Altice USA Reports Third Quarter 2024 Results

Altice USA (NYSE: ATUS) today reports results for the third quarter ended September 30, 2024.

Dennis Mathew, Altice USA Chairman and Chief Executive Officer, said: "Over the last two years, we’ve made significant progress in strengthening our networks, stabilizing our operations, and setting a strong foundation for long-term growth. These efforts have resulted in positive momentum across our fiber and mobile product lines in the third quarter. Our focus remains on transforming our business for future growth with significant revenue opportunities, including expanding our advanced product portfolio, increasing penetration of our best-in-class fiber network, and driving operational efficiencies with a sustainable capital structure. Executing on these goals will drive free cash flow, increase shareholder value and support sustainable long-term growth over time.”

Third Quarter 2024Financial Overview

• Total revenue of $2.2 billion (-3.9% year over year)
• Residential revenue of $1.7 billion (-5.6% year over year)
• Residential revenue per user (“ARPU”)⁽¹⁾ of $135.77 (-1.9% year over year)
• Business Services revenue of $366.4 million (-0.1% year over year)
• News and Advertising revenue of $117.7 million (+9.5% year over year)
• Net income (loss) attributable to stockholders of ($43.0) million ($(0.09)/share on a diluted basis) in Q3 2024 and $66.8 million ($0.15/share on a diluted basis) in Q3 2023
• Net cash flows from operating activities of $436.0 million in Q3 2024 and $474.5 million in Q3 2023
• Adjusted EBITDA⁽²⁾ of $862.0 million (-5.8% year over year), and margin of 38.7%
• Cash capital expenditures of $359.2 million (+1.7% year over year) and Capital intensity⁽³⁾ of 16.1% (13.1% excluding fiber and new builds)
  • We remained disciplined on capital spend over the course of the year and now anticipate cash capital expenditures of $1.5 billion in full year 2024, representing a $200 million dollar reduction compared to full year 2023 cash capital expenditures
• Free Cash Flow⁽²⁾ of $76.9 million, including $115 million of higher cash interest in Q3 2024
  year over year

Third Quarter 2024 Key Operational Highlights

• Strong Fiber Net Adds Reaching 482k Fiber Customers, a +63% Increase in Total Fiber Customers Compared to Q3 2023
  • Fiber customer growth continued in Q3 2024 with +47k fiber net additions, of which 73% were driven by migrations of existing customers
  • Fiber network penetration reached 16.6% at the end of Q3 2024, up from 10.8% at the end of Q3 2023
• Mobile Line Net Adds of +36k in Q3 2024, Representing the Highest Mobile Line Net Adds in Four Years; Reaching 420k Lines
  • Optimum Mobile line net additions of +36k in Q3 2024, compared to +24k in Q3 2023
  • 5.2% of broadband base converged with mobile⁽⁴⁾ at the end of Q3 2024, up from 3.2% at the end of Q3 2023
• Strengthening Our Go-To-Market Strategy to Leverage Convergence Opportunities
  • Simplified product offers and base management strategy to drive convergence and provide customers more value
  • Evolved our video model with the introduction of new TV packages -- Entertainment TV, Extra TV, & Everything TV -- which drive higher margins via mutually beneficial programming agreements, offer consumers more content flexibility and are available alongside a customer's favorite streaming services via Optimum Stream
• Total Broadband Primary Service Units (PSUs) Net Losses of -50k⁽⁵⁾
  • Broadband net losses were -50k⁽⁵⁾ in Q3 2024, compared to -31k in Q3 2023
  • Performance was driven by continued low levels of switching activity, competitive pressures across our footprint, and muted trends in the income-constrained segment, including elevated non-pay disconnects from prior ACP subscribers
• Continued Progress in Delivering on Multi-Year Network Strategy; Reaching Nearly 3 million Fiber Passings
  • Fiber passings additions of +52k in Q3 2024, reaching 2.9 million fiber passings, and targeting approximately 3 million fiber passings by year-end 2024
  • Total passings additions of +38k in Q3 2024, reaching 9.8 million total passings, and targeting over 175k additional passings in full year 2024
  • Capital intensity⁽³⁾ of 16.1% in Q3 2024 compared to 15.2% in Q3 2023
  • Service call rate⁽⁶⁾ improved by 11% year over year in Q3 2024
  • Service visit repeat rate⁽⁷⁾ improved by 28% year over year in Q3 2024
  • Achieved approximately 99% node health across our entire footprint in Q3 2024 through enhanced node monitoring and proactive maintenance
  • Deploying new digital modulation technologies on our DOCSIS 3.1 HFC network to improve broadband performance with over 3 million customers expected to benefit from better speed attainability and reliability this year

