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Altice USA Reports First Quarter 2020 Results

April 30, 2020 4:05 PM

NEW YORK--(BUSINESS WIRE)-- Altice USA (NYSE: ATUS) today reports results for the first quarter ended March 31, 2020.

Dexter Goei, Altice USA Chief Executive Officer, said: “Since the onset of the COVID-19 pandemic, I have been incredibly proud of the Altice team’s focus on providing our customers with essential telecommunications services and news that they need more than ever. We remain committed to connecting and maintaining service to our customers while also prioritizing the safety of our employees. We have also launched numerous community outreach programs during this time. Against this backdrop, we have reported exceptional operational performance in Q1 including best-ever residential customer relationship and broadband net additions. Our first quarter results and preliminary April data have given us confidence in our core cable business, especially in broadband. However, we expect that the macroeconomic impact from the pandemic may affect our operations, particularly in our News and Advertising and SMB businesses. Although this reduces revenue and EBITDA visibility, we remain confident in our ability to deliver Free Cash Flow growth in 2020 while maintaining our leverage and share repurchase targets."

Key Financial Highlights

Three Months Ended

March 31,

($k)

2020

2019

Revenue..............................................................................................................................

$2,450,256

$2,396,567

Net loss attributable to Altice USA, Inc. stockholders.........................................................

(858)

(24,999)

Adjusted EBITDA(1)(2)...........................................................................................................

1,031,379

1,032,940

Capital Expenditures (cash)................................................................................................

299,082

340,386

(1) See “Reconciliation of Non-GAAP Measures” on page 6 of this release. Operating Free Cash Flow defined as Adjusted EBITDA less cash capital expenditures, and Free Cash Flow defined as net cash flows from operating activities less cash capital expenditures.

(2) Adjusted EBITDA growth of 1.0% and margin of 43.1% in Q1-20 exclude approximately $15.6m of losses related to Altice USA’s mobile business in the current period and $3.2m in Q1-19 period.

Key Operational Highlights

FY 2020 Outlook Update

Due to the uncertainty of the impact and duration of COVID-19 related disruptions to our business, the company intends to provide an update to FY 2020 revenue growth and Adjusted EBITDA margin expectations later in the year. Updated FY 2020 financial guidance in other areas is summarized below. The company expects:

Additional Highlights and Announcements

Altice USA’s Community response to COVID-19

Altice USA has taken a number of steps during this pandemic to support customers, employees and local communities such as:

Share Repurchases

For the three months ended March 31, 2020, Altice USA repurchased an aggregate of 31,216,259 shares for a total purchase price of approximately $750 million, at an average price of $24.03. As of March 31, 2020, Altice USA had 602,985,950 combined Class A and Class B shares outstanding. For the period April 1 until April 29, the company acquired an incremental 11,161,291 shares for a total price of approximately $276 million.

Financial and Operational Review

For the quarter ended March 31, 2020, compared to the quarter ended March 31, 2019:

_______________

(3) See “Reconciliation of Non-GAAP Measures” on page 6 of this release.

(4) Adjusted EBITDA growth of 1.0% and margin of 43.1% in Q1-20 exclude approximately $15.6m of losses related to Altice USA’s mobile business in the current period and $3.2m in Q1-19 period.

(5) Net debt, defined as debt less cash, and excluding finance leases and other notes.

Altice USA Consolidated Operating Results (In thousands, except per share data)

Three Months Ended

March 31,

2020

2019

Revenue:

Broadband........................................................................................................................................

$885,529

$775,573

Video.................................................................................................................................................

947,061

1,017,330

Telephony.........................................................................................................................................

125,030

154,464

Business services and wholesale.....................................................................................................

364,530

350,689

News and Advertising.......................................................................................................................

105,540

94,738

Mobile...............................................................................................................................................

18,356

Other.................................................................................................................................................

4,210

3,773

Total revenue.......................................................................................................................................

2,450,256

2,396,567

Operating expenses:

Programming and other direct costs.................................................................................................

864,514

812,985

Other operating expenses................................................................................................................

582,309

564,432

Restructuring and other expense......................................................................................................

7,294

15,244

Depreciation and amortization (including impairments)....................................................................

547,569

561,428

Operating income...............................................................................................................................

448,570

442,478

Other income (expense):

Interest expense, net............................................................................................................................

(363,552)

(386,464)

Gain (loss) on investments and sale of affiliate interests, net...............................................................

