Greetings, and welcome to the Altice USA Fourth Quarter and Full Year 2022 Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Brown. Thank you. Please go ahead.

Hello, everyone. Thank you for joining. We're joined today by Altice USA's CEO, Dennis Mathew; and CFO, Mike Grau, who together will take you through the presentation and then be available for questions. As today's presentation may contain forward-looking statements, please read the disclaimer on Slide 2. Dennis, please go ahead.

Thank you, Nick, and hello, everyone. I'm pleased to be here to discuss Altice USA's results for 2022, and share what we've been working on since I joined the company in October as well as give a preview of what's ahead in 2023. But before we get started, I want to take a moment to address the management changes we announced alongside our earnings this afternoon. Core to driving our culture and delivering against our plans is ensuring that we have the right leadership structure and team who can sharpen focus on our customer-centric strategy and drive growth. To that end, we announced the addition of several talented senior executives who bring decades of industry experience to the organization. But first, Mike Grau, whom you all know and who is with us today, has made the decision to step down as CFO on March 1. Mike has been with the company for over 20 years and at both Cablevision and Altice USA has been a steadfast and passionate leader. I'm incredibly thankful to him for his partnership over the last few months and appreciate that he will be staying on as an adviser until early July to help our new CFO, Mark Sirota, in his transition to the role. On behalf of the entire team at Altice USA, we thank him for his immense contributions and his leadership. On that note, I'm pleased to welcome Mark as CFO effective March 1. He most recently served as CFO of Comcast Business in the company's Central division, which spans more than 22 million passings, and he brings a tremendous amount of industry and financial experience to this role. I've known Mark for many years, and I'm confident that he will help drive discipline in the organization as we execute against our growth…

Thank you, Dennis, and good afternoon, everybody. First, let me say it's been a pleasure serving as CFO for the last 3.5 years, leading the finance team at Altice USA. I'm very grateful for the partnership and friendship of the countless colleagues I've worked with for over more than 20 years here. It has also been great getting to know all of you. While this was a difficult personal decision to make, I have no doubt that you will be in great hands with Mark and the team. Getting back to our results and picking it up on Slide 8. Business Services revenue declined 7.1% year-over-year for the full year, although grew 0.6%, excluding AirStrand revenue. Within this, SMB and other revenue was down 9.3% year-over-year or grew 1%, excluding AirStrand revenue, and Lightpath revenue growth was essentially flat. Note that Lightpath growth in Q4 was impacted by the loss of onetime contract termination revenues from the prior year, but we still expect an acceleration of growth here given our recent network and sales force expansions across New York, Boston and Miami. We have seen some increased competition in the SMB market in the last few quarters, which is impacting both customer and ARPU growth. However, we expect all of the initiatives and investments that Dennis mentioned in relation to the residential business will also positively impact our SMB trends. This includes our fiber upgrade, the rebrand, expanded sales distribution, customer care improvements and new bundle propositions. We're also focused on developing additional products and services, specifically designed for the SMB market. Slide 9 is an overview of our CapEx. Our cash CapEx was up approximately 55% year-over-year, mainly driven by increased investments in fiber upgrades and in new builds. Total CapEx for 2022 of $1.9 billion was about $100…

[Operator Instructions] Our first question today is coming from Philip Cusick of JPMorgan.

Dennis, maybe you can just talk about the fiber plans and the network upgrade plan. It seems like you've gone from a sort of very aggressive fiber plan that Altice had before to a more traditional Comcast-like sort of network upgrade path. Can you talk about your philosophy on what cable needs to have to compete with fiber and with wireless over time? And how we should think about both the fiber plan over the next 5 years and the CapEx plan that has been outlined a year ago.

