Altice USA Reports First Quarter 2019 Results

NEW YORK–(BUSINESS WIRE)–Altice USA (NYSE:ATUS) today reported results for the first quarter
ended March 31, 2019.

Dexter Goei, Altice USA Chief Executive Officer, said: “Altice
USA has made a great start to 2019 as we continue to realize the
benefits of our ongoing investments to improve the customer experience
and deliver state-of-the-art connectivity services, advanced business
solutions and high-quality content. Altice One is delivering the best
ever video customer performance for Altice USA. With our focus on
network investment we continue to see improved broadband customer growth
and significant growth in the demand for higher speeds and data usage.
Finally, we are on track with all our new growth initiatives including
the launch of our wireless service this summer, accelerating our
fiber-to-the-home deployment and enhancing the growth of our advanced
advertising and news platforms, now including Cheddar.”

Altice USA Key Financial Highlights

• Revenue growth +2.9% YoY in Q1 2019 to $2.40 billion, driven by
  Residential revenue growth of +2.4%, Business services revenue growth
  of +5.3% and advertising revenue growth of +6.8%.
• Net loss reduced to $25 million in Q1 2019, or $0.04/share (from $129
  million in Q1 2018, or $0.17/share).
• Adjusted EBITDA grew +5.3% YoY to $1.03 billion, an Adjusted EBITDA
  margin of 43.1% in Q1 2019 (+6.7% YoY Adjusted EBITDA growth and 43.7%
  Adjusted EBITDA margin excluding the impact of consolidating i24NEWS
  and mobile losses)⁽¹⁾.
• Free Cash Flow⁽²⁾ declined -5.6% YoY in Q1 2019 to $164
  million mainly reflecting higher investment in key growth initiatives
  including Altice One, fiber (FTTH), new home build expansion and
  mobile.
• 2019 guidance reiterated including $1.5 billion of share repurchases
  ($600 million in Q1 2019).

Altice USA Key Operational Highlights

• Altice One is delivering the best ever video customer performance for
  Altice USA, including growth at Suddenlink for the second consecutive
  quarter. Altice USA’s ongoing network investment is supporting
  continued strong growth in data as well. Optimum also benefited
  compared to the prior year quarter where performance was impacted by
  multiple snowstorms and a programming dispute.
• Total unique Residential customer relationships grew +0.4% YoY with
  quarterly net additions of +22k in Q1 2019; significantly improved
  compared to prior year (vs. +8k in Q1 2018):
  • Video RGU quarterly net losses of -10k in Q1 2019 were
    significantly better than the prior year (vs. -30k in Q1 2018) and
    represent the best ever video customer performance for Altice USA;
  • Residential broadband RGU quarterly net additions of +37k were
    also ahead of the prior year (vs. +26k in Q1 2018);
  • Residential ARPU per unique customer increased 2.1% YoY to $142.6
    in Q1 2019, supporting Residential revenue growth of +2.4% YoY.
• Business services revenue growth of +5.3% YoY in Q1 2019 with
  continued strength in Enterprise & Carrier segment +6.0% YoY and SMB
  +4.8% YoY.
• Advertising revenue growth of 6.8% YoY in Q1 2019 supported by the
  growth of local and national multi-screen advertising solutions
  provided by a4.
• Continued network investment is supporting an increased demand for
  higher speed tiers and significant growth in data usage; the average
  broadband speed taken by Altice USA’s customer base increased 29% YoY
  to 191 Mbps at the end of Q1 2019 and average household data usage
  reached over 280GB (continuing to grow over 20% YoY).
• Altice USA has reached approximately 400k unique Altice One customers⁽³⁾
  (approximately 12% of total video customers) with the highest
  ever net promoter scores for video and broadband; successful launch of
  the new Altice One Operating System 3.0 in April 2019.

