Charter Communications Inc. (CHTR) Q1 2020 Earnings Conference Call

Ladies and gentlemen, thank you for standing by and welcome to Charter's first quarter 2020 investor call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require further assistance, please press star 0. I'd now like to hand the conference over to your speaker today, Stefan Anninger. Please go ahead.

Good morning and welcome to Charter's first quarter 2020 investor call. The presentation that accompanies this call can be found on our website under the financial information section. Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, including our most recent 10-K and also our 10-Q filed this morning. We will not review those risk factors and other cautionary statements on this call, however, we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future. During the course of today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures, as defined by Charter, may not be comparable to measures with similar titles used by other companies. Please also note that all growth rates noted on this call and in the presentation are calculated on a year-over-year basis unless otherwise specified. On today's call, we have Tom Rutledge, Chairman and CEO, and Chris Winfrey, our CFO. With that, let's turn the call over to Tom.

Thanks, Tom. Our first quarter results were strong and reflect where we were heading as a company before the COVID-19 crisis started here in the U.S. Our residential customer relationship net additions increased versus the prior year in each month of the first quarter, and we were driving increasingly efficient operations given our customer-friendly operating strategy and growing our free cash flow quickly. Residential revenue grew by 4.2% in the quarter, primarily driven by accelerating relationship growth and similar PSU bundled and video mix trends we've been seeing over several quarters. SMB revenue grew by 5.4%. Enterprise revenue declined by 3.2% year-over-year, driven by the sale of Napa site and by continuing pressure from the wholesale side of the business. Excluding the cell tower backhaul and Napa site, enterprise grew by 6.9%. First quarter advertising revenue grew by 5.7%, driven by political in the month of March. Non-political advertising revenue declined by 18.7% year-over-year, primarily due to COVID-19 related softness, including the abrupt postponement of sporting events. Mobile revenue totaled $258 million, with $131 million of that being device revenue. The total consolidated first quarter revenue was up 4.8% year-over-year. Moving to operating expenses, in the first quarter, total operating expenses grew by $191 million or 2.7% year-over-year. Cable operating expenses, excluding mobile, grew by 1.1% year-over-year, or 1.7% excluding Napa site. That's despite faster relationship and revenue growth. Programming increased 0.9% year-over-year, reflecting the same great volume and mix considerations that we've talked about in prior quarters, and we also had over $20 million in non-recurring programming benefits this quarter. Regulatory, connectivity, and produced content expenses decreased by 1.7% year-over-year, driven by lower regulatory fees and a $20 million benefit from the timing of sports rights payments. Cost to service customers increased by 1.4% year-over-year compared to 4.5% customer relationship growth. That expense includes roughly $30 million for recently accelerated hourly wage increases and COVID-19 benefits, as well as $25 million of incremental estimated bad debt for COVID impacts as of March 31st. Excluding that debt expense in both years, Q1 cost to service customers declined by 0.7%. We continue to meaningfully lower our relationship service costs. Cable marketing expenses increased by 4.2% year-over-year, driven by higher labor cost and commissions in mobile. Expenses totaled $374 million, and they were comprised of mobile device cost tied to device revenue, customer acquisition, and MVNO usage cost and operating expenses. In total, we grew adjusted EBITDA by 8.4% in the quarter. When including our mobile EBITDA loss of $116 million, cable adjusted EBITDA grew by 8.1%. We generated $396 million in net income attributable to Charter shareholders in the first quarter, and capital expenditures totaled $1.5 billion. We generated $1.4 billion in consolidated free cash flow, and excluding our investment in mobile, we generated $1.6 billion of cable free cash flow, up about $700 million versus last year's quarter. During the quarter, we repurchased 5.2 million Charter shares and Charter Holding common units totaling about $2.6 billion at an average price of $490 per share. Let me briefly turn to our customer results before addressing our business outlook in more detail, including the impact of COVID-19 related customer offers and programs. We grew total residential and SMB customer relationships by close to 1.3 million over the last 12 months, or by 4.5%, and by 486,000 relationships in the first quarter. Including residential and SMB, we grew our internet customers by 582,000 in the quarter, and by close to 1.6 million, or 6.1%, over the last 12 months. Video declined by 70,000 in the quarter, better than last year's first quarter decline of 145,000, and wireline voice declined by 65,000, which was also better than last year's first quarter decline of 99,000. Through February, total customer relationships, internet, and video net additions were all better year-over-year, and mobile net additions had continued to accelerate. By mid-March, due to increased social distancing practices and shelter-in-place orders throughout the country, demand increased significantly for our products, but we temporarily yielded less mobile sales call time focused on self-installation instructions, and our mobile retail channel has been partially impacted. Also, beginning in mid-March, we introduced three COVID-19 