(455,473)

254,725

Gain (loss) on derivative contracts, net.................................................................................................

439,861

(177,029)

Loss on interest rate swap contracts....................................................................................................

(54,832)

(23,672)

Loss on extinguishment of debt and write-off of deferred financing costs............................................

(157,902)

Other income, net.................................................................................................................................

923

80

Income (loss) before income taxes...................................................................................................

15,497

(47,784)

Income tax benefit (expense)................................................................................................................

(17,035)

22,586

Net loss................................................................................................................................................

(1,538)

(25,198)

Net loss attributable to noncontrolling interests....................................................................................

680

199

Net loss attributable to Altice USA stockholders............................................................................

$(858)

$(24,999)

Basic and diluted net loss per share................................................................................................

$—

$(0.04)

Basic and diluted weighted average common shares....................................................................

621,414

695,528

Reconciliation of Non-GAAP Measures:

We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, 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, 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 Operating Free Cash Flow (defined as Adjusted EBITDA less cash capital expenditures), and Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as indicators of the Company’s financial performance. We believe these measures are one of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although they may not be directly comparable to similar measures reported by other companies.

Three Months Ended

March 31,

2020

2019

Net loss..................................................................................................................................................................

$(1,538)

$(25,198)

Income tax expense (benefit).................................................................................................................................

17,035

(22,586)

Other income, net...................................................................................................................................................

(923)

(80)

Loss on interest rate swap contracts, net...............................................................................................................

54,832

23,672

Loss (gain) on derivative contracts, net..................................................................................................................

(439,861)

177,029

Loss (gain) on investments and sales of affiliate interests, net...............................................................................

455,473

(254,725)

Loss on extinguishment of debt and write-off of deferred financing costs..............................................................

157,902

Interest expense, net..............................................................................................................................................

363,552

386,464

Depreciation and amortization (including impairments)..........................................................................................

547,569

561,428

Restructuring and other expense ...........................................................................................................................

7,294

15,244

Share-based compensation....................................................................................................................................

27,946

13,790

Adjusted EBITDA..................................................................................................................................................

$1,031,379

$1,032,940

Capital Expenditures (cash)....................................................................................................................................

299,082

340,386

Operating Free Cash Flow...................................................................................................................................

$732,297

$692,554

Net cash flows from operating activities............................................................................................................

$593,565

$503,994

Capital Expenditures (cash)....................................................................................................................................

299,082

340,386

Free Cash Flow.....................................................................................................................................................

$294,483

$163,608

Customer Metrics(10) (in thousands, except per customer amounts)
Q1-19 Q2-19 Q3-19 Q4-19 FY-19 Q1-20
Homes passed(6).....................................................................................

8,724.00

8,750.40

8,769.10

8,818.60

8,818.60

8,834.80

Residential(8) .....................................................................................

4,539.80

4,538.90

4,538.60

4,533.30

4,533.30

4,568.40

SMB(8) ..............................................................................................

382.4

384.4

384.4

383.1

383.1

381.7

Total Unique Customer Relationships(7) ............................................

4,922.20

4,923.20

4,922.90

4,916.30

4,916.30

4,950.10

Residential Customers:.....................................................................
Broadband ......................................................................................

4,152.30

4,165.40

4,180.30

4,187.30

4,187.30

4,237.40

Video.................................................................................................

3,276.10

3,255.30

3,223.40

3,179.20

3,179.20

3,137.50

Telephony .......................................................................................

2,510.10

2,485.80

2,446.60

2,398.80

2,398.80

2,359.80

Residential ARPU ($)(9)...........................................................................

143.33

145.02

143.63

142.65

143.98

143.39

(6) Homes passed represents the estimated number of single residence homes, apartments and condominium units passed by the broadband network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our broadband network. Broadband services were not available to approximately 30 homes passed and telephony services were not available to approximately 500 homes passed. Customer metrics for homes passed and SMB for prior periods have been adjusted to conform definitions between Suddenlink and Optimum in connection with the migration of Suddenlink customers to the Optimum billing system in 2019. Customer metrics as of March 31, 2020 include approximately 6,000 customers that have not been disconnected pursuant to the Keep Americans Connected pledge that the Company made in response to the COVID-19 pandemic, however the metrics exclude approximately 9,000 new customers with students in the household that are receiving broadband services for free until the end of the 2019-20 school year.

(7) Total Unique Customer Relationships represent number of households/businesses that receive at least one of the Company’s fixed-line services.

