Cable One, Inc. (NYSE:CABO) Q1 2023 Earnings Call Transcript May 7, 2023

Operator: Good afternoon and thank you for attending today’s Cable One First Quarter 2023 Earnings Call. My name is Jason, and I’ll be the moderator for today’s call. All lines will be muted during the presentation portion of the call and opportunity for questions and answers at the end. I’d now like to pass the conference over to our host, Jordan Morkert.

Jordan Morkert: Good afternoon, and welcome to Cable One’s First Quarter 2023 Earnings Call. We’re glad to have you join us as we review our results. Before we proceed, I would like to remind you that today’s discussion contains forward-looking statements relating to future events that involve risks and uncertainties. You can find factors that could cause Cable One’s actual results to differ materially from the forward-looking statements discussed during today’s call in today’s earnings release and in our recent SEC filings. Cable One is under no obligation and expressly disclaims any obligation, except as required by law, to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Additionally, today’s remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. generally accepted accounting principles or GAAP. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cableone.net. During today’s call, whenever we refer to first quarter results on an adjusted basis, we are excluding Tallahassee and Managed IT Operations we divested in the second quarter of 2022 which exclusively provided business services. For more information, please refer to the slides we have posted to our IR website. Joining me on today’s call is our President and CEO, Julie Laulis; and Todd Koetje, our CFO.

With that, let me turn the call over to Julie.

Julie Laulis: Thank you, Jordan, and good afternoon, everyone. We appreciate you joining us for today’s call. Amidst the ongoing debate surrounding the longevity of traditional broadband providers, our first quarter 2023 results highlight the resiliency of our business model. In the face of ongoing macroeconomic challenges, demand for a reliable, value-based broadband product continues. This is evidenced by first quarter residential broadband revenue growth of 5.5% from prior year where we grew in customers as well as in ARPU. First quarter business services revenue growth of 2.9% on an adjusted basis, where we had stronger growth in our SMB and enterprise broadband service offerings. First quarter adjusted EBITDA margin up 110 basis points from the prior year to 54.2%, reflecting continued efficiencies and product mix shift.

First quarter reduction in capital intensity, all while continuing to increase our network capacity, demonstrating our commitment to building infrastructure in a capital-efficient manner. And our first quarter adjusted EBITDA less CapEx was $132.7 million, an increase of 4.4% year-over-year. Our robust financial results underscore the significance of the services that keep our customers and communities connected to what matters most. Looking first at residential broadband service on a sequential quarterly basis, we saw an increase of approximately 2,200 customers. While a return to positive growth is encouraging, the ongoing slow pace of home move activity continues to impact new customer sales and net growth. We are pleased to report that churn rates remain consistently low demonstrating strong customer retention and satisfaction.

We continue to test and learn with our products and pricing to further insulate our current base and foster profitable growth. Turning to residential broadband ARPU. We reported solid year-over-year growth of 4.5%. The demand for higher speed tiers remains robust with sales of both 500 meg and gig service plans increasing by more than 450 basis points sequentially. We also see substantial opportunity to continue upselling our current customer base, whose average service offerings remain below our sell-in levels. Continuing speed tier upgrades and the modem rate adjustment which began during the fourth quarter are the primary drivers of our Q1 2023 ARPU growth. We believe there is also a meaningful opportunity for customer and ARPU growth over the long term as we make disciplined capital investments that will allow for enhanced service offerings and continued expansion of our addressable market.

We are investing in our network and deploying devices today that significantly increase downstream and upstream speeds, lower latency and provide greater visibility into the in-home Wi-Fi experience, all in a more energy-efficient manner. As our network evolves to DOCSIS 4.0, we estimate these network upgrades will cost around $200 per passing. Our ongoing commitment to providing products and services that meet the needs of our customers today and in the future gives us a strong competitive edge against wire competition, which remains relatively low. We believe the superior experience we provide our customers paired with our local expertise and first-mover advantages make us a fierce competitor with a proven track record and accompanying results.

