Charter Communications - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered a modest top-line beat with revenue of $13.74B (+0.4% YoY) versus S&P Global consensus ~$13.67B, while diluted EPS of $8.42 was slightly below consensus ~$8.59; Adjusted EBITDA grew 4.8% YoY to $5.76B with a 180 bps margin expansion to 42.0%. Consensus values from S&P Global*
• Internet net losses narrowed to 60K (vs. -177K in Q4), aided by the waning ACP headwind; mobile momentum continued (+514K lines), and video attrition improved (-181K vs. -294K in Q3 2024) as “Life Unlimited” packaging gained traction.
• Free cash flow inflected to $1.56B (vs. $358M in Q1 2024), driven by lower capex, higher EBITDA, and lower cash interest; FY25 capex outlook was reaffirmed at ~$12B (incl. ~$4.2B line extensions, ~$1.5B network evolution).
• Management highlighted improving service metrics (billing/repair calls -15% YoY; truck rolls -6%), AI/ML-enabled productivity, and converged bundles reducing churn; tariffs expected to have no meaningful P&L or capex impact, and leverage to move back toward mid-4x over coming quarters.

What Went Well and What Went Wrong

• What Went Well

  • Adjusted EBITDA growth and margin expansion: EBITDA +4.8% YoY to $5.76B; margin 42.0% (+180 bps), supported by a 10.4% decline in programming costs and cost efficiencies in service operations.
  • Mobile momentum and convergence: +514K mobile lines; ~20% of Internet customers now take mobile, with materially lower churn in converged homes; CBRS on track for 23 markets by year-end.
  • FCF strength: $1.56B FCF (vs. $358M), with capex down ~$392M YoY to $2.40B and lower cash interest; management reiterated FY25 capex ~ $12B and sees multi-year capital intensity decline.

• What Went Wrong

  • EPS miss and non-cash items: Diluted EPS $8.42 came in below S&P Global consensus ~$8.59, with GAAP EPS affected by a non-cash impairment (Lakers RSN) in “other operating expense”. Consensus from S&P Global*
  • Persistent access headwinds: Internet customers -60K in Q1 and -1.6% YoY to 30.02M; management cited lingering mobile substitution and housing churn dynamics despite ACP headwind abating.
  • Advertising softness: Ad revenue -12.9% YoY (ex-political -5.1%), reflecting a challenged local/national market, partially offset by device sales strength in “Other”.

Transcript

Operator (participant)

Hello, and welcome to Charter Communications' First Quarter 2025 Investor Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Stefan Anninger.

Stefan Anninger (Head of Investor Relations)

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 the 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. As a reminder, 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 Chris Winfrey, our President and CEO, and Jessica Fischer, our CFO. With that, let's turn the call over to Chris.

Chris Winfrey (President and CEO)

Thanks, Stefan. We performed well during the first quarter, adding over 500,000 Spectrum Mobile lines and over 2.1 million lines over the last year for line growth of over 25%. We continue to be the fastest-growing mobile provider in the U.S., with the fastest connectivity at the best price. Our internet customer results improved year-over-year as we continue to compete well and with the Affordable Connectivity Program headwind now behind us. Revenue was relatively flat year-over-year, while EBITDA growth accelerated to 4.8%, driven by a strong contribution from mobile growth and continually improving service quality through employee and technology investments, which also reduced service transactions and cost. The operating environment remains competitive, but the impact of the elimination of the ACP is behind us. On the fiber front, we continue to do well.

While our fiber overlap is expanding, it's growing at about the same pace we've seen for the past couple of years. We also believe these new fiber builds are destined for poor financial returns. Cell phone internet growth appears to have plateaued, and broadband data usage continues to grow. In the first quarter, monthly data usage by our non-video internet customers grew to approximately 825 gigabytes per month, and over 30% of those customers now use over one terabyte of data per month, with handset data usage growing at an even faster rate.

Our fully converged network is the most efficient way to satisfy that growing demand for data, unlike cell phone networks, which need to regularly execute massive network upgrades via densification, which gets reported as CAPEX, or if they choose not to densify tens of billions of dollars in spectrum acquisitions that are not included in investor or analyst models. Unlicensed spectrum via Wi-Fi continues to be the wireless workhorse for the American consumer and for the mobile telcos. Spectrum Mobile devices utilize our gigabit-enabled, fully managed network for the vast majority of traffic, and they offload less than 13% of traffic to slower 5G macro or cell towers. Our CBRS deployment is going very well, and by the end of this year, we will be launched across 23 markets using low-power, shared-licensed, and unlicensed spectrum fully deployed across high-traffic areas with good ROIs.

