Altice USA Inc. (NYSE:ATUS) Q2 2020 Earnings Conference Call July 30, 2020 4:30 PM ET Company Participants Nick Brown - Investor Relations Dexter Goei - Chief Executive Officer Mike Grau - Chief Financial Officer Conference Call Participants Craig Moffett - MoffettNathanson Brett Feldman - Goldman Sachs Philip Cusick - JPMorgan Doug Mitchelson - Crédit Suisse John Hodulik - UBS Michael Rollins - Citi Andrew Beale - Arete Research Frank Louthan - Raymond James Operator Ladies and gentlemen, thank you for sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition | --- | --- | --- | |--------------------------|------------------------------------------------------------------------------|-------------------------------------| | | | ...

Altice USA, Inc. (NYSE:ATUS) Q1 2020 Earnings Conference Call April 30, 2020 4:30 PM ET Company Participants Nick Brown - Investor Relations Dexter Goei - Chief Executive Officer Mike Grau - Chief Financial Officer Conference Call Participants Philip Cusick - JPMorgan Craig Moffett - Moffett and Nathanson Brett Feldman - Goldman Sachs Benjamin Swinburne - Morgan Stanley John Hodulik - UBS James Ratcliffe - Evercore ISI Michael Rollins – Citi Jonathan Chaplin - New Street Research Doug Mitchelson - Crédit Su ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited statements show a reduced net loss of $1.5 million for Q1 2020 [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Total assets slightly decreased to $33.40 billion while stockholders' equity declined due to share repurchases Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$33,396,480** | **$34,108,122** | | Total Current Assets | $927,614 | $1,381,356 | | Goodwill | $8,142,309 | $8,142,309 | | **Total Liabilities** | **$31,740,253** | **$31,720,309** | | Long-term debt, net | $24,267,820 | $24,249,603 | | **Total Stockholders' Equity** | **$1,590,415** | **$2,279,262** | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2020 revenue grew slightly to $2.45 billion, with net loss improving significantly to $1.5 million Q1 2020 vs Q1 2019 Statement of Operations (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Revenue** | **$2,450,256** | **$2,396,567** | | Operating Income | $448,570 | $442,478 | | Gain (loss) on investments, net | ($455,473) | $254,725 | | Gain (loss) on derivative contracts, net | $439,861 | ($177,029) | | **Net Loss** | **($1,538)** | **($25,198)** | | Net loss attributable to Altice USA, Inc. stockholders | ($858) | ($24,999) | | Basic and diluted loss per share | $0.00 | ($0.04) | [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to $593.6 million, while financing cash outflow grew due to share repurchases Q1 2020 vs Q1 2019 Cash Flows (in thousands) | Cash Flow Category | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$593,565** | **$503,994** | | Net cash used in investing activities | ($297,743) | ($339,907) | | Net cash used in financing activities | ($752,803) | ($339,615) | | Net decrease in cash and cash equivalents | ($457,405) | ($175,773) | - The significant increase in cash used for financing activities was primarily driven by the purchase of Altice USA Class A common stock under a share repurchase program, which amounted to **$726.0 million in Q1 2020** compared to $586.8 million in Q1 2019[27](index=27&type=chunk) [Combined Notes to Consolidated Financial Statements](index=23&type=section&id=Combined%20Notes%20to%20Consolidated%20Financial%20Statements) Notes detail revenue sources, debt structure, share repurchases, and the tax impact of the CARES Act - The company operates principally through its Optimum and Suddenlink brands, providing broadband, video, and telephony services, and launched Altice Mobile in September 2019[44](index=44&type=chunk) - During Q1 2020, Altice USA repurchased **31,216,259 shares for approximately $750 million**, with approximately **$4.06 billion** remaining available under its share repurchase program as of March 31, 2020[46](index=46&type=chunk) - The Coronavirus Aid, Relief and Economic Security (CARES) Act positively impacted income tax computations, resulting in a **state tax benefit of approximately $10.5 million** for Q1 2020[86](index=86&type=chunk)[87](index=87&type=chunk) Revenue by Service (in thousands) | Service Line | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | **Residential:** | | | | 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 | $0 | | **Total revenue** | **$2,450,256** | **$2,396,567** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Broadband revenue growth offset video decline, while Free Cash Flow increased significantly to $294.5 million - Management states that for Q1 2020, the company's results of operations were not significantly impacted by the COVID-19 pandemic, but future results may be impacted[112](index=112&type=chunk) - The company's strategic focus includes constructing a fiber-to-the-home (FTTH) network and growing its Altice Mobile service, which had approximately **110,000 mobile lines** as of March 31, 2020[114](index=114&type=chunk)[130](index=130&type=chunk) Key Performance Indicators | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenue | $2,450.3M | $2,396.6M | | Net Loss | ($1.5M) | ($25.2M) | | Adjusted EBITDA | $1,031.4M | $1,032.9M | | Operating Free Cash Flow | $732.3M | $692.6M | | Free Cash Flow | $294.5M | $163.6M | [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Revenue grew 2.2% YoY to $2.45 billion, driven by strong Broadband performance offsetting Video declines - Broadband revenue **grew 14% YoY** due to higher average recurring revenue per customer and an increase in the number of broadband customers[124](index=124&type=chunk) - Video revenue **decreased 7% YoY**, attributed to a decline in video customers and competition from Verizon, DBS providers, and internet-delivered content[125](index=125&type=chunk)[126](index=126&type=chunk) - Programming and other direct costs **increased by 6% YoY**, primarily due to a $28.2 million increase in programming costs from contractual rate hikes[134](index=134&type=chunk) - The significant improvement in net loss was driven by a **$439.9 million gain on derivative contracts**, which largely offset a **$455.5 million loss on investments**[142](index=142&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains adequate liquidity with $24.45 billion in debt and targets a leverage ratio of 4.5x-5.0x - The company targets a year-end leverage ratio of **4.5x to 5.0x**, calculated as net debt to L2QA EBITDA[150](index=150&type=chunk) - In Q1 2020, the company repurchased **31.2 million shares for approximately $750 million** under its authorized share repurchase program[176](index=176&type=chunk) Capital Expenditures (in thousands) | Category | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Customer premise equipment | $63,335 | $74,937 | | Network infrastructure | $140,063 | $139,978 | | Support and other | $60,626 | $93,777 | | Business services | $35,058 | $31,694 | | **Total Capital purchases (cash basis)** | **$299,082** | **$340,386** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from equity prices and interest rates through derivative contracts - The company's main equity price risk is from its holdings of Comcast common stock, valued at **$1.48 billion** as of March 31, 2020, which is managed through derivative contracts[178](index=178&type=chunk) - The fair value of the company's fixed-rate debt was **$18.02 billion**, which was **$805.9 million higher** than its carrying value of $17.22 billion as of March 31, 2020[182](index=182&type=chunk) - To manage interest rate risk, the company utilizes interest rate swap contracts with notional amounts totaling over **$5.0 billion**[183](index=183&type=chunk)[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material internal control changes - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[187](index=187&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[188](index=188&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company faces legal proceedings including IPO-related class actions and patent infringement lawsuits - The company is defending against class-action lawsuits filed by stockholders from its IPO, alleging that the Registration Statement and Prospectus misrepresented or omitted material facts[106](index=106&type=chunk) - Sprint Communications has filed two patent infringement lawsuits against the company concerning its Voice over Internet Protocol (VoIP) and Video on Demand (VOD) services[106](index=106&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Key updated risks include the potential adverse effects of the COVID-19 pandemic and stock price volatility - A new material risk factor is the **COVID-19 pandemic**, which could adversely impact the business through declining demand and disruptions to suppliers[190](index=190&type=chunk) - The company warns that substantial sales of its Class A common stock by existing major stockholders could cause the stock's market price to decline[192](index=192&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 31.2 million shares in Q1 2020, with $4.06 billion remaining for future buybacks - As of March 31, 2020, the company had approximately **$4.06 billion remaining** under its authorized share repurchase programs[193](index=193&type=chunk) Share Repurchases for Q1 2020 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2020 | 5,178,537 | $28.36 | | February 2020 | 6,180,527 | $28.18 | | March 2020 | 19,857,195 | $21.60 | | **Q1 2020 Total** | **31,216,259** | **N/A** | [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including certifications and award agreements