Being into fixed wireless competition, it’s no secret that demand for data is increasing at unprecedented levels, and it’s unlikely that growth will slow anytime soon. Just over one of five customers on our network are now using a terabyte of data. Given the enormity of data needs today and in the future, we believe it’s clear that mobile fixed wireless cannot ultimately meet the data needs of many customers. While we see a small segment of our win share from DSL customers experimenting with mobile fixed wireless products, on the whole, we do not see a noticeable impact to our existing customer base which values the premium capacity and reliability we offer. And we believe those trying out mobile fixed wireless after switching from DSL will migrate to our data services from the need for a more reliable and robust service arises.

Moving to Business Services. On an adjusted basis, we drove revenue growth of 2.9% year-over-year despite short-term challenges to new business creation due to macroeconomic conditions. Our business services team remains steadfast in managing the many aspects we control, including offering a streamlined suite of products to existing customers, driving efficiencies that align with customer needs and maintaining a relentless focus on white glove service. As a result, both our enterprise and small business broadband offerings continued to see strong growth. Demand for data continues to grow, as evidenced by a new milestone as nearly 21% of our residential customers now exceed a terabyte of usage each month an increase of more than 20% from the same period last year.

Despite continued growth in demand, our average network utilization during peak hours has also improved. During the first quarter of 2023, downstream and upstream utilization during peak hours decreased from 23% to 21%, a reflection of our ongoing investment in our plant to stay ahead of customer demand. Transitioning to integration activities. Our teams continue to execute across multiple projects as they thoughtfully prepare for the larger platform conversions to come. We are delighted with the synergies achieved to date and confident that the conversion of the larger platforms will yield even greater results. I would like to express my sincere gratitude to the skilled associates across our family of brands for their exceptional contribution in identifying best practices and fostering a unified company culture.

Building on our associates’ exceptional contributions to the company, last year we embarked on a digital transformation journey to reimagine the future of Cable One with the intention of delivering significantly enhanced experiences for our customers and associates through numerous initiatives such as automated field maintenance, truck roll recommendation engine and contact center modernization. We’ve been able to anticipate customer needs and improve our efficiency. We will continue on this journey to nurture a culture of innovation that benefits our customers, associates and shareholders. Turning now to our unconsolidated investments. For the fourth quarter 2022, the combined adjusted EBITDA of certain other companies we have invested in was approximately $348 million on an annualized basis.

This represents growth of approximately 21% in the fourth quarter of 2022 as compared to the fourth quarter of 2021. These companies also added more than 130,000 new fiber passings during the fourth quarter period ended December 31, 2022. This momentum continued in the first quarter, where total residential and business data customers grew by approximately 11,400 or 2.5%. This does not include the operations of Metronet or Ziply where we have less significant investments. These excellent results highlight the execution of these proven management teams as well as the growth potential of these investments. Before handing the call over to Todd, there are a few notable events from the quarter that I’m pleased to share. Our laser focus on creating a workplace in which our associates feel valued and included resulted in Forbes ranking us for the third year in a row on their list of America’s Best Midsize Employers.

I am also proud to share that Cable One was recently named by Newsweek as one of America’s Greatest Workplaces for Women 2023. These awards are especially meaningful as they speak to the culture of Cable One. Together with our associates, we have built an inclusive workplace that promotes diversity, opportunity and professional development. Our associates drive our culture, which values the unique experiences and perspectives we each bring to the table. Never has this been more apparent than in our recent company rally, which reunited our associates at in-person events across our footprint. Associates joined together to celebrate, connect and share while hearing from senior leadership about the future of our company. Our associates were energized and inspired by these events, further reaffirming our credo, we are stronger together.

And now, Todd, who will provide a full recap of our first quarter financial performance.