related offers and programs for our customers. In today's materials, we've provided an addendum showing customer counts for each of these. I expect we'll continue to report this addendum for a couple of quarters to provide investors with transparency on the impact of our COVID-19 related offers and programs. The first of three offers available for customers is our 60-day free internet offer for new internet customers with students or educators in the household. We launched the offer in mid-March, and it accounted for 119,000 of the 582,000 total internet net additions in the quarter. At the end of March, we still had a large number of pending connects, and customers in the offer could continue to grow at a fast pace in April. Interestingly and uniquely, about 50% of the customers who participated in the offer in March chose to order additional products with immediate billing. The vast majority of these customers are taking our flagship internet product at 200 megabits per second or 100 megabits per second, and a small minority subscribe to our low-income offer or our Ultra and one gigabit premium offerings. The profile of these customers is very similar to the profile of our typical internet customer acquisition. And while some of these customers will no doubt not subscribe to some of these services after 60 days, the payment trends for customers who took video and phone at the same time already indicate to us that most of these customers will remain. The second offer, a customer category, reflects customers under our 60-day Keep Americans Connected pledge to the FCC. These are customers who have indicated an inability to pay for the service for COVID-19 related reasons. As of March 31st, 140,000 residential customers were in this program, many who would have been in a collection cycle in normal circumstances, and only 1,000 of which had passed the point in the collection cycle where we would normally disconnect their service. At March 31st, to give this some color, approximately 25% of the 140,000 customers today have balances which are fully current, and in total, nearly 50% have made partial or full payment since entering into this protection program. However, approximately 65,000 of those customers now have past due balances beyond the point of normal disconnections, meaning at the end of April, the number of customers requesting disconnection protection has continued to grow in April. We expect it to grow further through the rest of Q2. We intend to work with these COVID-19 impacting customers to get them back into good payment status with the objective of fully continuing their service with us. The final category of customers we've isolated in our addendum are SMB customers who have requested a seasonal suspension of service or temporary downgrade of a line of service while their operations are closed or diminished. Certain restaurants, bars, and hotels are good examples. We refer to service to a minimal level and reduce the monthly bill until these customers fully reopen. We also expect this category to grow acutely. So what does all this mean beyond temporary ARPU dislocation and back-end subscriber risk? First, even if you exclude the impact of these offers and programs from our first quarter results, residential customer relationships and internet grew at a faster pace year-over-year. That remains our long-term opportunity. Second, customers may move in, out, or between these categories over time as the economy contracts and ultimately expands. Our issue is not demand for our products; it will be our customers' ability to pay and how we help them in that respect over time. So until we have a better sense for the depth and the duration of the COVID-19 crisis and its economic impact, it's difficult for us to project what the help we offer our customers would look like. However, we think we could end up creating more value over the long term as we continue to treat our customers and our employees well. With that in mind, I'd like to expand on Tom's remarks as it relates to our business outlook and where we're likely to see pressure and opportunities over the coming months and quarters, depending on how and when the economy really accelerates. For our residential and mobile services, the quality and value of our products are clear, and demand is high, with internet up significantly in March, even without the COVID-19 related offers, and video and phone also supportive net adds in March, at least temporarily. Looking forward, the risks are that household formation and growth will be impacted. The other issue will be customers' ability to pay, either via their wages or extended employment benefits under the CARES Act or other stimulus packages, and if, how, and over what period of time we can get some customers to repay back balances when they're able to make payments again. So there are all kinds of questions here about financial presentation, accounts receivables, revenue recognition, bad debt provisions, write-offs, which will really be reflected in Q2, and we'll work through in the coming months and quarters. And we intend to provide our investors transparency as we go through a reporting exercise. When the economy begins to recover and assuming our customers can pay us, expect our residential business will be in good shape. SMB represented $3.9 billion of revenue for us last year, or 8.5% of our total revenue. In the back half of March, we began to see softness in SMB sales, where essentially our entire direct sales force has been on hold, and that channel is a larger contributor to SMB sales than in instant residential. We estimate that less than 20% of our SMB customers are restaurants, hotels, bars, theaters, and the like, many of which will struggle in this downturn. We're working with all of our SMB customers in this difficult time. We believe we can return to growth in an economic recovery. We expect