Nice to hear from you, Philip. As I look at Optimum East and Optimum West, I think we have very different competitive profiles. As you know, in Optimum East, we have Verizon, who is 70% overbuilt in our footprint. We have Frontier, who's also building fiber very mature full product set. And so I'm very bullish, as I've mentioned, that I do think fiber is the best technology. We're seeing benefits of fiber from a churn perspective, from an ARPU perspective. And so we're going to continue to drive fiber in the East. And we're going to -- we're committed to driving 900,000 homes next year, 850,000 in the East. And so I feel really good about that strategy. We know that fiber from a operating perspective delivers an incredible experience from a speed as well as from a network management and maintenance perspective. And so I'm bullish there. But as I look at the Optimum West, it's a different profile. Optimum West is 25% overbuild. 50% of that is AT&T and the other 50% is fiber overbuilders in different pockets of the footprint. And so I think we have to take a different approach. And we've seen already in Q4 that we're able to leverage our portfolio of capabilities and be able to be competitive. And we've seen that the investments that we've made in our sales channels are starting to pay off. We doubled our door-to-door sales channel, and we see the benefits of that. And I do think we have to operate a bit more hyperlocal, where we are pricing and packaging and really competing at the local level so that we can drive sustainable growth. The reality is that the cost profile is very different in the East versus West. East is dense. West is a bit -- is less dense, and so the cost profile is different. And so -- we think that we can continue to invest in DOCSIS in the West, depending on the footprint. We're going to invest in 3.1, for example. We have 200,000-plus homes that we're going to invest in. And we believe that those investments will allow us to be competitive and to drive growth. And so we're going to take a balanced approach in terms of our CapEx spend over the next few years, and we're going to really make investments in the West in fiber where we think there's an appropriate return.

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

You mentioned, I believe, in your remarks that you're going to be looking to do more with your mobile offering. And I was hoping maybe you could just talk high level about the level of importance you see in being able to offer a converged service. In other words, do you anticipate that, that's going to be sort of the default product suite that your customers are going to want? Or do you think it's niche? And then whatever the answer to the question is, do you believe you have everything you need to be successful in the converged market, including the right MVNO partnership?

Thanks, Brett. I appreciate the question. I do believe that to be the connectivity provider of choice in the communities that we serve, that we have to have a very compelling broadband and mobile offering. And so we're actively working right now to looking at our pricing, packaging and offers with the goal of launching an evolution of our broadband and mobile offering later this year, which I'm very excited about. I think that we have a lot to offer there. I really do think we have a great partner in T-Mo from an MVNO partnership perspective. We've made the investments in retail. We've grown our retail presence to 137 stores, and that retail facility is really -- these facilities are the best place to showcase mobile and to be able to drive mobile sales, particularly into our base as we have our existing customers visiting us and we have a chance to showcase our products. And so, we are going to be focused on evolving our go-to-market strategy by building a value proposition that is centered around broadband and mobile. I'm very excited about our MVNO relationship with T-Mo. And I believe that our investments in retail will allow us to showcase mobile and be able to drive mobile effectively as we move forward.

The next question is coming from Ben Swinburne of Morgan Stanley.

Two questions. Dennis, given the improvement in customer metrics we're seeing in here in the fourth quarter. What's your expectation of getting back to overall customer growth in 2023? Is that realistic? At some point during the year. And maybe talk a little bit about your pricing philosophy given the competitive environment. And then I was wondering if we could get any help from you guys on your expectation for cash interest in '23, given the change in interest rates, that would be helpful as well.

Thank you so much. I'll let Mike address the last question. But in terms of customer growth, I'm not -- we're not going to commit to when we're going to get to positive, but I'm very optimistic. I'm very optimistic given the trends that we've seen. We're going to continue to lean into the investments that we've made in our sales channels, and we're seeing the fruits of that. We're also going to continue -- we've seen great receptivity in the West to our optimum branding. And so we're getting great customer reception to the new brand. We're also doing a better job in terms of churn. We have started to see improvements in the customer experience investments that we made. As I mentioned earlier, 5 to 20 points of improvement on NPS. Our contact rate is down 14% year-over-year. Service visits rate has improved 10%. And so this is all culminating into better customer experience, which we think will improve churn. And as we evolve our pricing and packaging and go to -- broadband and mobile strategy, and I am revisiting all of our pricing. So as I look at the pricing approach, I think that there were pockets where we were doing gift with purchase, and we had some very aggressive offers. And then there are other areas where we had intense competition where we may need to have revised offers and bundles with mobile and with broadband. And so I don't think it's a one-size-fits-all. I think we have to, as I mentioned, really look at our different areas and the competitive landscape and evolve pricing accordingly. I do know that our rack rates are a bit confusing. Only 10% of our broadband customers actually pay our rack rates. And so I'm looking -- and presenting it this way makes it confusing. And so I am looking at is there a evolution of that as we move forward as well.

