Altice USA : Financial DocumentationAltice USA Reports First Quarter 2022 Results04/28/2022 Download - PDF 599.72 KB

ALTICE USA REPORTS FIRST QUARTER 2022 RESULTS

NEW YORK (April 28, 2022) - Altice USA (NYSE: ATUS) today reports results for the first quarter ended March 31, 2022.

Dexter Goei, Altice USA Chief Executive Officer, said: "I am very pleased with our progress in this year of reinvestment and execution towards our key growth initiatives. The rapid expansion of our Optimum Fiber network is on schedule and continues to drive meaningful improvements across all of our customer service metrics relative to our legacy network. Significant progress has been made more broadly in enhancing our products and overall customer experience, as well as expanding our sales distribution channels. We are also off to a very good start with creating consistency in our marketing and offers under one unified Optimum brand."

Key Financial Highlights

• • Total Revenue declined -2.3% YoY in Q1 2022 to $2.42 billion (-2.1% excluding air strand revenue(1)), including Residential revenue decline of -3.6% YoY, Business Services revenue growth of +0.1% YoY (+1.5% excluding air strand revenue(1)) and News & Advertising revenue growth of +9.1% YoY.

• • Net income attributable to stockholders was $196.6 million in Q1 2022 ($0.43/share on a diluted basis) compared to net income of $274.1 million in Q1 2021 ($0.58/share on a diluted basis).

• • Net cash flows from operating activities were $600.2 million in Q1 2022, compared to $749.6 million in Q1 2021.

• • Adjusted EBITDA(2) declined -7.7% YoY in Q1 2022 to $991.7 million with a margin of 40.9%.

• • Cash capital expenditures of $392.4 million in Q1 2022 represented 16.2% of revenue and were up 84.4% YoY mainly driven by accelerated fiber ("FTTH") rollout and new builds (9.5% of revenue excluding FTTH and new builds).

• • Operating Free Cash Flow(2) decreased -30.5% YoY to $599.4 million in Q1 2022.

• • Free Cash Flow(2) decreased -61.3% YoY to $207.8 million in Q1 2022.

Q1-22 Summary Financials (in thousands)

Three Months Ended March 31,2022

2021

Revenue ....................................................................................................................................................	. $2,421,897	$2,478,821
Net income attributable to Altice USA, Inc. stockholders ...................................................................	. 196,551	274,136
Adjusted EBITDA(2) ..................................................................................................................................	. 991,730	1,074,805
Capital Expenditures (cash) ...................................................................................................................	. 392,371	212,791

Revenue Growth and Adjusted EBITDA Detail	Q1-22
Total Revenue YoY .....................................................	(2.3)%
excl. air strand revenue(1) .........................................	(2.1)%
Residential Revenue YoY .........................................	(3.6)%
Business Services Revenue YoY ............................	+0.1%
excl. air strand revenue(1) .......................................	+1.5%
News & Advertising Revenue YoY ..........................	+9.1%
Adjusted EBITDA YoY ...............................................	(7.7)%
Adjusted EBITDA Margin ..........................................	40.9%
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Residential unique customer relationships, broadband subscribers and organic net additions (losses)

Subscribers (in thousands)

FY-20(3)Q1-21

Q2-21(4)Q3-21

Q4-21

FY-21(4)Q1-22

Residential ending customer relationships ...........................

4,648.4 4,647.44,670.74,646.04,632.84,632.84,612.1

Residential customer organic net additions (losses) .........

80.8

(1.0)

(11.9)

(24.7)

(13.2)

(50.8)

(20.7)

Broadband ending subscribers ................................................

4,359.2 4,370.84,401.34,388.14,386.24,386.24,373.2

Broadband organic net additions (losses) ............................ 142.1

11.5

0.2

(13.1)

(1.9)

(3.3)

(13.0)

Key Operational Highlights

• • Total unique Residential customer relationships declined -1.5% YoY in Q1 2022 on an organic basis (-0.8% including the acquisition of Morris Broadband in Q2 2021). Unique Residential customer net losses in the quarter were -21k, compared to -1k Residential customer net losses in Q1 2021.

  • ▪ Residential Broadband RGUs: Quarterly Residential broadband net losses were -13k in Q1 2022, compared to +12k broadband net additions in Q1 2021.