Todd Koetje: Thanks, Julie. Starting with revenue. Total revenues in the first quarter of 2023 were $421.9 million, compared to $426.7 million in the first quarter of 2022, a 1.1% decrease. The decrease was primarily due to a continued decline in low-margin residential video and voice revenues as well as the impact of the divestiture of noncore operations during the second quarter of last year, which collectively contributed $2.4 million of business services revenue in Q1 2022. On an adjusted basis, total revenues were down by 0.6% year-over-year. Our business continues to be driven by the growth of our highly profitable residential data and Business Services segments. For Q1 2023, our residential data revenues expanded 5.5% year-over-year when compared to Q1 2022, and our business services revenue grew by 2.9% for the comparable period on an adjusted basis.

Operating expenses were $112.2 million or 26.6% of revenues in the first quarter of 2023 compared to $119.4 million or 28% of revenues in the comparable quarter of the prior year, a 140 basis point improvement driven largely by a $12.3 million decrease in video programming costs. Selling, general and administrative expenses were $86.7 million for the first quarter of 2023, compared to $87.8 million in the prior year quarter as higher labor costs and expenses associated with software platform investments were offset by reductions in health care and marketing costs. SG&A as a percentage of revenue remained consistent at 20.6% for both periods. Adjusted EBITDA was $228.8 million for the first quarter, an increase of 1% when compared to the first quarter of 2022.

Our adjusted EBITDA margin for the first quarter of 2023 was 54.2% a 110 basis point improvement compared to prior year as we continue to drive growth in our higher-margin advanced broadband products, while at the same time, extracting costs via scale, integration acumen and efficiencies in our product delivery and support model. Capital expenditures totaled $96.1 million for the first quarter of 2023, which equates to 42% of adjusted EBITDA, compared to $99.4 million or 43.9% in the prior year quarter. During the first quarter, we invested $12.8 million of CapEx for new market expansion initiatives and $3.6 million for integration activities. Ongoing capital expenditures will remain aligned with our balanced and disciplined allocation strategy that prioritizes investment in our advanced broadband networks as well as high return, high visibility projects that extend these networks to prospective new customers in unserved or underserved areas of rural America.

Adjusted EBITDA less capital expenditures was $132.7 million for the first quarter of 2023, an increase of 4.4% from the prior year quarter as both elements of this important metric continue to improve. And we appropriately balanced growth via investments in our existing networks, inorganic expansion opportunities and return of capital to shareholders. In the first quarter of 2023, we distributed $16.5 million in dividends and repurchased nearly 57,000 shares of our common stock or approximately 1% of outstanding shares for $41.8 million. As we navigate a challenging economic backdrop, a rising interest rate environment and constrained capital markets, we are squarely focused on managing our balance sheet in order to support our long-term investments and ensure our ability to operate through these cycles while continuing to reinvest in our core businesses.

As of March 31, we had approximately $203 million of cash and cash equivalents on hand and our business generates strong discretionary cash flow. Our debt balance was approximately $3.8 billion, consisting of approximately $1.8 billion in term loans, $920 million in convertible notes, $650 million in unsecured notes, $488 million of revolver borrowings and $5 million of finance lease liabilities. We also had $512 million available for additional borrowings under our $1 billion committed revolving credit facility. Our weighted average cost of debt for the quarter was approximately 4%. Our net leverage ratio was 3.8x and the vast majority of our borrowings are either fixed issuance or have been synthetically fixed under long-term interest rate contracts considerably mitigating our exposure to rising underlying interest rates.

As we discussed during last quarter’s call and disclosed in our 10-K, in February of this year, we successfully completed an opportunistic financing transaction with our lenders that provided Cable One with extended maturities of 2-plus years, incremental strategic flexibility and enhanced funding flexibility, all at comparable cost to our previous arrangements. As a result, our next scheduled maturity date is in 2026, with the remainder of our maturities five years and beyond. We also had our long-term issuer credit ratings affirmed by both Standard & Poor’s and Moody’s during the quarter. With that, we are now ready for questions.

Q&A Session

Operator: Our first question is from Phil Cusick with JPMorgan. Your line is now open.

Phil Cusick: Hi, guys. Thank you. A couple if I can. First, 1Q is usually the best broadband quarter of the year. How do you think about seasonal impacts from here as well as talk about any impact of slowing housing growth in your territories? And then second, can you talk about any M&A in the market today, both – probably more on the sell side out there? Are there any sellers out there that are starting to get more interested with rates going higher? Or are things sort of shutting down? Thanks very much.