On cash interest expense spend, you're right, we are somewhat subject to the rising rate environment. I would remind you that after swap contracts and different hedges, we are about 76% fixed on our debt towers. But still a decent amount of exposure to the rate environment. I think I would guide you to something in the neighborhood of about $1.5 billion of cash interest expense in 2023.

The next question is coming from Doug Mitchelson of Credit Suisse.

I think the follow-on to Ben's question is with the commentary around pricing and customer growth is, one of your strategies is to return to sustainable cash flow growth. So when do the lines cross for returning to EBITDA growth? Is it relatively obvious that it's late in '23 or '24 beyond what I've heard in this call is still cycling through some investments, but there's some efficiencies coming and rethinking pricing, which could be a little bit lower, in some cases, I imagine to be more competitive. So what is it all add up to on the bottom line? And separately, Dennis, for the New York footprint, are you able to give us a sense of how much of the Northeast footprint -- excuse me, the East you expect to build out? So I get that you're over 50% now, and I get the 2023 guide, is there kind of an end state for the East that you're willing to share for a percentage cover with fiber?

I'll let Mike jump in on the first, and then I'll address the fiber piece.

Doug. So in terms of return to EBITDA growth, we've with apologies, we've consciously avoided giving concrete financial guidance outside of the CapEx envelope. So I'm not going to give you a lot of clarity on that one. I do think your overall take on the call is right. We are cycling through some additional investments. but I do think we have mitigating factors. So I think what you'll see from us in '23 from an OpEx perspective, we will continue to invest in the customer experience. I think the sales distribution channel investments are in the latter innings, but around digital transformation and what have you, I think we will check the growth in OpEx and probably bring it down a little bit overall. But we're going to steer clear of giving any firm guidance on when a return to EBITDA growth will take place. Certainly, you recognize that given the customer losses we had in '22, there will be pressure on revenue and EBITDA in '23 on a year-over-year basis.

Doug, I will say that from an OpEx and EBITDA perspective, we have -- we are looking at the business and digital transformation is one that we're excited about and leaning into. So we're going to be leaning into a couple of different areas. One is self-install. Today, we do about 40% in terms of HFC broadband only. Self-install, we see a path to growing that by 50-plus percent. That one gives customers choice in terms of options for install, but then also gives us a lower cost profile from a truck roll perspective. We're also going to be launching later this year a new cable box, stream box which will also facilitate video self-install, which we don't even -- which we don't offer today. Additionally, we want -- we're going to be launching a new mobile app that mobile app will allow customers to more effectively manage their accounts, do basic troubleshooting, chat with us, again, all with the goal of driving down transactions in the system. So that we can more efficiently run the business, but also deliver a great customer experience because that's what customers want to do. They want to be able to interact with us on the app. They want the choice to be able to do things like self-install. And so we're going to continue to drive and lean into that. From a fiber perspective in the East, as I mentioned, I think that fiber is the right technology in the East. We're going to deliver another 850,000 homes in the East this year, and we're going to continue to look at our CapEx intensity and drive our build-out in the East as we go forward.

The next question is coming from Michael Rollins of Citi.

In the past, Altice has described some efforts to optimize the asset portfolio. And Dennis, just curious for your thoughts on whether you believe all of the markets that you have belong together under this current Altice USA umbrella? And if there are opportunities to streamline or optimize your markets or some of the assets that you continue to own?