In the meantime, we continue to execute on our long-held strategy of delivering the best networks and products at the best value for residential and business customers, combined with unmatched service. We have a unique set of assets and significant scale, as shown on slide four. We offer the fastest internet, the best Wi-Fi, the fastest mobile product, and Spectrum is the leading video provider in the U.S. The power of our network continues to improve, with symmetrical and multi-gig speeds everywhere we operate. We are adding 2x1 gigabit per second service to recently upgraded markets this year, and the next phases of our network evolution will deliver 5 gig and 10 gigabit per second service. As a reminder, the high split in DOCSIS 4.0 upgrade effectively creates up to 1 gigahertz of spectrum acquisition across our 950,000-mile footprint.

That network spectrum expansion enables up to 10 gigabit per second of speed to each premise and can also power small cells for unlicensed and shared-licensed spectrum nearly everywhere. Our footprint continues to grow with our expansion initiative, setting us up for future customer growth as portions of today's rural build become tomorrow's suburban footprint. Unlike our competitors, we provide the very best of our products across 100% of our footprint with full marketing and service capabilities, as shown on slide five. Having the best network and product capabilities by itself is not enough, though. We have to offer the most value. Slide six of today's presentation shows just one example of the value we offer versus our competitors. We give customers easy ways to save hundreds and even thousands of dollars per year, whether at promotion or retail, with the best products. The last key component is service.

We've always believed that investing in customer service and satisfaction creates a virtuous cycle in our business that leads to customer and financial growth and value creation. Our sales and service are 100% US-based, using our own employees with good-paying jobs and benefits. We're focused on ensuring that Charter is a great place to build a long, rewarding career, building tenure and driving better employee performance, all part of our execution initiative that we launched a few years ago. Next week, we'll announce to employees our new employee stock purchase plan. The program gives eligible employees the option to purchase Charter stock with matching restricted stock units, which increases based on tenure. Our employees are US-based and committed to their careers and the local communities we all serve as customers themselves and now as owners. We've also been investing in machine learning and AI for a number of years.

These applications directly benefit customers in various self-help channels, of course, but most of our effort is on making frontline work easier and more efficient. Ultimately, our investments in employee compensation, tenure, facilities, and tools, including machine learning and AI, are all resulting in significant improved service. Cable billing and repair calls were down 15% year-over-year in the first quarter, and service truck rolls were down 6%. That has been the trend, and it continues. Looking forward, AI remains a very large opportunity for us to create value for customers and shareholders. While we could sit back knowing our product quality and value proposition are better and our long-term investments are working, we are not standing still. In September of last year, we launched our Life Unlimited brand refresh, also our new customer commitment, which commits us to reliability and same-day service with customer credits when we do miss the mark.

Our new pricing and packaging, which better utilizes our market-leading mobile and now video products to present lower promotional and persistent bundled pricing to grow customer ARPU despite lower product pricing. That pricing and packaging is driving a higher number of total products sold at Connect, including video, with the launch of Seamless Entertainment still to come. Our gig internet attach rate is now close to double what it was a year ago. As a reminder, our internet and mobile products have no contracts, price locks when bundled, market-leading service commitments with 100% US-based service and sales, and taxes and fees are included in our pricing. None of our connectivity competitors do that.

Taken together, that's our strategy, offering the best products, including seamless connectivity and Seamless Entertainment, the most value with unmatched service, driving higher quality revenue for home passed with free cash flow growth and high return on investment. Before I turn things over to Jessica, I wanted to note that this week we added two Liberty-nominated members to our board of directors, Marty Patterson and David Wargo. I'd like to welcome them both to our board. At the same time, Greg Maffei and Jim Meyer, two Liberty Broadband designees, rolled off this week as well. I'd like to thank them for their many years of service and value creation for Charter and for our shareholders. Now I'll pass it over to Jessica.

Jessica Fischer (CFO)

Thanks, Chris. Please note that today's results include several Los Angeles wildfire effects. As Chris mentioned last quarter, we are committed to these communities and to actively rebuilding them. Our first quarter customer results include approximately 9,000 disconnects related to the fires. We provided credits to impacted customers and also incurred some incremental expenses, but first-quarter adjusted EBITDA was not meaningfully impacted by either. We expect that as we rebuild our plant to approximately 16,000 homes passed in Los Angeles over the coming quarters, we will incur additional CAPEX, though not at a level that would require us to change our outlook. Also, please note that this quarter we made a number of expense reclassifications to reflect changes in how we manage our business in connection with the recent launch of our Spectrum Business brand.

The reclassifications do not result in any changes to operating expenses or adjusted EBITDA for any period. We have reclassified prior periods so that appropriate year-over-year growth calculations can be accurately derived. Today's published trending schedule also shows our P&L using both the new and previous expense disclosure methodologies so that you can see the impact of the changes. Please turn to our customer results on slide 10. Including residential and SMB, we lost 60,000 internet customers in the first quarter. In mobile, we added 514,000 lines. Video customers declined by 181,000 versus a loss of 405,000 in 1Q 2024, with the improvement primarily driven by the rebundling we launched in September, along with our Life Unlimited brand refresh. Video performance does not yet reflect the benefits of incorporating Seamless Entertainment apps in our product. Wireline voice customers declined by 278,000. We were generally pleased with our first-quarter customer results.