a retail base for enterprise to be more stable. In March and April, we saw significant demands from healthcare and government segments to upgrade and add new services, which has taken the place of new connects in other areas. But we expect new sales to taper off, and retail services growth in the short term for enterprise will be moderated by customers' willingness to make changes, particularly for physical services in this climate. We'll have an offsetting benefit in churn, but absent higher new sales, it will be difficult to grow retail enterprise significantly in the short term. With respect to our advertising group, the second quarter will be challenging. March revenue was below our expectations by more than $30 million due to cancellations, and the April variance was more than double that amount. We're proactively working with clients to move their advertising spend from sports events to reach their audiences in different places or to move out their orders. Generally, we believe there's an opportunity to both recover and earn more advertising business once the economy picks back up. We still expect significant political spend in the back half this year, so the full-year impact won't be as dramatic on a year-over-year basis. So those are the short-term revenue challenges. The long-term opportunities, what are the potential offsets in our cost structure? Turn across all of our subscription services was already declining significantly before the crisis. Move, return, and voluntary turn is declining even more now, but new sales will also decline. All of which says that we expect a much lower level of service calls, truck rolls, installations, commissions, and labor-related activity. That applies to residential, SMB, and enterprise. As Tom mentioned, self-installation is now over 90%, up from 55% in the first part of the first quarter, and with utilization of digital self-care up over 30%, our integration investments in our self-service platforms and portals are paying off. The current crisis has accelerated customers' adoption curve for digital service, and we don't think it goes back to where it was. So outside of bad debt and some accelerated wage increases to our front line, our cost of service will decrease with less activity. Employee turnover will decline, and hiring activity is likely to slow across the business, which has direct cost and tenure benefits. And we think any remaining EBITDA shortfall relative to our plans would likely be offset by CapEx that would be lower than previously expected due to higher self-installation, lower churn, the timing of scalable infrastructure spend, and potential construction delays. So that's how we believe the model reflects what we don't know is the depth and duration of a recession. But we like our business model, how we manage the business across various climates, and we believe we can grow long-term. It's probably a good transition to the balance sheet and our liquidity profile. As Tom mentioned, we have done a lot of modeling to stress test our balance sheet under various economic scenarios. We finished the quarter with $2.9 billion of cash and $4.7 billion of availability under our revolver. In early March, at the beginning of the COVID-19 crisis, we priced a long-dated high-yield issuance at an all-time low coupon, and on April 17th, we issued $3 billion of our tightest coupons ever for 10 and 30-year investment-grade tranches. Pro forma for those investment-grade bonds and recently called debt, at March 31st, we had $8.4 billion of total available liquidity. As of the end of the first quarter, our net debt to last 12 months adjusted EBITDA was 4.4 times, or 4.3 times if you look at cable only. In that respect, we've already been deleveraging slightly. Pro forma for recent financing activities, our weighted average cost of debt is only 4.9%, and the weighted average life of our debt is 12.2 years, with more than 90% of our debt maturing beyond 2022. We have a schedule on slide 13 of today's presentation which puts our maturity profile in perspective relative to last year's Cable II data. Together with our significant liquidity and positive free cash flow, we remain in a very good position to finance our operations organically as well as through the capital markets, which remain open to Charter. As it relates to our stock repurchases, we've been under a 10b5-1 plan which was entered into right before the COVID-19 crisis began here in the U.S. Due to lower share prices in March, we purchased more of the target volume in March than April. We have never provided guidance on buybacks because we think it can encourage bad decision-making relative to better alternative uses of cash over time. So we're going to be thoughtful and respond to where we think the economy is going, our stock price, our liquidity, and any organic or inorganic opportunities which may arise. While the current environment does suggest caution in the short term, we are not modifying our four to four and a half times leverage target range today and will continue to monitor the economic climate and the interest rate market in regularly evaluating our leverage target. We know that we have a high-quality, resilient asset with dedicated employees across our local communities, and we've invested significantly in our network and people over the years. And there's high demand for our product across every part of our footprint, both homes and businesses, in good times and bad, which is why we continue to aggressively build out more broadband passings and ensure that our network is well invested, ready, and working for future opportunities. Our goal is to stay focused on what we do well and execute a proven operating strategy that works for customers and employees across various economic and regulatory climates to create shareholder value over the long term. Operator, we're now ready for questions.