Julie Laulis: Thanks, Phil. It’s Julie. Julie with a cold. Boy, do I sound nasally? So I don’t think any of us really know what to expect with this year. And I say that because I find it very interesting that some – on one hand, you might see factors that indicate economic issues like the move rate, right? Like the people just are not moving and interest rates are super high. But on the other hand, our customers are taking our higher speed tiers, which obviously cost more at a larger rate than ever before. So those two things seem somewhat opposed to each other. My best guess, having no crystal ball is that seasonality – that will follow our typical seasonality cycle. And then I think you asked about the moves and you put out pieces on moves.

And starts are low and they are low across our footprint. So it does not matter if it is what we might term a heavily competitive area or an area that has no other competitor than an ILEC. So across the footprint, starts are down. The good news is churn is also super low. Sparklight had a historic – Sparklight proper had a historic low taking out the COVID, of course, when we weren’t allowed to disconnect people. So I mean, we have indications that our customers are happy and they have a large need for our reliable and robust service that has high data throughput, which is good because, again, that continues to grow.

Todd Koetje: And Phil, on the M&A question, I think it’s a really good question. I think it’s probably a little too soon as it relates to how quickly the markets have changed from both value as well as cost of capital with what the Fed has been doing to attack inflation. More likely, those impacted companies relative to cost of capital or upgrade requirements will slow before they look to sell and play a little bit more of the patients game, and we’re seeing that as it relates to the aggressiveness of overbuilders in some of the markets and the pace at which that’s happening. The other thing I would say is, we continue to be a preferred aggregator, cultural integrator as it relates to a lot of the smaller businesses because they know the culture of Cable One and how well we take care of our people, and we will continually see some of those interested sellers, but they’re smaller and very strategic from a tuck-in geographic area that we’re already in.

Julie Laulis: I just got a reminder from one of our associates today that we are coming up on the seventh anniversary for NewWave being integrated and second year anniversary for Hargray. So time flies.

Todd Koetje: It does.

Phil Cusick: Thanks guys.

Operator: Our next question comes from Frank Louthan with Raymond James. Your line is now open.

Frank Louthan: Great. Thank you. Just was curious on the promotion side. Were you running any heavier promotions in the quarter? And what sort of pricing action are you looking at taking this year? And how should we see that in the various products?

Julie Laulis: Okay. Thanks for the question, Frank. I would not say that promotions were significantly heavier. We are testing and trying a lot of things still, Frank. And even when we do promotions, I’m heartened to see that our sell-in is – tends to widely be on the upper end of our product value chain versus any lower. So what I’m saying in my COGS headway is that we do promotions to make a phone ring, but we don’t see a lot of people taking the lower end promotions. And as you know, I think the – typically, we tend to discount the entry price and not any of our higher product offerings. Now again, we’re testing and experimenting and trying different things. The world is not the way it was even three years ago. So the Cable One evolved, was very cookie cutter and one size fit all, and we went to a couple of sizes a couple of years back.

Now we are being very flexible and agile and treating each market as it deserves to be treated depending on its size, if it has competition, its penetration levels, things like that. Pricing action, well, let’s see. We haven’t done a, what I would call a “naked” rate adjustment in about eight years now. So while not predicting the future, I do believe that there is pricing elasticity even though we happen to have a high ARPU, again, driven by customer choice, customers being pulled up to higher levels of service versus us pushing them there. So I’d say stay tuned.

Todd Koetje: Yes, Frank, it’s Todd. The only thing I’ll add to what Julie just said is we did have that price increase halfway through the fourth quarter on the equipment side of the equation. So that rolled through in the first quarter here and going forward. So great retention associated with that. Obviously, as we’re investing in a lot of the home health for our customers, that willingness to pay continues to increase and even some of our customers that were bringing their own seeing the value of the technology that we’re investing in and you can drive that take rate hire as well, which will be a tailwind to our ARPU as well as how we think about the pricing and packaging adjustments. You recall last year, we did a $5 increase when we took our baseline 100 meg speed tier to 200 meg, we gave them more capacity at the same time.