During the quarter, we saw improvements in customer gross additions across internet, video, and mobile, and lower churn in video and mobile, with internet churn stable year-over-year despite the lack of ACP and well below pre-COVID levels. We continue to compete well across our footprint. In rural, we ended the quarter with 902,000 subsidized rural passings. We grew those passings by 89,000 in the first quarter and by over 400,000 over the last 12 months. We generated 39,000 customer net additions in our subsidized rural footprint in the quarter. We continue to expect rural passings growth of approximately 450,000 in 2025, our biggest year so far, in addition to continued non-rural construction and fill-in activity.

Moving to first-quarter revenue on slide 11, over the last year, residential customers declined by 2.1%, while residential revenue per customer relationship grew by 2.1% year-over-year, given promotional rate step-ups, rate adjustments, and the growth of Spectrum Mobile. Those factors were partly offset by a higher mix of non-video customers, growth of lower-priced video packages within our base, and $47 million of costs allocated to programmer streaming apps and netted within video revenue. As slide 11 shows, in total, residential revenue declined by 0.1%. Turning to commercial revenue, total commercial grew by 1.4% year-over-year, with mid-market and large business revenue, formerly Spectrum Enterprise, growth of 3.9%, driven by PSU growth of 5.4%. When excluding all wholesale revenue, mid-market and large business revenue grew by 4.4%. Small business revenue declined by 0.2%, reflecting a decline in small business customers, partly offset by higher revenue per customer.

First-quarter advertising revenue declined by 12.9%, primarily due to less political revenue. Excluding political, advertising revenue decreased by 5.1% due to a more challenged national and local advertising market. Other revenue grew by 13.4%, primarily driven by higher mobile devices. In total, consolidated first-quarter revenue was up 0.4% year-over-year and 0.8% when excluding advertising revenue. Moving to operating expenses and adjusted EBITDA on slide 12. In the first quarter, total operating expenses declined by 2.6% year-over-year. Programming costs declined by 10.4% due to a 7.3% decline in video customers year-over-year, a higher mix of lighter video packages, and $47 million of costs allocated to programmer streaming apps and netted within video revenue, partly offset by higher programming rates. First quarter 2025 programming costs included $12 million of favorable adjustments versus $28 million of favorable adjustments in the prior year period.

Other costs of revenue increased by 8.7%, primarily driven by higher mobile device sales and higher mobile service direct costs. Cost-to-service customers, which combines field and technology operations and customer operations, declined 2.2% year-over-year, primarily due to productivity from our tenure investments, including lower labor costs. Marketing and residential sales expense grew by 7.7% as we remain focused on driving customer acquisition and given our Life Unlimited brand relaunch in September. Finally, other expense declined by 7.8%, mostly driven by one-time benefits of $75 million. Adjusted EBITDA grew by 4.8% year-over-year in the quarter and by 3.4% when excluding the one-time benefits in other expense that I mentioned.

Turning to net income, we generated $1.2 billion of net income attributable to Charter shareholders in the first quarter, compared to $1.1 billion last year, given this quarter's higher adjusted EBITDA and lower interest expense, partly offset by a non-cash impairment driven by a balance sheet write-down of our LA Laker RSN this quarter. Turning to slide 13, capital expenditures totaled $2.4 billion in the first quarter, down about $400 million from last year's first quarter, driven by the timing of CPE spend, upgrade rebuild related to network evolution, and line extension spend. While we continue to assess the potential impact of new tariffs, we do not currently expect tariffs to have a significant impact on our capital expenditures for this year and over the next several years.

We have attractive agreements with our equipment vendors, and we continue to work with them to minimize the impact of tariffs while at the same time supporting the health of the cable equipment ecosystem. We continue to expect total 2025 capital expenditures to reach approximately $12 billion, and we have not changed our multi-year capital outlook. We also do not anticipate the tariffs to have a meaningful impact on our P&L, as the vast majority of our P&L expenses are programming, labor, and service-driven and are not subject to the new tariffs. Turning to free cash flow on slide 14, first quarter free cash totaled $1.6 billion, an increase of approximately $1.2 billion compared to last year's first quarter. The increase was primarily driven by lower capital expenditures, higher EBITDA, and lower cash interest. Just a brief comment on 2025 cash taxes.