At this time, I'd like to remind everyone, in order to ask a question, please press star followed by the number 1 on your telephone keypad. And we'll pause for a moment while we compile the Q&A roster. And our first question comes from the line of Craig Moffett with MoffettNathanson. Go ahead, please. Your line is open.

Hi, thank you. I want to sort of take a bigger picture question for a moment, just given the strength of your results and the enviable position that you find yourself in of having a business that is relatively resilient in this kind of a market. What are the things that you can do that sort of take advantage of the dislocation, whether it's more edge out, potentially acquisitions, a faster move in acquiring spectrum, and trying to take some share in wireless? How do you think about using this dislocation as a way to make your business stronger when we come out the other side of this disruption?

Thank you, that's helpful. If I could just ask another, maybe slightly more prosaic question. I've just given all the attention being paid to sports right now, can you just talk about the way you'd like to see the issue of sports payments to RSNs and national sports networks work out and the pressure to rebate to customers and that sort of thing?

Thanks, Tom. Thanks, Greg. James, we'll take our next question, please.

Our next question comes from the line of Vijay Jayant with Evercore. Go ahead, please. Your line is open.

Thanks. You know, Tom, given that you obviously have exposure across the country, can you just talk about, you know, how the markets are different for areas like New York and California where lockdown started early and compared to the other markets that you start of seeing any set of green shoots as some of these states start opening up and any sort of change in direction of business? And then just a simple question on the network, obviously it's highly resilient right now, but I'm assuming that from the work-from-home orders right now that the data transfer is becoming more symmetrical and your upstream on your network is not conducive for that kind of thing. I think can you sort of help us think about is there any stress on the network from that side and, you know, what needs to be done if anything? Thanks.

Thanks so much. Thanks, DJ. James, we'll take our next question, please.

Our next question comes from the line of Mike McCormick from Guggenheim Partners. Go ahead, please. Your line is open.

Hey guys, thanks. Tom, just a quick question on spectrum. I know you mentioned the FCC's move recently, does that not change your appetite in any way for the CBRS spectrum auction later this year? And I'm thinking about sports rights, I know you touched on it briefly, but what are your thoughts more generally on the value of sports rights coming out of all this? Thanks.

Thanks, Mike. We'll take our next question. James, please.

Our next question comes from the line of Michael Rollins with Citi. Go ahead, please. Your line is open.