The other five of that will roll through here in – it was not in the first quarter, but going forward, second quarter through the balance of this year. But those are two already known. I just want to make sure I point it out.

Frank Louthan: All right. Great. What percentage of your customers use their own modems and so forth?

Todd Koetje: We don’t disclose the exact split. I would say the majority use our product.

Julie Laulis: Correct.

Frank Louthan: Got it. All right, thank you very much.

Todd Koetje: Room to go, though.

Julie Laulis: Just a little.

Frank Louthan: Of course, thanks…

Operator: Our next question comes from Greg Williams with TD Cowen. Your line is now open.

Greg Williams: Great. Thanks for taking my questions. Just two questions. Just dovetailing off the last topic on trialing and testing new plans. I’m just trying to understand this, if you can give us some examples. Is this in a way to play defense or offense against fiber-to-the-home or maybe even lower end plans in fixed wireless or something different altogether? Second question is just on your MBI put option, I know it’s two years away, but I get calls from investors a lot on it. And maybe you can help us generally, what’s the general game plan on tackling that option, whether it’s quoting free cash flow or simply raising debt or even buying pieces of the call option, if that’s possible along the way. Thanks.

Julie Laulis: Thanks, Greg. In terms of trialing and testing, we start with our customers in mind because we need to make sure that we are bringing them value and the things that make a difference in their lives. Remember, we’re neighbors to these people. And so what we do with them related to these products really matters. The things that you mentioned are absolutely in our sites, potential low-end plans, which is something that we have not really looked at in the past. If we can do it in a profitable way, if we can trend the cost out of it and be smart in how we onboard and service these customers, it is absolutely something that we are looking at. It would open up a new cohort for us. We absolutely will take defensive action.

And again, it is very market specific. It depends on who the competitor is, the size of the market, what their penetration is, what sort of offers they’re doing, but it is interesting, it doesn’t always happen this way because, again, some of the competition that we’ve had are decades old, even fiber competition. But sometimes, they will actually stop builds and move their resources elsewhere if we do that. And in terms of offensive, I guess, one thing that I would mention there as an example because you asked for one, is that we have been slowly and thoughtfully sort of migrating to an unlimited data offering versus our data plan. So we now – that accounts for a much smaller piece of our ARPU than it had in the past because, again, our customers are telling us, they don’t want to have to worry, and it is an offensive move so that if somebody else came into the market, we take that tactic or branding piece away from them.

Todd Koetje: Greg, I’ll hit on the MBI question that you had, and we’ve chatted about this quite extensively with everyone. But the reason we invested in that business. It’s higher growth prospects, more rural and competitively insulated business model. It’s fantastic leadership for all the reasons we’re still very excited about that investment today and they’ve done an amazing job. We do have an option to call the remaining share of that business that we don’t own, and we’re in that window right now. But I’ll repeat that we look at things through the free cash flow accretion dilution, and we’re not going to do dilutive transactions, would not get great strategy as it relates to our shareholder initiatives. But we also are compounding very attractive returns for our shareholders as a partner in that the put option is in the middle of 2025.

It’s a more variable valuation methodology as we’ve discussed, but not disclosed. And we look at that as an attractive option if we were to wait for that. And we will continue to diversify how we think about allocating our capital to not only prepare for events like that or other strategic events, but also through the mindset of how we can continue to invest in ourselves through our market extension, market expansion, and, of course, share repurchase in investing ourselves through the return of capital.

Greg Williams: Got it. Thank you.

Operator: Our next question comes from Craig Moffett with MoffettNathanson. Your line is now open.