We still expect under existing tax legislation that our calendar year 2025 cash tax payments will total between $1.6 billion and $2 billion. However, we expect second quarter cash taxes to total around $1 billion, given the two cash tax payments we are always required to make in the second quarter and some other timing items. We finished the quarter with $93.6 billion in debt principal. Our weighted average cost of debt remains at an attractive 5.2%. Our current run rate annualized cash interest is $4.9 billion. We began repurchasing stock in late February following shareholder approval of the Liberty Broadband transaction. During the quarter, we repurchased 2.1 million Charter shares in Charter Holdings Common Units, totaling $750 million at an average price per share of $365.

As of the end of the first quarter, our ratio of net debt to last 12-month adjusted EBITDA moved down to 4.06 times and stood at 4.16 times pro forma for the pending Liberty Broadband transaction. The decline in leverage in the quarter was driven by our inability to repurchase shares in the open market until we had shareholder approval of the Liberty Broadband transaction in late February. We expect to gradually increase our leverage to the middle of our four to four and a half times range pro forma for the Liberty transaction over the next several quarters. As we laid out last quarter, our plan is to grow EBITDA in 2025. With strong contributions from the mobile business, as well as continuing efficiency improvements driven by our investments, we made good progress against that plan in the first quarter.

As we continue to grow the business financially, we will also see outsized improvements to free cash flow, driven by the end of our major one-time investments in our network evolution and subsidized rural initiative. That reduction in capital spending from approximately $12 billion in 2025 to less than $8 billion in 2028 is equivalent to over $25 of annual free cash flow per share based on today's share count. Ultimately, the strength of our P&L and decline in capital intensity over the next several years, combined with our appropriate balance sheet management and resulting share buybacks, will drive stronger returns for shareholders for many years. With that, I'll turn it over to the operator for Q&A.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. As a reminder, we are allowing analysts to ask one question today. We will wait one moment to allow the queue to form. Our first question will come from the line of Craig Moffett with MoffettNathanson.

Craig Moffett (Analyst)

Hi, thank you. Two questions, if I could. First, can you just talk about the differences that you're seeing in the converged households where you've got wireless now? If you could also, by the way, update us on what the attach rate is since we have individual lines, but not penetration of households. What kind of differences are you seeing in churn rate? Is wireless really benefiting your broadband numbers now that it's reached some level of scale? Just quickly, Jessica, perhaps you could just let us know whether you think tariffs will have any impact on capital spending and your ability and cost of securing equipment for capital projects.

Chris Winfrey (President and CEO)

Sure. Let me tackle the first one, and then we can together tackle the second one. The converged household difference, we've talked about it before, Craig. There is a substantial difference in the internet churn rate for a customer who also takes mobile lines. To the extent they have more mobile lines, it's even better. To the extent it's supported mobile lines, it's even better. To the extent they have a device that they finance through us, it's even better. Incrementally, it goes to those degrees. However, we are getting good, reasonable penetration on internet, so what I'm about to say starts to lose some of its weight. There is a natural tendency for customers who are already going to churn less from internet to be attracted to taking more of your products. There is a self-fulfilling prophecy.

We try not to get too far over our skis in estimating the benefit of that churn reduction to internet. It is significant. Some of it is based on happy customers to begin with. When you look through the scale that we have today, it is clear that it is not just self-fulfilling prophecy that there are dramatic benefits to our customer base of having that. Part of the reason is it is not just product convergence that is driving that. It is really value convergence. We are saving these customers hundreds and even thousands of dollars. There is a technology convergence which allows you to have a faster mobile product because of the combination with our Wi-Fi and increasingly with CBRS. That creates a product variation that is positive for us.

There is also, as a newcomer to the mobile space, the ability for us to save these customers hundreds and thousands of dollars. That drives penetration, it drives satisfaction, and it drives lower churn for the existing internet relationship as well. We are seeing an improved ability to use Spectrum Mobile from an acquisition standpoint. For years, that has been the goal. We are starting to see not only the benefits of using mobile for churn reduction, but also in acquisition. We have often talked about the mobile penetration. I do not have that in front of me.

Jessica Fischer (CFO)

Yeah, I think just under 20% of our internet customers are mobile customers today.

Craig Moffett (Analyst)

Okay. Thank you.

Chris Winfrey (President and CEO)

On the tariff question, do you want to start off?

Jessica Fischer (CFO)

Yeah. I mean, I said it in the prepared remarks, Craig. I do not expect tariffs to have a meaningful sort of overall impact on our capital expenditures. That was part of the reason that I was able to reiterate our guide for the year at $12 billion and our multi-year CapEx outlook, even including what we expect for the impact of tariffs today.

Chris Winfrey (President and CEO)

Good. Look, I agree with all that. If you take a step back, I'd just highlight Charter is an American company offering services to more than 57 million U.S. families and businesses. We have a 100% U.S.-based workforce. Naturally, Craig, our preference is to buy American-made products when they're available and when they're priced competitively. Stating the obvious, I think tariff imbalances are by definition unfair. Clearly, President Trump has taken a strong stand that at least from the outside, it appears to be creating an important opportunity for other countries to lower their tariffs, eliminate trade barriers, and from our perspective, to benefit U.S. workers like ours and our U.S.-based customers. Again, stating the obvious, we hope that can all happen soon, and we're hoping that's the case.

