Altice USA(US:ATUS)2019-11-06 06:46Financial Data and Key Metrics Changes - Revenue growth slowed to 0.9% in Q3 2019, impacted by the absence of political advertising revenue and the prior year's rate event [6][10] - Adjusted EBITDA was flat year-over-year, but grew 0.7% excluding wireless losses, which increased since the launch of Altice Mobile [6][20] - Free cash flow generated in Q3 was $166 million, down year-over-year due to high network effects and temporary working capital outflows [23] Business Line Data and Key Metrics Changes - Residential business grew 0.5% and Business Services grew 3.9%, both slowing from the first half of the year [10] - Broadband revenue increased by 12%, driven by higher data speeds and consumption [10] - The newly combined News and Advertising divisions declined by 4.7% due to a drop in political advertising revenue [10] Market Data and Key Metrics Changes - Unique residential customer relationships grew 0.7% year-over-year, with broadband ads significantly outperforming previous years [10][11] - Altice One penetration reached over 500,000 customers, representing about 15% of the video base, up from 7% in Q3 last year [13] - Average customer speed increased to over 200 megabits per second, with household data usage growing over 20% year-over-year [14] Company Strategy and Development Direction - The company plans to market Altice Fiber more heavily and expects to benefit from new homes built [8] - A simplification of the debt capital structure was completed, with over $5 billion in refinancing activity in Q3 [9][26] - The company aims to unify Suddenlink and Optimum OSS and BSS platforms to enhance operational efficiency and customer experience [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue and free cash flow acceleration in 2020, despite a temporary decline in customer net additions expected in Q4 [12][27] - The company anticipates a normalized promotional environment in 2020, following a significant promotional roll-off in Q4 2019 [32][67] - Management highlighted strong demand for broadband and higher speeds, with expectations for continued market share growth [32][58] Other Important Information - The company completed the migration of Suddenlink to Optimum's OSS/BSS platforms, expecting about $50 million in annual cash flow savings [18] - The mobile service launched with 15,000 lines and generated $3 million in revenue, with expectations for growth as online sales channels open [15][16] - The company has a strong balance sheet with no bond maturities greater than $1.1 billion until 2025 [25] Q&A Session Summary Question: Can you provide more detail on the promotional roll-off? - Management noted that a significant percentage of promotions are rolling off in Q4, leading to expected net losses, but this is a one-time effect [31][32] Question: What is the timing for ramping up online sales for mobile? - Management expects to be ready in the next 2-3 weeks for online handset sales, which should drive higher volumes [35] Question: Can you discuss the economics of wireless? - Management believes they have a very attractive contract and are gross margin positive on their unlimited packages, with expectations for EBITDA positivity as volumes increase [39] Question: What is the status of the Lightpath process? - Management indicated ongoing discussions with several parties but emphasized the need for compelling offers before proceeding [49] Question: How does the $70 for life double play offer manage profitability? - Management explained that the offer excludes price adjustments for equipment and programming costs, allowing for sustainable customer satisfaction and reduced churn [74]