Opportunities to Improve Free Cash Flow⁽²⁾ Over Time

• Revenue Opportunities
  • Improve broadband subscriber trends
  • Reach 1 million+ mobile lines by year-end 2027
  • Launch additional high margin value-added services
  • Expand B2B product portfolio and scalable solutions
• Fiber Penetration
  • Maximize asset value and competitive positioning
  • Accelerate growth of fiber base with plans to achieve 1 million+ fiber subscribers by year-end 2026
  • Deliver 30%+ fiber penetration year-end 2026
• Operational Efficiency
  • Achieve gross margin of ~70% by year-end 2026
  • Improve other operating expenses⁽⁸⁾ by 4-6% by year-end 2026
  • Return normalized Adjusted EBITDA⁽²⁾ margins to ~40%
• Sustainable Capital Structure
  • Sufficient liquidity to support long-term operational roadmap
  • Deliver annual capex under $1.3bn in full year 2025
  • Maintain positive annual Free Cash Flow⁽²⁾

Balance Sheet Review as of September 30, 2024

• Net debt⁽⁹⁾ for CSC Holdings, LLC Restricted Group was $23,180 million at the end of Q3 2024, representing net leverage of 7.2x L2QA⁽¹⁰⁾
  • The weighted average cost of debt for CSC Holdings, LLC Restricted Group was 6.9% and the weighted average life of debt was 4.4 years
• Net debt⁽⁹⁾ for Cablevision Lightpath LLC was $1,410 million at the end of Q3 2024, representing net leverage of 5.7x L2QA⁽¹⁰⁾
  • The weighted average cost of debt for Cablevision Lightpath LLC was 5.4% and the weighted average life of debt was 3.3 years
• Consolidated net debt⁽⁹⁾ for Altice USA was $24,564 million, representing consolidated net leverage of 7.1x L2QA⁽¹⁰⁾
  • The weighted average cost of debt for consolidated Altice USA was 6.8% and the weighted average life of debt was 4.3 years

Shares Outstanding

• As of September 30, 2024, Altice USA had 461,189,373 combined shares of Class A and Class B common stock outstanding

Reconciliation of Non-GAAP Financial Measures

We define Adjusted EBITDA, which is a non-GAAP financial measure, as net income (loss) excluding income taxes, non-operating income or expenses, gain (loss) on extinguishment of debt and write-off of deferred financing costs, gain (loss) on interest rate swap contracts, gain (loss) on derivative contracts, gain (loss) on investments and sale of affiliate interests, interest expense, net, depreciation and amortization, share-based compensation, restructuring, impairments and other operating items (such as significant legal settlements and contractual payments for terminated employees). We define Adjusted EBITDA margin as Adjusted EBITDA divided by total revenue.

Adjusted EBITDA eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business and from intangible assets recognized from acquisitions, as well as certain non-cash and other operating items that affect the period-to-period comparability of our operating performance. In addition, Adjusted EBITDA is unaffected by our capital and tax structures and by our investment activities.

We believe Adjusted EBITDA is an appropriate measure for evaluating our operating performance. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in our industry. Internally, we use revenue and Adjusted EBITDA measures as important indicators of our business performance and evaluate management’s effectiveness with specific reference to these indicators. We believe Adjusted EBITDA provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to our ongoing operating results. Adjusted EBITDA should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), and other measures of performance presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

We also use Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as a liquidity measure. We believe this measure is useful to investors in evaluating our ability to service our debt and make continuing investments with internally generated funds, although it may not be directly comparable to similar measures reported by other companies.

About Altice USA

Altice USA (NYSE: ATUS) is one of the largest broadband communications and video services providers in the United States, delivering broadband, video, mobile, proprietary content and advertising services to approximately 4.6 million residential and business customers across 21 states through its Optimum brand. We operate Optimum Media, an advanced advertising and data business, which provides audience-based, multiscreen advertising solutions to local, regional and national businesses and advertising clients. We also offer hyper-local, national and international news through our News 12 and i24NEWS networks.

FORWARD-LOOKING STATEMENTS

Certain statements in this earnings release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this earnings release, including, without limitation, those regarding our intentions, beliefs or current expectations concerning, among other things: our future financial conditions and performance, our revenue streams, results of operations and liquidity, including Free Cash Flow; our strategy, objectives, prospects, trends, service and operational improvements, capital expenditure plans, broadband, fiber, video and mobile growth, product offerings and passings; our ability to achieve operational performance improvements; our ability to achieve near and longer term revenue, penetration, operational efficiency and capital structure opportunities (including mobile lines, fiber subscribers, fiber penetration, gross margin, operating expenses, EBITDA margins, annual capital expenditures, and annual Free Cash Flow); and future developments in the markets in which we participate or are seeking to participate. These forward-looking statements can be identified by the use of forward-looking terminology, including without limitation the terms “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “opportunity”, “plan”, “project”, “should”, “target”, or “will” or, in each case, their negative, or other variations or comparable terminology. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. To the extent that statements in this earnings release are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements including risks referred to in our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and subsequent Quarterly Reports on Form 10-Q. You are cautioned to not place undue reliance on Altice USA’s forward-looking statements. Any forward-looking statement speaks only as of the date on which it was made. Altice USA specifically disclaims any obligation to publicly update or revise any forward-looking statement, as of any future date.

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