Craig Moffett (Analyst)

Thank you.

Stefan Anninger (Head of Investor Relations)

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

Operator (participant)

Our next question will come from the line of John Hodulik with UBS. Your line is open. Please go ahead.

John Hodulik (Analyst)

Great. Thank you. Chris, could you update us on the rollout of Seamless Entertainment? I think we were waiting for some progress on the digital storefront and folding in some new apps. Is there any help you can give in terms of the timing, what that product will look like? It seems as if you guys are expecting some further improvement in some of your underlying KPIs, whether it's video or broadband. Could you flush that out a little bit? Is there a way to size the impact that we can expect to see? Thanks.

Chris Winfrey (President and CEO)

Sure. Let's go through the steps that I talked about the past couple of quarters. The first is to get to these direct-to-consumer apps, which are included now as part of our Spectrum TV Select services, launched in front of customers so that they could actually activate to the extent they were looking for it on spectrum.net or My Spectrum app. That has now been complete for all but two of the apps which are remaining, which I believe is Discovery+ and AMC+. The most recent launches were Peacock and AMC+. I'm sure I'll forget a couple along the way.

Now it means you've got Disney+, you've got ESPN+, you've got Vix, you've got Max, you've got Peacock, Paramount+, Tennis Channel, all of which either through TV Everywhere or through DTC authentication on those two platforms, spectrum.net or My Spectrum app. You can go authenticate those as a customer and get the ad-supported version of those today. The second piece that we were looking to implement was the ability for customers to seamlessly upgrade those ad-supported—I think I said ad-free—ad-supported DTC apps to upgrade those to ad-free for the incremental dollars of retail value. That is taking place and for the most part is implemented for those apps that have been launched as well. All that's available today in a much easier format.

It's not always consistent based on the credential requirements and authentication requirements of the program, but at least it's much more user-friendly today than it was just a couple of months ago. We are making real progress there. The digital store that we've talked about will be launching a little bit later this year, which enables all of that to be put together in an even more seamless way, but also to sell these direct-to-consumer apps to our broadband customers on the increment as well and manage your subscription in and out, including DTC, the direct-to-consumer ad-supported inclusion, upgrade to ad-free, selling these apps to broadband customers, and upgrading into packages that will allow you to have more value inside these direct-to-consumers. It's all making progress. We are at a stage where we're feeling more comfortable of driving that into the marketplace.

Those of you who live in footprint, particularly for investors, New York City and Los Angeles, keep an eye out for advertising that will be highlighting the benefits to customers of our video products of being able to include these services. I think the really exciting part is having the support of the programmers to help drive and understand that Spectrum Internet is the best place to be able to get these apps and that these apps are included as part of your service for Spectrum TV Select. Really, we have gotten the programs combined to come behind us. You will see advertising that is really compelling, helping support the Spectrum products from Disney, from Max, from Paramount+. All that is in market today, and it is compelling, and it recognizes that the best place for customers to get all this value is through Spectrum.

The best place for programmers to get the value to them is really to have all these services bundled together to the extent a customer can afford it. I am excited. The video product, because of where we have gotten to it, is not necessarily cheap because of all the rate increases that the programmers took historically. Now there is real value inside there. When you combine that with the utility of Xumo, it gives you the ability to save significant amounts of money. We now have $80 and more of value that comes in from the inclusion of these apps as part of your TV Select service. I am excited about it. To answer your question, we have not started to aggressively market that yet. We will start to see some of that coming around.

I don't think that the improvement in video that you've seen so far is uniquely driven by these apps inclusions as of yet. I would hope that it gets better. The reason our video performance is better is because we've been of the new pricing and packaging that bundles in that allows us to present a lower internet price both at promotion and retail when you bundle video. The reason that we're able to do that is because we had more confidence in the value of the video product that we were putting in front of customers. We felt good about standing behind the products that we offer. That's a real testament to the programmers who've worked with us over the past year and a half to get to that space. I think we're on a good trajectory. It's a little unknown. I'd call it option value. The biggest driver here for us is obviously internet and mobile. I think our video results can improve. I think we're offering a compelling product. At a minimum, it's something that we're proud to put on the bill now and to use together with broadband.

John Hodulik (Analyst)

Chris, do you think the launch of the service also will benefit the trends on the broadband side along with video?