Michael, I'm very excited about the West. I had a chance to visit Texas and spend some time with our friends in Plano and I'm continuing to learn about our West markets, and I continue to learn that we have tremendous opportunity. In our new build markets, we're seeing 40% penetration in year 1, and we have more new build to do. I'm seeing some great opportunity in terms of as we've now launched our door-to-door as we've scaled our door to door, we're seeing the returns there. And -- we're also seeing some really exciting opportunities with our retail channel as we look to drive mobile in the West. And so right now, my focus is how do we continue to drive growth. We've just gotten to 2 months of modest data growth in the West. And so we want to continue to lean into that, and that's my focus right now. We believe that the customer experience investments that we're making will allow us to compete more effectively where we are being overbuilt there. As I mentioned, we have 25% overbuilt in the West. And I believe that the investments that we're making in DOCSIS 3.1, the 200,000-plus homes will allow us to compete more effectively the investments that we're making in digital, the investments that we're making in quality are all going to allow us to continue to drive growth in the West in the long term as well.

The next question is coming from John Hodulik of UBS.

Sure. Two follow-ups. First of all, do you think that the changes to pricing will put further pressure on residential ARPU, obviously, that's been down a bit for the last several quarters. But do you think you can do that in a revenue-neutral way? And then number two, the New York City housing contract. Is that -- any more color you can provide on that? Is the 9,000 sort of a onetime thing? Or is there more growth there? And did that come at a lower ARPU than you traditionally see in the old Cablevision markets?

Thank you, John. Appreciate the question. On pricing, we are, as I mentioned, looking at pricing, and we are very -- I want us to be very focused on customer lifetime value. And so -- as I look at some of our offerings in last year, I do believe that we need to be a bit more disciplined in terms of our gift with purchase, in terms of our save offers, in terms of our repackaging and upsell offers. And so I believe that there's opportunity there. I think that the broadband and mobile value proposition will help us to drive gross adds from a subscriber perspective and that we have opportunity to sell into the base in ways that we have not done effectively yet as we look at CLV and we look at opportunities there. We want to drive mobile. We want to drive speed upgrades. We want to bring people over to fiber in the East, and we believe that we can do that profitably, and we can bring people into packages that bring the best of our products, but then also deliver great value. [niche] contributed 9,000 customers in Q4. There is more opportunity this year. There's more -- and we're excited about that. Nothing to announce today, but there are -- we're excited about that partnership, and we're going to continue to see growth from that in the first half of this year. Maybe I'll let Mike talk a little bit about the ARPU question that you had on [niche].

Yes, sure. So John, you're right. The ARPU did start to tail off in the back half of '22. I'm talking now about broadband ARPU. Certainly, customer ARPU has declined year-over-year, and that's a function of lower video penetration of the customer base, lower video attach rates and that's been a somewhat consistent trend for a couple of years. On the broadband ARPU, I think the pacing on the broadband ARPU growth in '22 is largely a function of the manner in which we applied promo roles over the course of '22. There was a lot more activity in that regard in the first half of the year and much less so in the second half of the year. And so you saw some sequential ARPU growth in the first and second quarter and then it started to tail off in the back half of the year, very similar to what you saw in 2021. And I think it's probably reasonable to expect a pretty similar trend in '23 as well as far as the quarterly pacing of ARPU growth. I think net-net, ARPU growth, we told you would be somewhat flattish in '22 at the beginning of the year, and we delivered on that. It probably came in maybe 1% full year growth, and I think '23 should look pretty similar in that regard.

The next question is coming from Craig Moffett of MoffettNathanson SVB.

Your peers have made very big commitments to wireless as kind of the centerpiece of their strategy. Your strategy is obviously, at this point, much more focused on fiber and the physical plant. But I wonder if you could just talk about whether you think that the wireless agreement that you have today is sufficient to get you to where you want to be with bundled service offerings and with your wireless strategy going forward?