Thanks, and good morning. Was curious if you could frame some of the scenarios that you were running for your SMB customers in trying to think through the exposure and how you frame the bad debt reserves in the quarter. Thanks.

Sure. And yeah, go ahead, Mike. SMB, I mean, I just put it a little bit in perspective, it's eight and a half percent of our revenue. And so you can get to some pretty wicked scenarios and it still doesn't have that material of an impact to the company. Certainly when you're talking about validity of your balance sheet perspective, it has an impact on the revenue growth rate for the entire company. And so I think, you know, given some of the stats that I was providing inside the prepared remarks, the idea is that people could take their own view of how bad in particular that segment of bars, restaurants, and theaters could be hit and for how long, and that would give you some sensitivity to what the trough looks like. And we don't know any more than anybody else in terms of the depth and duration of a recession, but that's why we wanted to get some of those stats to give a framework for people to think about it. And the second question was, firstly was SMB, the second was bad debt. Look, you know, every company's had to modify to a new GAAP standard which requires you to estimate your bad debt reserves for the receivables that you have at a period of time as opposed to when they age and sing for it. Everybody talked about that this quarter, we're no different. We had in total between cable and mobile about thirty million dollars of additional bad debt as an estimate for what might not be payable on the accounts of receivables that existed at the time of close in Q2. And let me start maybe back with the first objective. Our goal through all of this is to do well by the customer by providing good offers for remote education as well as for, in this case, Keep Americans Connected pledge. But our goal is also not going to be to quickly get into a collection environment and cut them off. Our goal is going to be to keep these customers. And in the second quarter, to the extent that we work with a customer to right-size their receivable, some of that could impact their revenue recognition inside of Q2 and some of that for a financed portion that they may need to pay back over time could impact our estimate for bad debt reserve that will apply for residential and SMB. And so when I mentioned in the prepared remarks that we're going to have a lot of technical accounting and reporting issues to deal with in Q2, it's true. But we're going to be focused on not the accounting income outcome or how Q2 is going to look, we're going to be focused on what's the right long-term outcome for the customers and for the company. And we'll make sure that the accounting does what's appropriate on the back end. But I think there will be a little bit of noise and we'll make sure that we disclose any revenue impacts and any bad debt impacts in our Q2 reporting. That's kind of an accounting explanation. The way I look at bad debt is, you know, have you created customers and did you keep them and do they pay you? And, you know, if you create customers and they pay you, that's good. And if you don't, get what about that. And when I look at the customers that we're creating, you know, we have, they're taking our high-quality products and in the residential space, they from a profile perspective they look like the customers we've always created. And so, you know, they're going to be affected by the macro climate obviously, but we have products that we can sell to those customers that have value and regardless of where they fall in the income range. We sell to very poor people, we sell to very rich people, and we have product mix that can work across the entire marketplace. So I'm confident that we can create customer relationships, valuable customer relationships through time. You know, even in the small business arena, we're still creating customers today. And even in, you know, if you think about the restaurant business which is closed, the vast majority of those customer relationships are still intact. They still want websites and they may have takeout businesses or whatever, but even the business is closed, it doesn't mean that they don't want to have a relationship with us.

Thank you. Thanks, Mike. James, we'll take our next question.

Our next question comes from the line of Peter Supino with Bernstein. Go ahead, please. Your line is open.

Hey, thank you. When you all analyze the improvements in churn, what are the drivers of that other than the all-digital upgrade that we've talked about at length and the insourcing of customer service? I wonder if your performance in the legacy Charter territories continues to provide any helpful data to answer this question. So what was good for Charter?

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

Our next question comes from the line of Jonathan Chaplin with New Street Research. Go ahead, please. Your line is open.

Thanks. Two quick ones. Tom, for you, you mentioned that the importance of the sort of the secular trends in sports haven't changed. I'm wondering if you can touch on some of the secular trends in the business that you had that you think have changed how the business is going to look different when we come out of the current environment. And then Chris, I think you said that non-programming costs were down year-over-year when you exclude the COVID impacts on from wages and bad debt. Is that a trend that you would have expected to continue throughout the year but for the impact of the pandemic? And then should we analyze that 30 million and 25 million with COVID-related impact or does it sort of flow differently as we go through the year? Thanks.