Chris Winfrey (President and CEO)

I think over time, that is certainly the goal. If for no other reason than by bundling in mobile and video, it allows us to have a lower presented price for internet, both at promotion and retail, and have lower rolloffs in terms of promotional rolloffs, which benefits not only at acquisition, but service transactions over time and churn over time as well. It was an elegant way to get us into an environment where we could, despite having a superior product, present a lower price than our competitors because of the all-in value that we could provide to the household, which is unique. None of our competitors are able to have internet and mobile everywhere they operate.

None of our competitors are able to actually offer that bundled together with video and, importantly, save customers hundreds or thousands of dollars on mobile and provide them a video product that can potentially reduce their bill compared to what they're paying through this wealth of direct-to-consumer apps that they're paying for or not paying for through unauthorized credentials.

John Hodulik (Analyst)

Great. Thank you.

Stefan Anninger (Head of Investor Relations)

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

Operator (participant)

Our next question will come from Jonathan Chaplin with New Street Research. Your line is open. Please go ahead.

Chris Winfrey (President and CEO)

Hey, Jonathan, you might be on mute.

Operator (participant)

Yeah, Jonathan, your line is open. You'll just need to unmute on your side, but please feel free to go ahead. Why don't we go to our next questioner, and we'll return to Jonathan. For our next question, we will hear from Ben Swinburne with Morgan Stanley.

Ben Swinburne (Analyst)

Morning. Can you hear me?

Chris Winfrey (President and CEO)

Yes.

Jessica Fischer (CFO)

Yep.

Chris Winfrey (President and CEO)

Hey, Ben.

Ben Swinburne (Analyst)

Hey. Great. Chris, I'm sure you're aware. There's a lot of focus right now, certainly in the investment community and in the industry on kind of promotions and promotional rolloff. This is not new, but something that Charter has been doing for a long time. We can sort of see in your results now, I think, the success you're having in kind of rolling off some of the Spectrum One promotions and driving faster revenue growth in mobile and broadband. I'm just wondering if you could talk about why it's working well for you in this environment and maybe more importantly, why you think you can continue to execute that approach with your new life unlimited plans in a market that seems to be increasingly focused on kind of price locks and all-in pricing. I guess your confidence that it's the right strategy because the revenues are there.

As you can tell from the questions, people are still looking for broadband to get better on the KPI front. I’d love to just get your thoughts, given where we are in the market around promo rolloff, pricing, and packaging in the competitive environment. I just wanted to ask Jessica, anything you’d want to give us in terms of OpEx outlook for the year that’s different from the end of the fourth quarter call? I was thinking maybe cost to service and other expenses seem to be trending nicely for you year on year. Just any update, if you have any, would be helpful. Thanks so much.

Chris Winfrey (President and CEO)

On the promotions and rolloffs, that's a very deep and extensive topic. I'll do my best to cover a bit of it. I think first and foremost, you have to have the very best product in terms of speed and reliability. The second is that you have to create value for customers and save them money, whether that's at promotion or at retail. The third is, yes, we do reuse promotional pricing to drive acquisition, but even when you're at retail, it needs to stick. You need to minimize the promotional rolloffs that you have because it drives service transactions. Customer dissatisfaction can result in churn, particularly if that retail price doesn't deliver the value relative to your competition.

While at Charter, we had, we believe, the lowest prices across cable. When you get into retail rate pricing, we were looking for a way that said, is there an elegant way to migrate to lower pricing at retail for internet, primarily bundled, but also including for single-play products in a way that was not tearing apart the existing base of revenue that we have. The way to do that is to use the products that we have that are competitive advantage, which is mobile. Now, given the work that we've done as video, to say, when you bundle together, you can have at a promotional rate $40 gig, which will have low rolloff, which will have first and foremost, to your question, price lock of two years if you bundle with two types of products and three-year price lock if you bundle with three products.

Even when you're out of that and you have two years of promotional rolloff, five years down the road, you're at a price point that is still very competitive in the marketplace and offers a better product and more value, whether it's bundled or not. That is where we put ourselves in a position to do so in a way that works well for customers and works well for our shareholders as well. Without spending 30 minutes on it, that's the essence of our strategy. To put more product and value in.

When you think about driving in with gig as opposed to just our 500 megabit per second, using the strengths that we have, putting in the unlimited+ version of the product when you bundle together with gig, putting in the cloud DVRs included as part of the service as long as the Xumo Box as well as the Xumo Box when you're bundling in that triple play. It is more than just the amount of PSUs. It is the depth and the quality of the product that we're willing to add in and contribute into that bundle as you move upstream. It drives quality into the customer base and protects them from churn as these small step-ups occur.

Most importantly, when you get to retail pricing, because it's a product set and pricing and packaging that cannot be replicated in the marketplace because of how we approach the market. If you can combine that with high-quality service, the goal is to have this customer for life. I think we had always done a pretty good job of all those things I said, but we had an opportunity to do even better. That's what the pricing and packaging that we launched in September enabled us to do. I think it's early days.

