NEW YORK–(BUSINESS WIRE)–Altice USA (NYSE:ATUS) today reported results for the second quarter ended June 30, 2018.
Dexter Goei, Altice USA Chief Executive Officer, said: “We are very pleased with Altice USA’s second quarter performance, which included improved subscriber trends, accelerating revenue growth and a material step up in free cash flow. Our residential video business is trending better year over year and we continue to see significant increases in data usage on our broadband network, driven mostly by video streaming across multiple devices in the home. As a result, our customers are demanding faster broadband speeds and enhanced WiFi coverage. We are facilitating these evolving data consumption needs through our network upgrades to provide the best connectivity services and quality experience, allowing us to achieve continued improvements in our subscriber trends and higher cash flow conversion. Our investments in broadband including FTTH, Altice One and Altice Mobile, are advancing this strategy by providing a platform for converged fixed / wireless services and seamless integration of linear and OTT video content which we believe position us extremely well for the future. Lastly, the strong growth we are seeing in our a4 targeted digital advertising business demonstrates our success in developing new and innovative products for advertisers.”
Altice USA Key Financial Highlights
Altice USA Operational Highlights
- Pay TV RGU quarterly net losses of -24k in Q2 2018 were better than the prior year (-37k in Q2 2017) due to another significant improvement in Suddenlink’s performance (-11k losses in Q2 2018 vs. -25k in Q2 2017) ahead of full expansion of Altice One rollout
- Residential broadband RGU quarterly net additions of +10k and telephony RGU net losses of -4k in Q2 2018 also improved compared to prior year (vs. +2k and -7k in Q2 2017 respectively)
- Residential ARPU increased 1.0% YoY to $140.2 in Q2 2018, supporting Residential revenue growth of +1.0% YoY which is expected to accelerate in 2H 2018 with rate event (fully effective only from end of June 2018)
Altice USA 2018 and Medium-Term Financial Outlook Reiterated
For the full year 2018 Altice USA expects:
Altice USA also reiterates its plan to expand its Adjusted EBITDA and cash flow margins over the medium- to long-term.
Additional Q2 2018 Highlights
Product & Service Enhancements
In the second quarter, the company continued expanding the availability of Altice One, the all-in-one entertainment platform that combines video, internet and connectivity into one experience. Altice One soft launched in the Suddenlink regions in the second quarter and we expect to complete the rollout in the third quarter. Altice One has been available throughout the Optimum footprint since January 2018 with the initial focus on gross additions and ensuring the best quality service. The migration of existing customers to the Altice One platform has commenced in the second half of 2018. A further update to the Altice One Operating System (OS) is expected to be launched in the second half of the year with new features for customers.
Network Investments to Enhance Broadband Speeds, Video Services and Reliability
Altice USA’s fiber-to-the-home (FTTH) deployment continues to progress well and the company remains on track to begin commercializing its fiber services later this year. Following successful beta trials, the company recently began its soft launch of a 1 Gig symmetrical internet-only service in select areas in the Optimum footprint.
While building the FTTH network, Altice USA also continues to roll out enhanced broadband services to its customers on its existing hybrid fiber coax (DOCSIS) cable network, mostly following digitalization and plant / CMTS upgrades. Of note, Suddenlink was once again rated the fastest Internet Service Provider in the U.S. for 2018, according to PC Mag5, and Optimum was named the most reliable cable Internet Service Provider in the U.S. in the 2018 American Customer Satisfaction Index (ACSI) survey6. As a result of our enhancements, an increasing number of consumers are selecting increased broadband speeds and using more data.
In addition, Altice USA continues its video QAM to IP transition on its cable network to enhance its video service delivery, and Altice One has been enabled for both QAM and IP video to support the transition.
The company’s focus with these network upgrades is on improving the quality of broadband WiFi / video services and cost efficiencies as well as boosting speeds. As well as initially expanding the availability of 1Gig broadband services, the upgraded coax network and new FTTH network will both be IP-based which is optimal for multi-device service offerings and will be access network technology (fixed and wireless) agnostic in the way services are offered to consumers. Continuous user interface improvements will be possible as well as reducing CPE cost and additional network cost efficiencies.
In November 2017, Altice USA announced a multi-year strategic agreement with Sprint whereby Altice USA will utilize Sprint’s network to provide mobile voice and data services to its customers throughout the nation. In this agreement, Sprint will provide Altice USA with access to its full MVNO model, allowing Altice USA to connect its network to the Sprint Nationwide network and have control over the Altice USA mobile features, functionality, and customer experience. In addition, Altice USA maintains the flexibility to work with other network operators without having to swap customers’ SIM cards. During the second quarter, Altice USA continued developing the core network to support this infrastructure-based MVNO including upgrading and expanding its WiFi network. The connection to Sprint microsites to support Sprint’s network densification, which will benefit Altice USA’s MVNO service, is currently running well ahead of schedule. The commercial launch of a mobile service for Altice USA customers is still on track for 2019.
i24NEWS recently secured a carriage agreement with another large MVPD for the distribution of the network, following separate carriage deals with Charter, Mediacom, and Altice USA’s Optimum and Suddenlink systems. With global headquarters in Tel Aviv, European headquarters in Paris, and U.S. headquarters in New York City, i24NEWS is the only 24/7 international news and current affairs channel broadcasting from the heart of the Middle East. It is available in millions of households worldwide, and offers live news reports daily to viewers, providing a unique and connected international news organization in the marketplace.
