Altice USA(ATUS) - 2021 Q4 - Annual Report

Part I Business Altice USA provides broadband, video, telephony, and mobile services to over five million customers across 21 states, actively expanding its FTTH network amidst a competitive and regulated environment - Altice USA delivers broadband, video, telephony, and mobile services to over five million residential and business customers across 21 states under the Optimum and Suddenlink brands[8] - The company is actively deploying a fiber-to-the-home (FTTH) network to provide multi-gig broadband speeds, supplementing its existing hybrid-fiber coaxial (HFC) network which reaches approximately 9.3 million passings[8][37] Key Financial Data (2019-2021) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Customer Relationships (thousands) | 5,014.7 | 5,024.6 | 4,916.3 | | Revenue ($ thousands) | 10,090,849 | 9,894,642 | 9,760,859 | | Adjusted EBITDA ($ thousands) | 4,427,251 | 4,414,814 | 4,265,471 | | Adjusted EBITDA Margin (%) | 43.9% | 44.6% | 43.7% | | Net Income Attributable to Stockholders ($ thousands) | 990,311 | 436,183 | 138,936 | Residential Customer Relationships (thousands) | Service | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Residential Relationships (thousands) | 4,632.8 | 4,648.4 | 4,533.3 | | Broadband (thousands) | 4,386.2 | 4,359.2 | 4,187.3 | | Video (thousands) | 2,732.3 | 2,961.0 | 3,179.2 | | Telephony (thousands) | 2,005.2 | 2,214.0 | 2,398.8 | Residential Revenue by Service ($ thousands) | Service | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Broadband ($ thousands) | $3,925,089 | $3,689,159 | $3,222,605 | | Video ($ thousands) | $3,526,205 | $3,670,859 | $3,997,873 | | Telephony ($ thousands) | $404,813 | $468,777 | $598,694 | - In December 2020, the company sold a 49.99% interest in its Lightpath fiber enterprise business for an implied enterprise value of $3.2 billion, while retaining a 50.01% controlling interest[22] Risk Factors The company faces intense competition, rising programming costs, high leverage of $26.5 billion, and extensive regulation, alongside technological and cybersecurity risks - The company operates in a highly competitive environment, facing pressure from fiber-based competitors like Verizon's Fios and AT&T, satellite providers, and over-the-top (OTT) streaming services such as Netflix, Hulu, and Disney+[75][77] - Programming and retransmission costs are a major expense category and are expected to continue increasing, particularly for sports and broadcast content, potentially impacting financial results and customer retention[79][80] - As of December 31, 2021, the company had substantial indebtedness of approximately $26.5 billion, exposing it to risks related to debt service, covenant compliance, and refinancing in volatile economic conditions[85] - The business is subject to extensive government regulation at federal, state, and local levels, covering areas such as franchise agreements, rate regulation, channel carriage, and net neutrality, which could increase operational expenses and limit revenues[107] - The tri-class stock structure concentrates approximately 95% of the voting power with Next Alt, controlled by Patrick Drahi, limiting the influence of other stockholders on corporate matters[122][123] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[127] Properties The company's principal physical assets include cable operating plant, headend facilities, fiber optic and coaxial networks, and customer premise equipment - The company's main physical assets include signal receiving equipment, headend facilities, fiber optic and coaxial cable networks, and customer premise equipment like set-top boxes and modems[127] Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 17 to the consolidated financial statements - Details on legal proceedings are provided in Note 17 of the consolidated financial statements[128] Mine Safety Disclosures This section is not applicable to the company - Not applicable[128] Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Altice USA's Class A common stock trades on the NYSE, with no current dividend plans and no share repurchases in Q4 2021 - Class A Common Stock is listed on the NYSE (ATUS); Class B is not listed[130] - The company has no current plans to pay cash dividends on its common stock[131] - No shares were repurchased during the quarter ended December 31, 2021[133] Stock Performance Comparison (June 2017 - Dec 2021) | Index | 6/22/2017 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Altice USA Class A ($) | $100.00 | $64.90 | $56.30 | $93.17 | $129.06 | $55.14 | | S&P 500 Index ($) | $100.00 | $109.82 | $102.97 | $132.71 | $154.29 | $195.78 | | 2021 Peer Group Index ($) | $100.00 | $105.79 | $96.08 | $127.35 | $138.78 | $127.94 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, Altice USA reported $10.09 billion in revenue, driven by broadband and business services growth, with net income surging to $990.3 million and total debt at $26.5 billion Consolidated Results of Operations (2020 vs 2021, in thousands) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenue ($ thousands) | $10,090,849 | $9,894,642 | $196,207 | | Operating Income ($ thousands) | $2,524,627 | $2,115,289 | $409,338 | | Net Income ($ thousands) | $1,010,932 | $443,479 | $567,453 | | Net Income Attributable to Stockholders ($ thousands) | $990,311 | $436,183 | $554,128 | Reconciliation to Non-GAAP Measures (2020 vs 2021, in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income ($ thousands) | $1,010,932 | $443,479 | | Adjusted EBITDA ($ thousands) | $4,427,251 | $4,414,814 | | Capital Expenditures (cash) ($ thousands) | $1,231,715 | $1,073,955 | | Operating Free Cash Flow ($ thousands) | $3,195,536 | $3,340,859 | | Free Cash Flow ($ thousands) | $1,622,363 | $1,906,209 | Customer Metrics (as of Dec 31) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Passings (thousands) | 9,263.3 | 9,034.1 | 229.2 | | Total Customer Relationships (thousands) | 5,014.7 | 5,024.6 | (9.9) | | Residential Broadband Customers (thousands) | 4,386.2 | 4,359.2 | 27.0 | | Residential Video Customers (thousands) | 2,732.3 | 2,961.0 | (228.7) | | FTTH Total Passings (thousands) | 1,171.0 | 900.1 | 270.9 | | FTTH Customer Relationships (thousands) | 69.7 | 26.1 | 43.6 | - Broadband revenue increased by $235.9 million (6%) in 2021, driven by higher average revenue per customer and an increase in broadband customers[159] - Video revenue decreased by $144.7 million (4%) in 2021, primarily due to a decline in video customers[160] - The company's leverage target for its CSC Holdings subsidiary is a net leverage ratio of 4.5x to 5.0x over time[194] - In 2021, the company repurchased 23.6 million shares for approximately $804.9 million, with approximately $1.19 billion remaining available under the share repurchase program at year-end[217] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from Comcast stock holdings and interest rate fluctuations using equity derivatives and interest rate swaps - The company holds Comcast common stock with a fair value of $2.16 billion as of December 31, 2021, hedged using equity derivative contracts to limit downside risk[224] - The fair value of the company's fixed-rate debt was $17.90 billion, slightly higher than its carrying value of $17.83 billion at year-end 2021[226] - Interest rate swap contracts are used to manage interest rate risk on floating-rate debt, resulting in a $92.7 million gain in 2021[227] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021, including the auditor's report and detailed financial statements - This item refers to the full financial statements and supplementary data, which are indexed starting on page F-1 of the report[229][248] - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[250][254] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[229] Controls and Procedures Management and the independent auditor concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[230] - Management's annual report concluded that internal control over financial reporting was effective as of December 31, 2021[231][232] Other Information The company reports no other information - None[233] Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14, covering governance, compensation, and ownership, is incorporated by reference from the forthcoming proxy statement - Information for Part III (Items 10-14) is incorporated by reference from the company's forthcoming definitive proxy statement[235] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section provides an index of all exhibits filed with the 10-K, including governance documents, material contracts, and certifications[236][238] Form 10-K Summary No Form 10-K summary was provided - None[243]