8-K: Altice USA Reports Improved Financial Trends in Second Half of 2023, Driven by Fiber and Mobile Growth

Altice USA saw improved financial trends in the second half of 2023, with growth in fiber and mobile customers, and a reduction in capital intensity.

Summary

• Altice USA reported its fourth quarter and full year 2023 results, showing improvements in financial trends during the second half of the year.
• Total revenue for Q4 2023 was $2.3 billion, a 2.9% year-over-year decrease, while full-year revenue was $9.24 billion, a 4.3% decrease year-over-year.
• Residential revenue was $1.79 billion in Q4 2023, down 2.8% year-over-year, and $7.27 billion for the full year, down 4.4% year-over-year, primarily due to the loss of higher ARPU video customers.
• Business Services revenue increased by 1.0% year-over-year in Q4 2023 to $372 million, and decreased by 0.5% for the full year to $1.47 billion, with Lightpath revenue growing 9.2% in Q4 and 2.1% for the full year.
• News and Advertising revenue was $128.1 million in Q4 2023, a 15.7% year-over-year decrease, and $447.7 million for the full year, a 13.9% decrease year-over-year, but excluding political advertising, it grew 8.9% in Q4.
• Net loss attributable to stockholders was $117.8 million in Q4 2023, or $0.26 per share, and net income was $53.2 million for the full year, or $0.12 per share.
• Adjusted EBITDA was $903.3 million in Q4 2023 and $3.61 billion for the full year, with margins of 39.2% and 39.1% respectively.
• Capital expenditures were $295.2 million in Q4 2023 and $1.70 billion for the full year, with capital intensity improving by 45.6% year-over-year in Q4.
• The company expects cash capital expenditures of approximately $1.6 billion to $1.7 billion in FY 2024.
• Fiber customer net additions were 46,000 in Q4 2023, the best quarter for fiber net adds, and 170,000 for the full year, reaching a 12.5% penetration of the fiber network.
• Optimum Mobile added 34,000 lines in Q4 2023, reaching 322,000 lines and 7.1% penetration of the total broadband customer base.
• Total broadband customer net losses were 27,000 in Q4 2023.
• Net debt for CSC Holdings, LLC Restricted Group was $23.02 billion at the end of Q4 2023, representing a net leverage of 6.8x Adjusted EBITDA on a Last Two Quarters Annualized basis.
• The company aims to return to a leverage target of 4.5x to 5.0x net debt / Adjusted EBITDA over time.

Sentiment

Score: 7

Explanation: The document shows a positive shift in the company's performance, with improvements in key areas like fiber and mobile growth, and customer experience. However, the company still faces challenges with revenue declines and high debt levels, which temper the overall sentiment.

Positives

• The company saw improvements in year-over-year trends across revenue, adjusted EBITDA, and customer ARPU in the second half of 2023.
• Fiber customer net additions were strong, with 46,000 added in Q4 2023, the best quarter for fiber net adds.
• Optimum Mobile experienced accelerated growth, adding 34,000 lines in Q4 2023.
• Customer experience metrics improved significantly, including a 21-point increase in tNPS and a 68% increase in self-install rate.
• Capital intensity decreased by 45.6% year-over-year in Q4 2023.
• The company generated positive free cash flow for the full year.
• The company proactively managed its debt maturity profile.

Negatives

• Total revenue decreased by 2.9% year-over-year in Q4 2023 and 4.3% for the full year.
• Residential revenue decreased by 2.8% year-over-year in Q4 2023 and 4.4% for the full year, primarily due to the loss of higher ARPU video customers.
• News and Advertising revenue decreased by 15.7% year-over-year in Q4 2023 and 13.9% for the full year.
• Net loss attributable to stockholders was $117.8 million in Q4 2023.
• Total broadband customer net losses were 27,000 in Q4 2023.
• Adjusted EBITDA margin declined by 1.1% year-over-year in Q4 2023 and 6.7% for the full year.

Risks

• The company faces continued competitive pressure in the broadband market, particularly during the holiday season.
• The loss of higher ARPU video customers is negatively impacting residential revenue.
• The company's high debt levels and leverage ratios remain a concern.
• The company's ability to achieve its leverage target of 4.5x to 5.0x net debt / Adjusted EBITDA is uncertain.
• The company's future performance is subject to risks and uncertainties, including those detailed in their SEC filings.

Future Outlook

The company expects to continue to invest in key growth initiatives, with anticipated cash capex of approximately $1.6 billion to $1.7 billion in FY 2024. They are confident they are on the right path to return to sustainable long-term customer, revenue and adjusted EBITDA growth over time.

Management Comments

• Dennis Mathew, Altice USA Chairman and Chief Executive Officer, said: '2023 marked the beginning of a transformative journey for Optimum as we drove significant improvements across every area of our business by acting with operational and financial discipline.'
• He also stated, 'We are well positioned as we enter 2024 and I am confident that were on the right path to return to sustainable long-term customer, revenue and adjusted EBITDA growth over time.'

Industry Context

The results reflect the ongoing shift in the telecommunications industry towards fiber and mobile services, with Altice USA focusing on these areas to drive growth. The company is facing competition in the broadband market, which is impacting subscriber numbers.

Comparison to Industry Standards

• Altice USA's fiber penetration of 12.5% is comparable to other cable companies that have invested in fiber upgrades, such as Comcast and Charter Communications, although some telcos like Verizon and AT&T have higher fiber penetration rates.
• The company's mobile growth is in line with the industry trend of cable companies offering mobile services to bundle with their broadband offerings, similar to Comcast's Xfinity Mobile and Charter's Spectrum Mobile.
• The decline in video subscribers is a common trend across the industry as customers shift towards streaming services, impacting revenue for traditional cable providers.
• Altice USA's net debt to adjusted EBITDA ratio of 6.7x is higher than some of its peers, such as Comcast and Charter, which typically operate with leverage ratios closer to 4x to 5x.

Stakeholder Impact

• Shareholders may view the improved financial trends and growth in fiber and mobile as positive signs, but will also be concerned about the high debt levels and revenue declines.
• Employees may be impacted by the company's restructuring and cost-cutting efforts.
• Customers should benefit from the improved network and customer experience.
• Suppliers and creditors may be impacted by the company's financial performance and debt management.

Next Steps

• The company expects to continue to invest in key growth initiatives, with anticipated cash capex of approximately $1.6 billion to $1.7 billion in FY 2024.
• The company aims to return to a leverage target of 4.5x to 5.0x net debt / Adjusted EBITDA over time.

Key Dates

Keywords

Fiber, Mobile, Broadband, Revenue, EBITDA, ARPU, Customer Experience, Capital Expenditure, Debt, Net Adds