  • ▪ Residential Video RGUs: Quarterly video net losses were -74k in Q1 2022, compared to -54k video net losses in Q1 2021.

• • Residential revenue declined -3.6% YoY in Q1 2022 to $1.91 billion:

  • ▪ Residential revenue per customer relationship in Q1 2022 declined -3.0% YoY to $137.92, mostly due to the loss of higher ARPU video customers, although was stable sequentially (+0.1% compared to Q4 2021).

• • Business Services revenue grew +0.1% YoY in Q1 2022 to $368 million, or grew +1.5% excluding air strand revenue(1). SMB / Other revenue was flat (-0.1% YoY) in Q1 2022, or grew +1.9% excluding air strand revenue(1). Lightpath revenue grew +0.6% YoY in Q1 2022. The Lightpath business increased net sales bookings by ~70% YoY in Q1 2022 which is expected to support accelerated revenue growth in the coming quarters.

• • News and Advertising revenue grew +9.1% YoY to $115 million in Q1 2022, approaching pre-pandemic levels of growth, driven by strength in the travel, entertainment, and sports betting segments.

Fiber Rollout and Network Upgrade Update

• • Fiber (FTTH) rollout update: Altice USA is executing on an accelerated fiber deployment over the next four years across its Optimum and Suddenlink footprint (under the Optimum Fiber brand), expecting to reach 6.5 million fiber passings by the end of 2025 (including 1.3 million total incremental FTTH passings in FY 2022). As of Q1 2022 the Company has 1.32 million FTTH passings, adding 146k new FTTH passings in the quarter. The company reported +11k FTTH customer net additions in Q1 2022, reaching 6.1% penetration of the FTTH network.

• • New build activity update: Altice USA has also been accelerating the pace of its network edge-outs, adding +42k total passings in Q1 2022, and a total of +237k total passings in the last twelve months ("LTM") (+149k passings have been added LTM on an organic basis excluding the acquisition of Morris Broadband in Q2 2021). The Company continues to see strong momentum in growing customer penetration, typically reaching approximately 40% within a year of rollout in new-build areas. The Company is targeting an incremental 175k+ new passings in FY 2022.

• • HFC cable network upgrades update: Altice USA continues to upgrade its existing hybrid fiber-coaxial ("HFC") network to deliver higher speeds to customers in certain Suddenlink markets. In Q1 2022 the Company completed upgrades of 16k of these homes and is targeting 100k homes to be upgraded in FY 2022. These markets previously only offered up to 150 Mbps download speeds and are being upgraded to offer up to 400 Mbps or 1 Gbps.

• • Infrastructure subsidies update: Altice USA has applied for subsidies for rolling out FTTH to over 150k homes and was awarded its first subsidy grant in Yavapai County (Arizona) for 8k homes in Q1 2022.

• • Broadband speed taken by Altice USA's customer base on average has nearly doubled in the past three years to 363 Mbps in Q1 2022. Approximately 46% of Altice USA's broadband customers remain on plans with download speeds of 200 Mbps or less, representing a sizable opportunity to continue to upgrade speeds. Broadband-only customer usage averaged 630 GB per month in Q1 2022, which is 27% higher than the average usage of the entire customer base (495 GB per month).

• • 1 Gbps ("1 Gig") broadband speed sell-in to all new customers, where 1 Gig services are available, was 46% in Q1 2022 (1 Gig sell-in to new customers taking the FTTH product was higher at 59% in Q1 2022). Approximately 17% of the residential customer base currently take 1 Gig speeds, representing a significant growth opportunity for the Company.

FY 2022 Capex Guidance Reiterated

• • The Company expects to continue to accelerate investments in key growth initiatives, increasing cash capex to approximately $1.7 billion to $1.8 billion in FY 2022.

Additional Highlights and Announcements

Altice USA and T-Mobile Extend Strategic MVNO Agreement for Optimum Mobile

At the end of March 2022, Altice USA and T-Mobile announced the expansion of a multi-year MVNO agreement through which T-Mobile will continue to serve as the nationwide network for Altice USA's Optimum Mobile service. Terms of the new agreement are mutually beneficial to both companies.

Under the agreement, Optimum Mobile customers will continue to benefit from T-Mobile's nationwide network, including accessing America's largest 5G network. The agreement also enables Optimum Mobile to provide more flexibility and value to customers and, when coupled with Optimum and Suddenlink broadband service, deliver a 360-degree seamless connectivity experience at home and on the go.