Altice USA Spin-Off Complete
On June 8, 2018 Altice USA announced that the planned separation of Altice USA from Altice N.V. had been implemented, as expected. The separation was effected by a spin-off of Altice N.V.’s 67.2% interest in Altice USA through a distribution in kind to Altice N.V. shareholders7.
As part of the spin-off transaction, Altice USA paid a $1.5 billion cash dividend to all shareholders immediately prior to completion of the separation on June 6, 2018.
As a result of the spin-off there has been a significant increase in the free float of Altice USA from approximately 10% to 43.7% as of the end of July 2018 (based on public minorities economic ownership of Altice USA A- and B-shares, excluding sponsors and the Altice USA Next Concert).
Financial and Operational Review
For quarter ended June 30, 2018 compared to quarter ended June 30, 2017
- Optimum revenue growth +1.6% YoY;
- Suddenlink revenue growth +3.0% YoY.
- Optimum Adjusted EBITDA growth of +3.0% YoY; Adjusted EBITDA margin increased +0.6 percentage points YoY to 41.2% due to realization of efficiency savings (vs. 40.7% in Q2 2017);
- Suddenlink Adjusted EBITDA declined -1.6% YoY; Adjusted EBITDA margin decreased -2.2 percentage points YoY to 45.4% mainly due to higher content expense from adding back Viacom content in Q4 2017 and less capitalization of CPE ahead of the full launch of Altice One (vs. 47.6% in Q2 2017).
- Optimum OpFCF declined -1.7% YoY;
- Suddenlink OpFCF declined -4.2% YoY due to higher content expense from adding back Viacom and higher capex related to a step up in new home builds.
- Optimum’s base of unique Residential customer relationships grew by +2k net additions in Q2 2018, in line with last year with the customer trends normalizing as expected following the Starz dispute and multiple storms in Q1. Optimum achieved broadband RGU net additions of +8k, -13k pay TV RGU net losses and -4k telephony RGU net losses (compared to Q2 2017 with +10k broadband RGUs net additions, -12k pay TV RGU net losses and -1k telephony RGU net losses). Altice USA continues to have a strong competitive position in the Optimum footprint, enhanced with the recent full commercial launch of Altice One. Optimum Residential ARPU per unique customer was stable YoY (+0.1% YoY) with a delayed rate event only fully effective from the end of June 2018;
- Customer trends at Suddenlink reflected normal seasonality in Q2 2018 but were better than the prior year. Suddenlink unique Residential customer relationship net losses of -5k in Q2 2018 were lower compared to -14k net losses in Q2 2017. Completing the rollout of Altice One across the Suddenlink footprint by the end of Q3 2018 will further support trends here. Broadband RGUs grew in Q2 2018 with quarterly net additions of +2k (compared to broadband RGU net losses of -8k in Q2 2017). Pay TV RGU net losses of -11k were again significantly better than the prior year (-25k in Q2 2017). Telephony RGU net additions of +0k were also better than the prior year (vs. -7k in Q2 2017). Increased demand for higher speed broadband tiers at Suddenlink continues to drive growth in Residential ARPU per unique customer (+3.0% YoY).
- Optimum’s programming costs increased +2.1% YoY in Q2 2018 to $492m;
- Suddenlink’s programming costs increased +12.3% YoY in Q2 2018 to $169m.
Altice USA Consolidated Operating Results
(Dollars in thousands, except per share data)
Reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA less Cash Capital Expenditures:
We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, income (loss) from discontinued operations, other non-operating income or expenses, loss on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, gain (loss) on derivative contracts, gain (loss) on investments, interest expense (including cash interest expense), interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses.
We believe Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry. Internally, we use revenue and Adjusted EBITDA measures as important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators. We believe Adjusted EBITDA provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to the Company’s ongoing operating results. Adjusted EBITDA should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), and other measures of performance presented in accordance with GAAP. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.
We also use Adjusted EBITDA less cash Capital Expenditures, or Operating Free Cash Flow, as an indicator of the Company’s financial performance. We believe this measure is one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although it may not be directly comparable to similar measures reported by other companies.
Altice USA (Dollars in thousands)
Cablevision (Dollars in thousands)
Suddenlink (Dollars in thousands)
Altice USA Customer Metrics
Optimum Customer Metrics
Suddenlink Customer Metrics
Consolidated Net Debt as of June 30, 2018, breakdown by credit silo
Altice USA Pro Forma Net Leverage Reconciliation as of June 30, 2018
Cablevision Operating Results
(Dollars in thousands)
Suddenlink Operating Results
(Dollars in thousands)
About Altice USA
Altice USA (NYSE: ATUS) is one of the largest broadband communications and video services providers in the United States, delivering broadband, pay television, telephony services, proprietary content and advertising services to approximately 4.9 million Residential and Business customers across 21 states through its Optimum and Suddenlink brands.
Source: Business Wire Entertainment News