITDA acceleration through the year, probably will again in the fourth quarter with political advertising. Can you sort of point out any puts or takes as we try to get a sense of what EBITDA trends look like in 2025? Obviously, you don't want to give guidance now, but is there anything you can point to or that suggests the momentum you've seen through the year will continue in '25? Thanks.

Yes. Starting on the margin implications for the new pricing and packaging. When we look at how we can drive the most product value to the consumer that generates the most revenue, we're confident that the new pricing and packaging will be successful in driving additional cash flow per customer because of the value we've pushed into the bundles. Does that mean that margin as a percentage will go up? That's less clear. I think that the video product is a bit more attractive in the new pricing and packaging as we pull it together. Therefore, your mix around how much video versus mobile and internet may change. The mix tends to drive margin percentage across the company. The EBITDA growth in Q4 will be strong but might not accelerate in the way we had hoped due to some expense reductions coming in sooner than expected and the damages from the storm. Still strong, but maybe not accelerating. For next year, we're targeting EBITDA growth but note headwinds will remain, including internet customer losses and it being a non-political year for advertising. Even with that, our expense reduction efforts will support our goals. However, there will be meaningful headwinds in 2024.

Got it. Thanks, Jessica.

On that note, Jessica is right about focusing on cash flow margin. But it's important to highlight that our triple play bundles have the highest EBITDA contribution. They have the lowest churn as well as the longest customer life and the best ROI. This remains true today, which aligns with our launch of Spectrum pricing and packaging. You must ensure there is real value in the products being offered, and if so with high-quality service, there’s potential for long-term financial benefits.

Thanks, John. We appreciate everyone’s participation today.