Altice USA(US:ATUS)2024-08-01 21:13PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Altice USA's unaudited consolidated financial statements for Q2 and H1 2024 and 2023, covering balance sheets, operations, comprehensive income, stockholders' deficiency, and cash flows Consolidated Balance Sheets The consolidated balance sheet as of June 30, 2024, shows total assets of $32.02 billion, a slight increase from $31.92 billion at December 31, 2023, with total liabilities increasing to $32.41 billion and a stockholders' deficiency of $396.7 million Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $32,016,339 | $31,923,616 | | Cash and cash equivalents | $362,107 | $302,058 | | Goodwill | $8,044,716 | $8,044,716 | | Total Liabilities | $32,413,033 | $32,358,034 | | Long-term debt, net | $24,893,826 | $24,715,554 | | Total Stockholders' Deficiency | ($396,694) | ($434,418) | Consolidated Statements of Operations Altice USA reported Q2 2024 revenue of $2.24 billion, a decrease from $2.32 billion in Q2 2023, with net income attributable to stockholders falling sharply to $15.4 million from $78.3 million Q2 & H1 2024 vs 2023 Performance (in thousands, except per share) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,240,755 | $2,324,274 | $4,491,690 | $4,618,252 | | Operating Income | $501,582 | $481,983 | $894,736 | $907,113 | | Net Income (to Stockholders) | $15,361 | $78,300 | ($5,832) | $104,165 | | Diluted EPS | $0.03 | $0.17 | ($0.01) | $0.23 | Consolidated Statements of Cash Flows Net cash from operating activities for H1 2024 was $706.5 million, down from $855.7 million in H1 2023, while net cash used in investing activities decreased significantly to $685.9 million due to lower capital expenditures Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $706,455 | $855,687 | | Net cash used in investing activities | ($685,893) | ($1,057,920) | | Capital expenditures | ($683,816) | ($1,056,342) | | Net cash provided by financing activities | $40,311 | $115,335 | | Net increase (decrease) in cash | $60,873 | ($86,898) | Combined Notes to Consolidated Financial Statements The notes detail accounting policies, revenue breakdown by service, substantial debt obligations, financing activities, derivative contracts for hedging, and disclosures on significant legal proceedings Revenue by Service (Six Months Ended June 30, in thousands) | Service | 2024 | 2023 | | :--- | :--- | :--- | | Residential Broadband | $1,831,983 | $1,922,910 | | Residential Video | $1,495,039 | $1,545,739 | | Business services and wholesale | $734,151 | $728,345 | | News and advertising | $211,005 | $212,202 | | Total Revenue | $4,491,690 | $4,618,252 | - In January 2024, CSC Holdings issued $2.05 billion in 11.750% senior guaranteed notes due 2029 to repay existing term loans. In February 2024, the company redeemed its 5.250% senior notes due June 2024 using its revolving credit facility67 - The company settled a copyright infringement lawsuit with BMG Plaintiffs on July 1, 2024. A similar lawsuit filed by Warner Plaintiffs remains ongoing, and the company intends to defend itself vigorously103 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting a 3.6% YoY Q2 2024 revenue decline due to customer losses, a 6% decrease in Adjusted EBITDA, and reduced capital expenditures amid a significant debt load of over $25 billion - The company's operations are focused on providing broadband, video, telephony, and mobile services under the Optimum brand to approximately 4.7 million residential and business customers across 21 states120 Key Operating Metrics | Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Customer Relationships (thousands) | 4,652.0 | 4,810.5 | | Residential Broadband Customers (thousands) | 4,088.7 | 4,227.0 | | Residential Video Customers (thousands) | 2,021.9 | 2,312.2 | | Total Mobile Lines (thousands) | 384.5 | 264.2 | | FTTH Total Passings (thousands) | 2,842.0 | 2,659.5 | Results of Operations Q2 2024 total revenue decreased by $83.5 million (3.6%) YoY due to broadband and video customer losses, partially offset by mobile revenue, with Adjusted EBITDA decreasing 6% to $867.2 million - Broadband revenue decreased 5% in Q2 2024 compared to Q2 2023, driven by a decline in broadband customers and lower average recurring revenue per customer133 - Programming and other direct costs decreased by 6% in Q2 2024 YoY, mainly due to lower programming costs from having fewer video customers, which partially offset contractual rate increases141 Adjusted EBITDA Reconciliation Highlights (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income | $21,702 | $86,144 | | Interest expense, net | $442,955 | $406,709 | | Depreciation and amortization | $395,770 | $418,705 | | Adjusted EBITDA | $867,177 | $921,742 | Liquidity and Capital Resources The company's liquidity is supported by cash and credit facilities, with total debt at $25.2 billion as of June 30, 2024, and H1 2024 capital expenditures significantly reduced to $683.8 million, resulting in Free Cash Flow of $22.6 million - The company expects to use Free Cash Flow, availability under its revolving credit facilities, and future refinancing to manage its debt obligations169 Capital Expenditures (Cash Basis, in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $347,721 | $473,445 | | Six Months Ended June 30 | $683,816 | $1,056,342 | Free Cash Flow (Deficit) (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(40,927) | $(34,604) | | Six Months Ended June 30 | $22,639 | $(200,655) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk on its variable-rate debt using swap contracts, with the fair value of fixed-rate debt approximately $6.6 billion lower than its carrying value as of June 30, 2024 - The company utilizes interest rate swap contracts to manage interest rate risk by effectively fixing borrowing rates on portions of its floating-rate debt183 - At June 30, 2024, the fair value of the company's fixed-rate debt was $11.25 billion, which was $6.61 billion lower than its carrying value of $17.86 billion182 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the quarter194 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section updates on legal proceedings, referencing Note 15 for details on the settlement of a copyright infringement lawsuit with BMG Plaintiffs and ongoing defense against a similar suit from Warner Plaintiffs - This section refers to Note 15 for a detailed discussion of legal proceedings, which includes information on significant copyright infringement litigation196103 Item 5. Other Information On July 31, 2024, the Board of Directors approved an indemnification agreement for directors and executive officers, requiring the company to indemnify them for legal expenses and liabilities related to their service - The company's Board of Directors approved and adopted a form of indemnification agreement for its directors and executive officers on July 31, 2024197 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Indemnification Agreement, CEO and CFO certifications, and XBRL formatted financial statements - Exhibits filed with the report include the Form of Indemnification Agreement (10.1), CEO/CFO certifications (31.1, 31.2, 32), and XBRL data files (101)198