Altice USA FY 2019 Outlook Reiterated

For the full year 2019 Altice USA expects:

• Revenue growth of 2.5-3.0% YoY.
• Adjusted EBITDA margin expansion (ex-mobile).
• Increased investment for the continued rollout of Altice One, FTTH,
  and new mobile network with annual capex within a range of $1.3
  billion to $1.4 billion.
• Free Cash Flow growth (compared to $1.35 billion in FY 2018) including
  mobile related costs.
• Year-end leverage target unchanged at 4.5x to 5.0x net debt / Adjusted
  EBITDA (L2QA basis).
• Share repurchases of $1.5 billion (ex-M&A).

Additional Q1 2019 Highlights

Product & Service Enhancements

Altice USA continues to expand the presence of Altice One across the
U.S., now with approximately 400,000 customers across the country. A
major update to Altice One was introduced in April 2019 with the launch
of the Operating System 3.0, which brings users a new sports hub, an
enhanced home screen, and voice guidance, allowing for better search and
discovery and an overall easier and more accessible experience.

Network Investments to Enhance Broadband Speeds, Video Services
and Reliability

Altice Fiber symmetrical 1 Gbps (Gigabit) internet service over Altice’s
new FTTH network continues to be rolled out to residential customers in
select areas of Long Island, New Jersey and Connecticut. Altice Fiber
provides an unmatched experience to support the most data intensive
activities, from streaming 4K ultra-high-definition (UHD) and
high-definition (HD) video on multiple devices, enjoying multi-player
gaming experiences, video chat, streaming music, high quality virtual
and augmented reality experiences, and downloading large files
simultaneously on dozens of devices at once.

As well as driving additional medium-term operating efficiencies, Altice
USA’s FTTH network is expected to reduce long-term capital intensity.
The new fiber network will offer a better customer experience driving
lower interactions and lower technical service visit requirements, as
well as structurally reducing maintenance, power costs and customer
premise equipment costs.

In addition to its fiber deployment, Altice USA continues to enhance
broadband services on its existing hybrid fiber-coaxial (HFC) network in
the Optimum service area, now delivering broadband speeds of up to 400
Mbps for residential customers and with plans to launch 1 Gbps service
with an upgrade to DOCSIS 3.1 and smart WiFi capabilities over HFC in
2019. In addition, the company is adding further Gigabit capacity in
certain areas in the Suddenlink service area, and continuing to expand
the footprint through new home builds at an accelerated pace.

These upgrades are allowing the company to meet customer demand for
higher broadband speeds. The average broadband speed taken by Altice
USA’s customer base growing 29% YoY to 191 Mbps at the end of Q1 2019
(from 149 Mbps at the end of Q1 2018 and just 70 Mbps at the end of Q1
2017).

Average household data usage has reached over 280GB per month at the end
of Q1 2019 and grew over 20% YoY as customers are using Altice USA’s
broadband services more and more. Optimum customers are connecting 12
devices in the home on average. Altice One is also improving customers’
broadband experience with an advanced WiFi router and WiFi mini
repeaters, demonstrated by approximately 40% improvement in WiFi
throughput and attenuation compared to legacy customer premise equipment.

Mobile

Altice USA has completed the development of its core network to support
its infrastructure-based MVNO including upgrading and expanding its WiFi
network. Approximately 19 thousand AirStrands have been deployed with
the Sprint partnership in less than a year, representing the quickest
and largest deployment of its kind in the United States to date,
leveraging Altice USA’s existing network infrastructure. As of the first
quarter of 2019, Altice USA has signed major mobile handset partnerships
and has also developed its IT platform focused on a digital-first
experience. The commercial launch of a mobile service for Altice USA
customers is on track for the summer of 2019.

Advertising

Altice USA’s advanced advertising unit, a4, continues to deliver on its
mission of simplifying the complex nature of digital advertising by
adding OTT and connected TV set environments to its all-in-one media
planning and delivery platform, Athena. This addition further enhances
a4’s existing ability to deliver advanced solutions for clients helping
them identify and reach their desired audiences across all screens
within a single household and in all formats. This offering extends the
guarantee of measurability and analytics of reach and frequency among
all devices inside the universe of targeted households available through
a4.