(8) Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. In calculating the number of customers, we count all customers other than inactive/disconnected customers. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk Residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(9) ARPU calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, video and telephony services to Residential customers by the average number of total Residential customers for the same period.

(10) Customer metrics do not include Altice Mobile customers.

Consolidated Net Debt as of March 31, 2020

Altice USA (CSC Holdings) In $m

Principal

Amount

Coupon /

Margin

Maturity

Guaranteed Notes....................................................

1,096

5.375%

2023

Guaranteed Notes....................................................

1,000

6.625%

2025

Guaranteed Notes....................................................

1,499

5.500%

2026

Guaranteed Notes....................................................

1,310

5.500%

2027

Guaranteed Notes....................................................

1,000

5.375%

2028

Guaranteed Notes....................................................

1,750

6.500%

2029

Senior Notes.............................................................

1,000

6.750%

2021

Senior Notes.............................................................

649

5.875%

2022

Senior Notes.............................................................

750

5.250%

2024

Senior Notes.............................................................

1,684

10.875%

2025

Senior Notes.............................................................

618

7.750%

2025

Senior Notes.............................................................

1,046

7.500%

2028

Senior Notes.............................................................

2,250

5.750%

2030

Legacy unexchanged Cequel Notes........................

6

Term Loan................................................................

2,918

L+2.250%

2025

Term Loan B-3..........................................................

1,262

L+2.250%

2026

Term Loan B-5..........................................................

3,000

L+2.500%

2027

Drawn RCF...............................................................

L+2.250%

2021,2024

Gross Debt Consolidated......................................

22,838

Finance leases and other notes...............................

226

Total Debt ...............................................................

23,064

Total Cash...............................................................

(244)

Net Debt...................................................................

22,820

Undrawn RCF..........................................................

2,297

WACD (%)................................................................

5.6%

Net Leverage Schedules as of March 31, 2020 ($m)

Actual

Gross Debt Consolidated(11)...........................................................

$22,838

Cash....................................................................................................

(244)

Net Debt Consolidated.....................................................................

$22,594

LTM EBITDA........................................................................................

$4,263.90

L2QA EBITDA......................................................................................

$4,232.80

Net Leverage (LTM) ............................................................................

5.3x

Net Leverage (L2QA) ..........................................................................

5.3x

Reconciliation to Financial Reported Debt

Actual

Total Debenture and Loans from
Financial Institutions (Carrying Amount)........................................

$22,628

Unamortized Financing Costs...............................................................

85

Fair Value Adjustments.........................................................................

125

Gross Debt Consolidated...................................................................

22,838

Finance leases and other notes............................................................

226

Total Debt............................................................................................

23,064

Cash......................................................................................................

(244)

Net Debt...............................................................................................

$22,820

(11) Principal amount of debt excluding finance leases and other notes.

About Altice USA

Altice USA (NYSE: ATUS) is one of the largest broadband communications and video services providers in the United States, delivering broadband, video, mobile, proprietary content and advertising services to more than 4.9 million residential and business customers across 21 states through its Optimum and Suddenlink brands. The company operates a4, an advanced advertising and data business, which provides audience- based, multiscreen advertising solutions to local, regional and national businesses and advertising clients. Altice USA also offers hyper-local, national, international and business news through its News 12, Cheddar and i24NEWS networks.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the information under the heading "FY 2020 Outlook Update". These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this release, including, without limitation, those regarding our intentions, beliefs or current expectations concerning, among other things: our future financial conditions and performance, results of operations and liquidity; our strategy, plans, objectives, prospects, growth, goals and targets; and future developments in the markets in which we participate or are seeking to participate. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "anticipate", "believe", "could", "estimate", "expect", "forecast", "intend", "may", "plan", "project", "should" or "will" or, in each case, their negative, or other variations or comparable terminology. Where, in any forward- looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. To the extent that statements in this release are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements including risks referred to in our most recently filed Annual Report on Form 10-K and in our most recently filed Quarterly Report on Form 10-Q. You are cautioned to not place undue reliance on Altice USA’s forward-looking statements. Any forward-looking statement speaks only as of the date on which it was made. Altice USA specifically disclaims any obligation to publicly update or revise any forward-looking statement, as of any future date.

Investor Relations

Nick Brown: +1 917 589 9983 / [email protected]

Cathy Yao: +1 347 668 8001 / [email protected]

Communications

Lisa Anselmo: +1 929 418 4362 / [email protected]

Source: Altice USA

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