Craig Moffett: Hi, thank you. Two questions, if I could. And first, Julie, one last time, congratulations on being inducted into the Cable Hall of Fame, which really is a terrific honor. First, can you just talk about your exposure to the ACP program in the event that ACP is potentially not reauthorized. I suspect most of those customers are customers that were already customers of yours. But do you have a sense of how many customers are fully dependent on that program in order to keep – subscribe to broadband. And then second, I wonder if you could just update us on your thinking about wireless. And when at some point down the road, wireless might make sense as part of the bundle.

Julie Laulis: Yes. Thank you for – I thought I might be able to squeak by this call. I wouldn’t let them put it in the script.

Todd Koetje: Craig, if you didn’t say anything I definitely was. So I’m pleased that you brought it up.

Julie Laulis: It was a nice slide. Thank you very much. I say, gosh, if you do anything long enough, I guess, they give you an award, but ACP, we only have – we have less than 30,000 ACP customers. So I think our exposure is not large if, for some reason, those funds are not reauthorized. You are right. The majority of those people were our customers, and they upgraded to higher tiers. They’re using the money to offset more versus get into the program. Wireless mobile, you can jump in here, too. Again, I think it’s interesting. Of course, I listened in on Altice and they said that customer research was saying that they wanted converged products. And we have not heard that. We need to keep our customers in mind. And if it’s what our customers want, then that’s something that we can move towards.

Right now, I honestly think our focus is best served. We have a very capable team. They know what they’re doing in the towns that we operate in and we need to be doing everything we can to grow our market share and defend our market share in places where there is competition. Again, that percentage is relatively low, especially vis-a-vis our peers. I do think that we have options that are available to us, they’re not exactly the same as our peers, but we do have options available to us if a converged product is what our customers want and if it will mean helping our profitability in the long run.

Todd Koetje: And Craig, I’ll build on that a second as it relates to the profitability because that to us is, of course, second to what our customers want is the most critical element of making that decision and those economics at this stage, aren’t at the place where we want them to be. We’ve talked about the reliability elements associated with that. And then their bigger question is, is it really a converged product? Or is it just something that’s discounted in terms of how you potentially get co-market.

Craig Moffett: Got it. Thank you.

Operator: Our next question comes from Steven Cahall with Wells Fargo. Your line is now open.

Steven Cahall: Yes, thank you. Two questions. Maybe first, just to go back to ARPU, when we think about that 4.5% strong growth that you saw in the quarter, could you just help us think about whether a little bit or a lot came from the non-unlimited pricing tiers that you have? Just wondering because Julie, you said that ultimately, that could go away if competition dictates it. So just wondering if that becomes a meaningful headwind to ARPU growth or not really something we need to worry about. And then thanks for the color on the DOCSIS 4.0 upgrade plan. That $200 a passing. Does that include CPE and any time line we should think about for your goal to get to DOCSIS 4.0? Thank you.

Julie Laulis: Yes. I wouldn’t worry about the unlimited. We pretty much slowly and quietly been tucking that into everyone’s plan over the past couple of years. For the fourth quarter, the main driver of the ARPU increase was that modem adjustment that we took at the end of last year with a smidge of customer migrations up to higher tiers. So that’s what drove that ARPU. As Todd referenced, we do have the folks that were migrated from 100 meg to 200 meg that are receiving as we – well, we’ve already received it quite honestly. It was in April. The second $5 adjustments bring them up to that $65 price point. So we’ll be seeing that flow through in the second quarter. And of course, that – well, for that segment of those customers is larger than the adjustment that was done on the modems, but there’s only a subsegment about 150,000 customers that did that migration.

Todd Koetje: Yes, Steve, you will see the data side of the equation, the data plan side of the ARPU be very material and continue to decline. I wouldn’t have concern about that to your question.

Julie Laulis: I don’t think people have noticed it to date because of the other things making up for it.

Todd Koetje: And when we can upgrade customers based on maybe previously where they had that, it was a good catalyst to get them into a plane that’s better for their needs and better for their usage, as Julie was talking about with so many of our customers continuing to increase the amount of usage and monthly capacity. The unlimited plans are ideal for that and it’s a much happier longer-term loyal customer. On the 4.0 side, the $200 million per passing approximate that we included here is not including the actual in-home equipment. It is the – everything basically but that, that will be not a need necessarily. But if the customer is looking for all of those enhanced offerings and services that come with that 4.0 architecture, it could require the need for incremental in-home CPE, and that’s not in that number.