Altice USA News and Cheddar Acquisition

Altice USA has reached an agreement to acquire Cheddar, the
digital-first news company, for $200 million, subject to certain closing
adjustments as set forth in the merger agreement. With this acquisition,
Altice broadens its portfolio of high-quality news businesses by adding
Cheddar’s innovative digital-first, live business, general news and
college network focused on young professional and millennial audiences.
The transaction is expected to close in the next two months upon receipt
of regulatory approval.

The Cheddar networks are available in approximately 40 million pay TV
homes through multichannel video programming distributors (MVPDs), all
virtual MVPDs (YouTube TV, Sling, Hulu Live, DIRECTV NOW, etc.), leading
free TV systems (Pluto, Roku Channel, etc.), and a campus network of
1,600 owned and operated screens on 600 campuses. Cheddar recently
expanded distribution to millions of homes through various cable
systems, reaching carriage agreements with Comcast, Charter and Altice
USA. Cheddar is available on nearly all OTT subscription pay TV services
in the U.S., and has a widespread presence across Facebook, Instagram,
Twitter, LinkedIn, Snapchat and other social platforms generating over
400 million video views per month.

With the acquisition of Cheddar, Altice’s full suite of news offerings
now covers hyper-local, national, business and international content,
reaching broader and more diverse audiences on both digital and linear
formats. Cheddar Founder and CEO Jon Steinberg will join Altice USA to
lead the news division inclusive of Cheddar, News 12 and i24NEWS.

Altice USA’s News 12 Networks is the main source of local news among
adults in the New York Tri-State area, according to a new study from Pew
Research Center.⁽⁴⁾ News 12 recently received 51 New York
Emmy® Award nominations (up from 34 the year before), was honored as a
finalist in ten New York Associated Press Award categories, and won four
regional Edward R. Murrow awards. Viewership continues to grow, as
evidenced by Nielsen ratings. In Q1 2019, News 12 Networks achieved its
sixth consecutive quarter of YoY growth in the M-F 5-9 AM daypart among
adults aged 25-54, and saw a 20% increase in ratings over the prior year
quarter among adults aged 25-54 during the M-F 6-9 AM daypart.

In addition, i24NEWS has now increased its distribution with carriage
agreements with some of the largest MVPDs, highlighting the desire for
high-quality independent reporting in the U.S.

Corporate Culture

Altice USA understands that to compete in the highly competitive
businesses of media, telecommunications and technology that talent and
culture are critical components of its present day and future success.
To that end, Altice USA has focused on ensuring that it is a company
that attracts and retains best-in-class talent across all areas of the
company. In acknowledgment of the company’s progress, Altice USA was
recently named by Forbes as a Best Employer for 2019 – a
distinction realized through a nationwide anonymous survey of working
professionals. In addition, Altice USA was also recognized as a Best
Place to Work for LGBTQ Equality after scoring a perfect 100 on this
year’s Corporate Equality Index – the Human Rights Campaign Foundation’s
prestigious national ranking that recognizes workplaces with policies
and practices that create inclusive environments for lesbian, gay,
bisexual, transgender and queer employees to thrive.

Share Repurchases

From January 1 through March 31, 2019, Altice USA repurchased an
aggregate of 29,255,674 shares for a total purchase price of
approximately $600 million, equivalent to $20.51 per share. The acquired
shares were retired and the cost for these shares was recorded in
paid-in capital in Altice USA’s consolidated balance sheet. As of March
31, 2019, Altice USA had 679,784,612 combined Class A and Class B shares
outstanding.

For the full year 2019, Altice USA is targeting $1.5 billion of share
repurchases excluding any potential merger, asset sale and acquisition
(M&A) activity. The acquisition of Cheddar will not impact this target.