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | |----------------------------|-----------------------------------------------------|----------------------| | | | | | | | | | | Registrant; ...

Financial Data and Key Metrics Changes - Revenue growth for 2019 was 2% with adjusted EBITDA growth of 2.5%, or 3.4% excluding mobile launch costs [4][23] - Free cash flow generated in Q4 was $397 million, with annual free cash flow target slightly missed at $1.2 billion due to working capital outflows [23][24] - Adjusted EBITDA margin reached 43.7% in 2019, up 20 basis points year-over-year [25] Business Line Data and Key Metrics Changes - Residential business grew 1.6% in 2019, with broadband being the main driver of revenue growth [8][10] - Business services grew 4.8% in 2019, consistent with the prior year [10] - News and Advertising division declined 2.3% in 2019, but excluding political revenue, it grew by about 10% [10][21] Market Data and Key Metrics Changes - Broadband net additions were 72,000 in 2019, consistent with the previous year [12] - Video customer losses were 10,000, a decline of 3.3% year-over-year, which is better than industry performance [12] - Average household data usage grew over 20% year-over-year to over 300 gigabits per month [16] Company Strategy and Development Direction - Increased investment in fiber build and DOCSIS 3.1 deployment to enhance customer connectivity experience [7][18] - Anticipated acceleration in revenue growth for the core cable business and total revenue including a full year of mobile [7] - Acquisition of Service Electric of New Jersey for $150 million to expand broadband, video, mobile, and advertising services [7][10] Management's Comments on Operating Environment and Future Outlook - Management noted a stronger than expected operational performance turnaround in December, with normalized trends continuing into Q1 [5][6] - Management expressed cautious optimism regarding video losses and emphasized the importance of monitoring free cash flow despite potential revenue impacts from video [33] - The company expects revenue growth of 2% to 2.5% in 2020, with further adjusted EBITDA margin expansion [28][29] Other Important Information - The company plans to continue share repurchases, targeting $1.7 billion in buybacks for 2020 [24][29] - The average speeds taken by customers have increased about 3x in the past three years to over 200 megabits per second [17] Q&A Session Summary Question: Revenue guidance and video losses - Management acknowledged conservative revenue guidance due to mobile handsets and political advertising factors, but noted strong performance in early Q1 [31][32] Question: Wireless business and profitability - Management expressed relief over the T-Mobile/Sprint merger approval and highlighted the importance of balancing OpEx and profitability in the wireless business [37][38] Question: Price increase impact - Management indicated a slight uptick in price increases, with a range of 4% to 5%, and noted a normalized reaction from customers so far [41] Question: Fiber rollout and wireless losses - Management confirmed plans to drive fiber rollout in Q2 and emphasized the importance of managing OpEx in the wireless segment [46][47] Question: Broadband pricing and ARPU growth - Management stated that the majority of broadband ARPU growth is driven by up-tiering, with no significant resistance points observed in customer spending [62][73]