I think the real value of what we've done last September, you won't see until you start to get into beyond year one as you have rolloffs that are less or, in fact, bundled price locks that are taking place, which means you have even lower amounts of calls, lower amounts of churn. For many years to come, you'll have a compounding effect of those lower service transactions and lower churn because there's more value inside that bundle and there's more customers who are bundled, if that makes sense.

Jessica Fischer (CFO)

Yep. On the operating expenses side, Ben, we had a little more volatility in the quarter and the growth rate for marketing and residential sales. I still anticipate over the course of the year that that line will grow in the low to mid-single digits. I'm in the same place that we were before on programming and cost per video customer and cost to service customer, where cost to service customers, where I would expect it to be flat to slightly down for the year. In other expense, I think we hadn't given a suggestion there. I think absent the one-time item in this quarter, and I would just note that other expense is a space where we sometimes do encounter one-time items over the course of the year. Absent those, I would have expected also a low to mid-single digit growth rate in other expense, but I'll call out that it's subject to those one-time items.

Ben Swinburne (Analyst)

Got it. Thank you so much.

Stefan Anninger (Head of Investor Relations)

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

Operator (participant)

For our next question, we'll return to Jonathan Chaplin with New Street Research. Please unmute your line and go ahead. Jonathan, I see that you are unmuted. You may need to select a different microphone input.

Jonathan Chaplin (Analyst)

Sorry. Can you hear me now?

Jessica Fischer (CFO)

We can. Yes, we can hear you.

Jonathan Chaplin (Analyst)

Sorry about that. Chris, I'd love to just delve a little bit more into the life unlimited pivot that you guys made back in September. I think this is sort of a really important moment for the company. When we look at our Recon Analytics data on NPS, it looks like there's a steady improvement since September. I'd love to get a perspective of how that sort of matches your internal tracking. I know that you said in response to the earlier question, the real benefits we'll see over time. I'm wondering what sort of you're seeing in early life churn on the customers that are on the life unlimited package relative to what you've seen before and sort of signals that give you confidence in that future improvement.

Chris Winfrey (President and CEO)

Yeah. What you had just asked there is what I would call early tenured customer retention rate is better post the launch of the bundled pricing and packaging in September, which is what you would expect. That answers the question there. I think, as I was talking through Ben, that the real benefit of this won't be fully recognized until we get beyond year one and into year two and into year three. I think even going into years four and five, you'll see the benefit of that.

We are looking at ways when customers call in under what I would call legacy pricing and packaging, ways to migrate them into this new Spectrum pricing and packaging in a way that delivers them a much higher level of value at the same or slightly higher price point, but we're giving them a tremendously higher amount of product in doing so because we can and because it preserves margin for us and puts that customer in a much better relationship. Maybe there's a chance that even prior to the September one-year expiration that we can start to actively migrate customers into Spectrum pricing and packaging that was launched at the same time as the life unlimited branding. That may give us an opportunity to do more with that legacy customer or existing customer base earlier.

As it relates to NPS, there are so many different factors going in. You can have great improving NPS, and then you can have a small rate increase that puts a ding into that. I do agree generally we see the same overall trend that net promoter score is increasing. That's a function of the pricing and packaging. That's the function of the quality and the reliability of the product. It's also a function of the changes we've made with our customer commitment and some of the softer things that we've done inside of the call centers to make sure our customers know that the employee that they're speaking to genuinely is an employee. It's based here in the U.S., and that we appreciate the time the customers had with us and really their commitment to us as Spectrum.

We've made a lot of changes in that environment too and standing behind the product with credits, providing that transparency and proactively providing credits when we do miss the mark. I think goes a long way. All those things put together is how you get net promoter score to go up. Value, reliability, great service, recognition, US-based employee that we have 100% for sales and service infrastructure, which I do not think we touted enough. I think all that is working to your point. I think it is very early days. I think you'll see bumps along the road, but the overall trend should be going up into the right.

Jonathan Chaplin (Analyst)

Chris, if there's no change in market growth or the competitive environment from what we're seeing right now, the improvements that you expect in year two, three, four, etc., do you think those are enough to get you back to positive broadband subscriber growth?

Chris Winfrey (President and CEO)

I do.

Jonathan Chaplin (Analyst)

Great. Thank you.

Jessica Fischer (CFO)

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

Operator (participant)

Our next question will come from Jim Schneider with Goldman Sachs. Your line is open. Please go ahead.

Jim Schneider (Analyst)

Good morning. Thanks for taking my question. I was wondering if you could maybe give us a bit of an update on what you see in terms of the broader consumer behavior in your base. One of your peers sort of called out higher mobile substitution in some of their cohorts. I'm wondering if you're seeing any of those effects. More broadly, maybe talk about any consumer trade-down effects, pressure and credit metrics, although they didn't seem to show up this quarter in any way. Just kind of wondering what you're hearing anecdotally from the consumer side based on all the sort of macro uncertainty we have right now. Thank you.