Thanks, Greg. I am excited about wireless being a key product in our portfolio. I'm excited about as I mentioned, being the connectivity provider of choice in the communities that we serve, so connectivity in the home and outside the home. And I believe that with our MVNO relationship, we can deliver incredible value with our broadband and mobile services combined. This is largely an untapped opportunity for us. And so this is going to be a focus as we move forward. We are actively working on new pricing packaging that brings broadband and mobile together with even more value. And I think that's going to be critical to helping us win in this space. We've made the investments in retail. As I mentioned, we are at 137 retail stores, and we're going to continue to grow that a bit this year, and that will give us an opportunity to showcase mobile effectively. And so this is fairly untapped. And I think we do have the right MVNO relationship and partner, I think we have the right product set. We just have to bring it all together. And I'm focused on with our new leadership team, how we can continue to lean into training, how we can lean into our commissions and incentives for our teammates. So I think there's some work that we need to do internally. And then externally, we have to tell the story with our pricing, with our packaging, with our marketing, and then also from a customer base management perspective, we have a huge opportunity there to reach into our base, make them aware and be able to have a more disciplined approach of presenting mobile to our existing customers.

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

Dennis, I'm wondering if you can give us a little bit more color on the pressure you're seeing in the business services market is particularly surprised by -- it looks like there's a little bit of mounting pressure on the -- on Lightpath revenues. I think you referenced some increased competition, and I'd love to get some more context on that. And then Mike, just a clarification for you. Did you say that the operating costs would come down in 2023 or that the growth in operating costs would come down in 2023?

Thanks, Jonathan. On the B2B side, we are seeing pressure as we see increased fiber overbuilders in the West, as we see Verizon be very competitive in this space. As you know, from a B2B SMB perspective, we're highly penetrated in the East. And so we're very focused on churn management and making sure that we're doing all the right things, blocking and tackling to be able to mitigate churn in terms of quality of our network, quality of our products, service and value proposition. And as I look at the West, we have opportunities to expand our product portfolio and to continue to compete, especially in those areas where we have fiber overbuilders to bring the full product portfolio to bear. We do have some gaps in our product set in the West that need to be addressed. And I believe when we address those gaps, particularly from a voice perspective, in some pockets, we have an opportunity to bring mobile to bear on the B2B side. I think this will allow us to compete more effectively and then there's future opportunity that we're looking at in terms of expanding the product portfolio even further from what we offer today. Today, we offer connectivity, but there's more solutions that we can bring to bear that would allow us to drive -- be more competitive, drive ARPU -- and so that's -- those are all things that we're actively focused on delivering and bringing to market.

So Jonathan, just to add to what.

Yes, sorry, go ahead, Mike.

No, I was just going to add to what Dennis was saying to address your specific question on Lightpath. I mean I think our comments noted in part the revenue growth, the lack thereof in the fourth quarter was due to a onetime early termination liability that took place in the fourth quarter of '21, which was fairly material. In general, I would say the Lightpath management team has had certain challenges around residual churn that they've had to confront -- for the last first couple of years. I mean, certainly, a lot of that had to do with the T-Mo Sprint merger as they've pruned certain redundancies in their network and then different other customers, we're seeing some residual churn challenges. I will say net installs and Lightpath has started to go positive as of the last half of '22, the bookings, the actual new sales bookings in Lightpath were pretty strong in '22. They're actually quite strong. We had record quarters in both the first and second quarter, and we had a very strong fourth quarter as well. We've just started in the early innings of expanding into Miami and Boston. So pointing being, I think there are a return to revenue growth of Lightpath into the kind of low to mid-single digits that we were accustomed to seeing maybe, say, 10 years ago, I think that's very imminent and pretty encouraged by what we're seeing there. On operating costs, to clarify what I said earlier, what I said or what I should have said what I meant to say, we are going to temper the growth we've been seeing in OpEx, and I would expect it to flatten or even go down -- come down a little bit from the fourth quarter run rate.

Got it. And that Lightpath turn that you're saying is imminent, Mike, is that a 2023 return to growth at Lightpath?