Optimum Mobile has approximately 198k mobile lines(5) as of March 31, 2022. Mobile net additions in Q1 2022 were +12k, supported by new mobile promotions. Mobile revenue grew +25.0% YoY to $24.0 million for the quarter. At the end of Q1 2022, Optimum Mobile reached 4.3% penetration of Altice USA's Residential customer base.

"Let's Reconnect" Rebrand Campaign

"Let's Reconnect" is Altice USA's company-wide commitment to reconnect with its customers, communities, and people to unify all of its products under the Optimum brand. As part of Let's Reconnect, changes are being made to ensure that Optimum is delivering the highest quality service and experience to its customers and keeping them at the center of everything that the Company does.

This includes improvements in speed and reliability through the Company's expanded fiber network and mobile service, 24/7 customer support online and over the phone, and the opening of more retail stores across the country.

Shares Outstanding

As of March 31, 2022, Altice USA had 454,654,818 combined Class A and Class B shares outstanding.

Balance Sheet Review

As of March 31, 2022:

• • Net debt for CSC Holdings, LLC Restricted Group was $22,874 million at the end of Q1 2022(6), representing net leverage of 5.5x Adjusted EBITDA on a LTM basis, or 5.8x Adjusted EBITDA on a Last 2-Quarter Annualized ("L2QA") basis. The weighted average cost of debt for CSC Holdings, LLC Restricted Group was 4.7% as of the end of Q1 2022 and the weighted average life was 6.0 years. The Company expects to return to a leverage target of 4.5x - 5.0x net debt / Adjusted EBITDA on a L2QA basis for its CSC Holdings, LLC debt silo over time.

• • Net debt for Cablevision Lightpath LLC was $1,382 million at the end of Q1 2022(6), representing net leverage of 6.7x LTM (6.5x L2QA). The weighted average cost of debt for Cablevision Lightpath LLC was 4.3% as of the end of Q1 2022 and the weighted average life was 5.8 years.

• • Consolidated net debt for Altice USA was $24,220 million(6), representing consolidated net leverage of 5.6x LTM (5.8x L2QA at the end of Q1 2022).

Altice USA Consolidated Operating Results

(In thousands, except per share data)

(Unaudited)

Three Months Ended

March 31,

2022	2021
Revenue:
Broadband .......................................................................................................................................................... $	985,517$	970,571
Video ...................................................................................................................................................................	841,887	905,834
Telephony ...........................................................................................................................................................	85,234	106,981
Residential revenue .............................................................................................................................................	1,912,638	1,983,386
Business services and wholesale ......................................................................................................................	367,522	367,216
News and Advertising ..........................................................................................................................................	114,675	105,070
Mobile ....................................................................................................................................................................	24,035	19,235
Other ......................................................................................................................................................................	3,027	3,914
Total revenue ....................................................................................................................................................	2,421,897	2,478,821
Operating expenses:
Programming and other direct costs ...............................................................................................................	828,793	851,864
Other operating expenses ................................................................................................................................	641,906	580,433
Restructuring and other expense ....................................................................................................................	3,378	3,209
Depreciation and amortization (including impairments) ...............................................................................	435,349	434,857
Operating income ...............................................................................................................................................	512,471	608,458
Other income (expense):
Interest expense, net ...........................................................................................................................................	(303,362)	(316,312)
Gain (loss) on investments ..................................................................................................................................	(150,773)	73,453
Gain (loss) on derivative contracts, net .............................................................................................................	101,074	(53,565)
Gain on interest rate swap contracts .................................................................................................................	123,147	75,653
Other income, net .................................................................................................................................................	2,430	2,859
Income before income taxes ...........................................................................................................................	284,987	390,546
Income tax expense .............................................................................................................................................	(82,846)	(112,007)
Net income ...........................................................................................................................................................	202,141	278,539
Net income attributable to noncontrolling interests ..........................................................................................	(5,590)	(4,403)
Net income attributable to Altice USA stockholders ................................................................................. $	196,551$	274,136
Basic net income per share ............................................................................................................................. $	0.43$	0.58
Diluted net income per share .......................................................................................................................... $	0.43$	0.58
Basic weighted average common shares ....................................................................................................	453,229	469,233
Diluted weighted average common shares ..................................................................................................	453,229	475,448
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