Financial and Operational Review

For quarter ended March 31, 2019 compared to quarter ended March 31,
2018

• Reported revenue growth for Altice USA of +2.9% to $2.397 billion.
• Net loss reduced to $25 million in Q1 2019, or $0.04/share (from $129
  million in Q1 2018, or $0.17/share)
• Adjusted EBITDA grew +5.3% to $1.033 billion with an Adjusted EBITDA
  margin of 43.1% (+6.7% Adjusted EBITDA growth and margin of 43.7%
  excluding impact of consolidating i24NEWS and mobile losses).
• Cash capex for Altice USA was $340 million in Q1 2019, representing
  14.2% of revenue (10.0% excluding mobile and FTTH / new home build
  capex).
• Operating Free Cash Flow⁽⁵⁾ declined -4.3% to $693 million,
  mostly reflecting increased investment in FTTH, new home build, DOCSIS
  3.1 and mobile.
• Altice USA saw significantly improved residential customer trends with
  total unique Residential customer relationship quarterly net additions
  of +22k in Q1 2019 (vs. +8k in Q1 2018). This included Residential
  broadband RGU net additions of +37k, video RGU net losses of -10k, and
  telephony RGU net losses of -20k in Q1 2019 (vs. +26k, -30k, and -8k,
  respectively, in Q1 2018). Altice USA Residential ARPU increased +2.1%
  to $142.57.
• Altice USA’s Business services revenue increased +5.3% with the
  Enterprise & Carrier segment growing +6.0% and SMB revenue growing
  +4.8%. Altice USA continues to make progress with new initiatives
  including Business Hosted Voice for SMB customers and security / DDOS
  protection for mid-market enterprise customers. The overall SMB
  customer base grew by +1.4% due to improved value proposition with
  voice and data bundles and reduced churn.

• Altice USA’s Advertising revenue increased +6.8% due to an increase in
  targeted data and analytics revenue. Altice USA, through its data and
  analytics subsidiary a4, is seeing strong growth with Athena, a
  self-serve client application for end-to-end multi-screen campaign
  management with “one-stop shopping” for advertisers (now including a
  new OTT advertising solution). Athena is the main growth driver of a4
  and is being used by more and more customers, providing local and
  national advertising solutions with in-depth reporting, measurement
  and analytics.
• Altice USA’s programming costs increased +4.6% due primarily to an
  increase in contractual programming rates, partially offset by the
  decrease in video customers. Programming costs per video customer are
  still expected to increase by high single digits going forward (+7.4%
  in Q1 2019).
• Net debt for Altice USA at the end of the first quarter was $22.047
  billion on a reported basis⁽⁶⁾, an increase of $639 million
  from the end of the fourth quarter of 2018 reflecting $600 million of
  share repurchases and redemption costs, accrued interest, fees and
  other expenses related to refinancing activity, partially offset by
  free cash flow generation of $164 million. This represents
  consolidated L2QA net leverage for Altice USA of 5.2x on a reported
  basis at the end of March 2019 (5.2x LTM). The year-end leverage
  target for Altice USA remains 4.5-5.0x net debt to EBITDA.
• Altice USA’s blended weighted average cost of debt was 6.2% and the
  blended weighted average life was 6.4 years at the end of March 2019.
  There are no significant maturities until 2021 (none in 2019) and
  near-term maturities could be covered by ~$2.5 billion revolving
  credit facility.

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, 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 and sale of
affiliate interests, net, 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.

Consolidated Net Debt as of March 31, 2019,
Actual

Altice USA Net Leverage Schedules as of March
31, 2019 ($m)

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.

Contacts

Head of Investor Relations
Nick Brown: +1 917 589 9983 / nick.brown@alticeusa.com

Head of Communications
Lisa Anselmo: +1 929 418 4362 / lisa.anselmo@alticeusa.com

Read full story here