And Jonathan, you talked about... or I was going to say just to follow up on that, and this was probably directed at Chris, going from 55 percent to 90 percent, what does that do for margins when we, you know, in a year or maybe it's two years when we get out of this environment, how much are margins structurally higher because of that?

Yeah, I don't want to get into a percentage margin discussion, but, you know, the cost of the self-installation is about a third of the cost of a professional install. And the benefit of that inheres to both OpEx and CapEx depending on, you know, what type of installation it is. So it's significant. And, you know, keep in mind that we were already at 55 percent, we would have been at 70 percent by the end of the quarter absent the, you know, the acceleration. Your second question is on non-programming expense. There's, you know, there's marketing, there's advertising expense, there's enterprise expenses. And so I prefer to think about cost to serve customers, which is really the residential and SMB, and cost to provide network operations, field operations, and customer service operations, the call centers and billing, which is the bulk of our cost. That cost, as I mentioned in the prepared remarks, absent, leaving aside just bad debt, was down year-over-year in gross dollars and it was down as a per-relationship basis. And I know I've cautioned in the past that what we're committed to is that per-relationship cost to serve is going to continue to decline. And I've been hesitant to say that the dollar cost to serve excluding bad debt would also decline on a gross basis. Clearly it would have inside of Q1 year-over-year. And given that we do expect, you know, once we get beyond April, April's been a high-activity month, we think that sales transactions and move churn and all of the different service transactions will start to slow down. And so that could actually accelerate, excluding bad debt, the cost to serve decline year-over-year, certainly on a per-relationship basis. So I think the trends there are good and they continue. And there is an increase in the amount of our labor expense because we've accelerated the path that Tom was already putting the company on to a $20 minimum wage. That was $30 million in the quarter for really a month and a half expense. So, you know, yes, that'll get annualized at the appropriate rate, but I think that's a small dollar amount to the amount of transactions that come out of the business. And I think our operating strategy fully funds that. And the acceleration of the adoption of self-service and self-install, you know, are very helpful in making that viable for not just our employees but for all stakeholders.

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

Our next question comes from the line of Ben Swinburne with Morgan Stanley. Go ahead, please. Your line is open.

Thanks. Good morning. I just want to ask you both about two comments you made in the prepared remarks. Now, Tom, you've been in the business for a long time and you've been through lots of cycles and I don't think I'm breaking news to say that the cable company historically has not had the best customer reputation and even reputation with sort of regulators and politicians. And you mentioned sort of the reputational benefits that the company's seeing. I'm just wondering if you have, you know, sort of conviction in that being sustainable or any real data behind that because, you know, obviously that's not been the lens with which cable operators historically have been looked at. And then Chris, you were talking about capital allocation, the buyback, you mentioned organic or inorganic opportunities. Just wondering if you could just take a minute to remind us of kind of your M&A framework and sort of the kinds of things you guys historically have talked about either being interested in or not interested in, just so we can flesh out that comment a little more if you're willing. Thanks.