What I will remind you and all others as we’ve been very actively already investing in that 4.0 architecture and specifically in the network architecture in terms of spacing of the amps and splitting of the nodes and deeper every time, we’re doing that with our fiber, and that’s what allows us to have that number be so efficient. And that will be a plan that we execute not on in a 12-month period of time. But over time, as we look at selectively rolling out in markets on a very staged basis.

Julie Laulis: Yes. So legacy modems will work unless they want to step up to higher symmetrical and enhanced services.

Todd Koetje: That’s correct.

Julie Laulis: And the time line is market by market, not a forced march, but where we perceive there to be need for a variety of reasons.

Steven Cahall: Yes, thank you.

Todd Koetje: You’re welcome.

Operator: Our next question comes from Brandon Nispel with KeyBanc Capital Markets. Your line is now open.

Brandon Nispel: Great. Thanks for taking the questions. A lot of them have been asked. But, I guess, for Todd, if starts are down, how much capital – will capital spending come down for network expansion. I noticed it was down this quarter. And what should we be expecting in terms of new home passings within your footprint? I’ll just leave it at that. Thanks.

Todd Koetje: Thanks for the question, Brandon. I appreciate that. The new homes passed, we were up a little – I think it was like 1.8% – 1.75% year-over-year. And we’ve kind of always talked about that as being in the 1%, 1.5% market expansion where we are either extending or in some cases building in some new markets in and around our current geographies will be the primary driver of that or, of course, where there was a meaningful amount of population growth in many of our markets and developers adding new neighborhoods, and we expect that to continue. It’s been a little bit more benign here in the last six to nine months as we’ve talked about on several of these calls as it relates to the new home development but more of what we anticipate to be a temporary macroeconomic impact than a long-term where are people looking to live.

And then the capital dynamic will obviously have some impact associated with that. It will ebb and flow a little bit on when we’re doing projects on the integration side, which are still in flight as it relates to some of the platform migrations as we’ve talked about and market expansion has, I wouldn’t call it a straight line level of where that spend is, but something that we absolutely feel is within that kind of broader 400 per year kind of dollar consistency that we’ve talked about.

Julie Laulis: The new home passings are incredibly cyclical. Our markets – we have many markets that are growing and developments are planned. But when the economy is like it is right now, they might just be doing curb and gutter work and not actually building the homes. But they will be built, they will be built. It’s just a matter of time.

Brandon Nispel: Okay, got it. If I could ask one last, I guess, it’s a follow-up, but you commented on not being able to forecast broadband net adds that well. I would imagine that you still expect to grow this year broadband net adds that is – but do you expect to grow every quarter this year sequentially? Thanks.

Todd Koetje: I would agree with your comment that we fully expect to grow broadband adds. We’ve been very consistent in saying that. I think we’ve demonstrated that in this quarter to predict it on a quarter-by-quarter basis is a little bit more challenging, Brandon, as you know. We’ve seen some would have returned to the predictable seasonality than what I think even in like early 2022, we were trying to follow that and it was still kind of more challenging to actually follow and predict. But then again, you’re throwing macroeconomic headwinds into things now and obviously, a different competitive environment, but we are very confident we can continue to grow through of the year.

Julie Laulis: Which again is cyclical. Yes. No, I agree. We will grow.

Brandon Nispel: Thank you.

Todd Koetje: Thank you.

Operator: There are no more questions, so I’ll pass the call back over to the management team for closing remarks.

Julie Laulis: Thank you, Jason. I’d like to once more express my gratitude to our dedicated associates for their unwavering commitment and hard work in driving our company and most importantly, serving our customers. and thanks, everyone, for joining us for today’s call. We look forward to speaking to you again next quarter. And as many of our associates have already wished me today, I will also wish you May the Fourth be with you.

Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.