Chris Winfrey (President and CEO)

Sure. Look, I do not think what we are seeing is that different. I will come to that, but I just want to be clear. Our sales are up, and our churn is relatively stable despite the higher non-pay disconnect that Jessica mentioned. We feel good about our own trends. The factors that are going into broadband industry growth right now, got the end of ACP. It is largely behind us. I assume that is the same for the industry as a whole. As you mentioned, mobile substitution, including some low-end cell phone internet migration, is almost back to where it was pre-pandemic. It is continuing. My hope is that it slows and gets back to where it was, and that is our expectation. Both of those, I think, are going in our direction in terms of industry growth.

One of the big bogeys here is we'll have to see where the housing market goes. That has always been a contributor to broadband industry growth that has not changed. The first two I mentioned, end of ACP, mobile substitution reversion, I think are going in our direction. The housing climate is a little bit unknown right now, and that'll have an impact. Even that tends to be temporary in nature. The other thing that you asked about is essentially, I think the market climate really is a recession question. We have not seen anything significant with the consumer so far, and neither in non-pay disconnect rates. They're up slightly only because of the lack of ACP.

I would say in a market environment where customers are rightfully tightening their wallet, our strategy is to go back and think about what I just said with Ben and Jonathan. Our strategy of having the very best products and service at attractive prices and focusing on saving customers money. If you look at that slide that is in the presentation that we had today, it is huge money. In a recessionary environment, but particularly in a recessionary environment, I think our products and our pricing work very well across all environments. I think even in a recession, we can present value to customers and stickiness through having the best products at the best prices. Advertising and telling customers you can save them hundreds or even thousands of dollars on converged broadband and mobile services is a great way.

If you can put together the video package, whether it is through skinny bundles or through really full, when I say full, meaning linear live video plus all of the direct consumer app bundles in a way that creates value and saves you money in a recessionary environment, I think you are in a good position. I would just add one final thing to that. We do have, we are proud of that, a variety of packages that meet the needs of low-income or income-constrained consumers. We always have, and we target that market to make sure that we are servicing all areas of our communities. I do not have a crystal ball on the economy, but I think we are pretty well positioned for potential headwinds in a recessionary environment if that is what is coming. Like I said, I do not have a crystal ball, and I am not predicting that. I'm just saying that we're in a pretty good spot.

Jim Schneider (Analyst)

Thank you.

Stefan Anninger (Head of Investor Relations)

Thanks, Jim. Operator, we'll take our final question, please.

Operator (participant)

Our final question will come from Bryan Kraft with Deutsche Bank.

Bryan Kraft (Analyst)

Hi. Can you hear me okay?

Chris Winfrey (President and CEO)

Hey, Bryan.

Bryan Kraft (Analyst)

Hi. Good morning. I just have another question on fiber competition. Would you be able to give us a sense for the difference in your broadband penetration levels in markets where you've competed with fiber for a long time relative to the non-fiber markets? Are you splitting the market 50/50 in those areas after you kind of take out the portion captured by fixed wireless at this point? Also, specifically in the older markets, has it been stable as of late, or is competitive fiber still gaining share in those areas? Just trying to get some more color there, if you wouldn't mind sharing that. Thank you.

Chris Winfrey (President and CEO)

Sure. It's been a while, but we've provided color on this in the past. When we have new fiber overbuilders inside of our markets, we have a huge penetration points of rollback. That's been the case, still the case. It is just a question of mix and newness of fiber rollout. The pace of fiber rollout has been about the same. When you think about all of the market dynamics that are impacting our internet growth rate, it isn't because that fiber overbuild has been there for more than a decade. The impact of fiber has been consistent and steady. It's really more about the mobile substitution and the introduction of a new low-end competitor with cell phone internet. Those have been the two big drivers and just market size because of all the things that we've been talking about through this call.

The other thing I would tell you about fiber penetration is at least inside of our footprint, which goes to your question of 50/50 split. That's not what we see. It's never been what we see. It's not what we see today. When you hear other companies talk about the type of penetrations that they are getting, all I can say is they must be having outsized penetration in non-Charter markets because we don't see a 50/50 split. Share sales continuing even after a tenured rollout of the fiber overbuild of having higher penetration than 50/50 of the broadband penetration inside those markets.

Bryan Kraft (Analyst)

Thanks. Thanks, Chris, for that call. I appreciate it.

Chris Winfrey (President and CEO)

Good.

Stefan Anninger (Head of Investor Relations)

Thanks, Bryan. That concludes our call. Thanks, everyone. Leila, I'll pass it back to you.

Chris Winfrey (President and CEO)

Thank you all.

Operator (participant)

Thank you for joining the call today. We have now concluded, and you may disconnect.