I was speaking less specifically than that, we are trying to steer away from providing concrete guidance of that nature. I just -- I'm simply saying that we're very encouraged by some of the underlying metrics we're seeing at Lightpath, which tend to be a foreshadow of future revenue growth.

The next question is coming from Greg Williams of Cowen and Company.

Just wanted to revisit the fiber-to-the-home discipline in your messaging. Is there a fear that fiber overbuilders can encroach on your territories in the West, you mentioned 25%, could that escalate now that you're taking more disciplined approach. Second question is just on media reports saying that you're exploring fiber-to-the-home JVs. We saw a JV with AT&T -- and is that something you are exploring because the messaging I'm hearing today suggests maybe the opposite as you're investing less in fiber-to-the-home and not more.

Greg, thank you for the question. On the second item, I don't want to address any speculation here. I'm really focused on the core business and driving long-term sustainable growth. And so to your question on the West, we do anticipate additional fiber overbuild to happen. And so that's where I'm saying we're going to have to be very thoughtful and surgical as to where we need fiber to be most competitive. I'm not saying that we need fiber in every one of those areas. We do have some untapped opportunity as we bring broadband together with mobile and deliver a very compelling value proposition. And as we make these upgrades to 3.1, we can deliver gig speeds, high-quality network, high-quality speeds combined with a very strong value proposition with broadband and mobile and that we can be competitive by acting a bit more hyper locally as we look at the competitive landscape and bring to bear some pricing, packaging and offers that would allow us to compete most effectively, especially with the fiber overbuilders given that we have a broader portfolio of products to bring to bear. But we will look at being thoughtful, being measured in terms of where we want to build fiber in the West, we are planning for a build-out of some homes this coming year, and we'll continue to look at that on a case-by-case basis as we move forward. As we look at density, as we look at the return on investment, we want to be measured in terms of how we make those investments and where.

The next question is coming from Kutgun Maral of RBC Capital Markets.

I wanted to follow up on costs and maybe hone in on the programming cost outlook. Some of your peers have started to benefit from a fairly remarkable moderation in the growth of programming cost per video subscriber. Altice has historically, we've seen this growth to be in the mid- to high single-digit range. Is there a scope to have that get closer to low single digits or even maybe flattish in the coming years? Or is that just not as likely given how your video product is structured?

Thanks for the question. I'll address kind of at a broad level, and then I'll let Mike jump in on the programming piece. But we do -- we -- I am also looking at our video service and how that fits into the portfolio. We know that there continues to be a demand for legacy video, we know that there's the demand for streaming video and apps. And so I do believe that there's an opportunity to rightsize our go-to-market strategy with video in terms of pricing, packaging, bundling as appropriate. And so -- that is something that we're also looking at in terms of how it fits into the portfolio and how we may want to leverage it as we go forward so that we can be most competitive, particularly in areas where -- we've got fiber overbuilders and other competition. We have this video product and an opportunity to bundle that in to be able to drive our go-to-market as we move forward.

So on the overall question in terms of the inflation rate we're seeing, you're right, we have historically been seeing numbers in the by mid- to high single digits. I think that's tempered. When we look at programming cost per sub per month and look at the inflation on that basis, so adjusting for volumes, we've had a couple of quarters of the last 6 quarters. We've got a couple at 5 or even sub-5%. So I think it's nudging downwards. Anecdotally, I will say, when we go into renewal negotiations, we often come out the other side with a result that is better than what we expected and probably couldn't have said that very often in the 10 years that proceeded, say, the last 2 years. So I do think there's a little bit of a shift in favor of the distributor in this regard. And we are seeing some tempering of the programming cost inflation we've seen historically. As far as whether that can evolve to be flattish in the near to medium future. I mean, that would be a great outcome for us, but I would hesitate to make that kind of commitment.

Unfortunately, we have ran out of time for questions today. I would like to turn the floor back over to management for any additional or closing comments.

No, just. Thank you all for joining us, and have a good evening. Appreciate it. Thank you. Have a great day.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time, and enjoy the rest of your day.