And on the M&A framework, on the inorganic side, I think the prospect is probably more actionable on the organic side, some of the things that Tom's often talked about in the past. But on the inorganic side, would be M&A. Nothing's changed with the way that we think about opportunities. Tom just mentioned we've loved cable and at the right price we would do cable all day long. And that means tack-ons, which we do frequently as we can, as well as bigger acquisitions. That hasn't been the case today, they're mostly family-controlled or family-owned, so that'll be not in our hands, that will be in the hands of others who decide. We have looked, you know, all around and see if there's anything on the content side. We haven't done anything that really matches up well with our assets and capabilities other than some of the local news that we've expanded organically, and that makes a lot of sense for us and particularly this environment has been a big asset. And we've thought a lot about wireless. Given the assets that we have, the ability to deploy small cells, the attractive environment that we have, we haven't found a scenario that made a whole lot of sense for us or for the industry. And there are pieces that we can take a look at to accelerate growth, whether that's in enterprise or whether that's in wireless technology where we've made some minority and some joint investments with Comcast. Same would apply to advertising, but none of those are going to be particularly material. It'll be great for those segments of business and the ability to accelerate growth hopefully, but it's not going to be something that materially shows up on the balance sheet and impacts our liquidity. All of which leads you back to, I think, unless Tom's got something else, leads you back to, you know, we think the organic opportunities and if you can't buy somebody else's cable stock, buy more of your stock at some point in the future is probably between organic and that is where we've ended up in the meantime.

Thank you both. Thanks, Ben. James, we'll take our next question, please.

Our next question comes from the line of Jessica Reif Ehrlich from Bank of America. Go ahead, please. Your line is open.

Thanks. I was just wondering if you could talk about maybe some of the new offers for customers. I think I saw something that you're doing with Sirius. Could you talk about any plans you have for Peacock or for others? Would you need to wait for your NBCU renewal at the end of the year? And then finally, in terms of customer offers, does the AT&T promo offer for HBO impact the way you would sell or offer HBO?

Thanks, Jessica. Operator, we'll take our last question, please.

And our last question comes from the line of John Hodulik from UBS. Go ahead, please. Your line is open.

Great, I'll make it quick. First, I guess just two quick ones. The first, Chris, on the comments on March advertising, I guess, or April, I guess you said it's twice as, the variance is twice what you saw in March. Does that mean that we're down sort of 36% so far in April? And any color you could give on what you think that, how the quarter is going to shape up there? And then on the CapEx question, you said, you know, given the outbreak, it'll likely come in lighter than you previously expected, which was already lower capital intensities. Any magnitude of change there? And if you could give us any color on the buckets, would be great. Thanks.

So the April comment that I made was really not related to the percentage, the quantity every year was really the variance to what would have been our expectation. So $30 million we had literally come off the books in March, was already sold, came off the books. It's over twice that that came off the books for April. We think that'll probably, you know, be the trough in April, small, as that recovery in May and maybe depending on how the openings encourage you, you start to come back. So Q2 is going to be, you know, a rough advertising, it's not a big portion part of our business, but it's going to be a rough advertising quarter. We do think that things come back online, that there will be some pent-up demand for advertising on the core local, which for us has been growing, our core business has been growing at three to four percent year-over-year. On top of that, that pent-up demand, so whenever the market opens back up, and that's a lot of SMBs, and when the distancing starts to open back up, but Q2 will be the rougher point and then the back half of the year will have political advertising which takes a little bit, for a full year perspective, takes a little bit of the sting out of the collapse that we're seeing inside of Q2. And there's nothing about us that's unique there, right? The CapEx side, I think is way too early. I think all we're signaling at this point is that we've been focused on a lot of different activities right now and there's the possibility that some of the programs that we've had, it might be slightly delayed, construction can be slightly delayed. Your installation CapEx certainly on one hand is going to be lower because of the lower unit cost because of the self-installation. On the other hand, we're doing a lot of installations, the volume is very, very high as Tom mentioned. So there's a lot of moving parts there, but if we had to guess, it will probably be slightly off relative to the dollar amount that we intended to spend. But as I said to our guests at the very beginning of the Q&A, you know, are there areas that we could accelerate or spend given the strength of the balance sheet and the strength of the business? And we'll be moving from a reactive mode into very much proactive to thinking about what are the things that we could do longer-term to even take more advantage of the assets we have. So I don't want to prejudice too much other than say right now in the pattern, it probably looks like it would be a slightly minimal lower dollar amount that we intended.

Got it. Thank you. But operator, that concludes your call. Thank you all very much. And ladies and gentlemen, this does conclude today's call. We do thank you for your participation. You may now disconnect.