Altice USA Reports Fourth Quarter and Full Year 2020 Results

NEW YORK--(BUSINESS WIRE)-- Altice USA (NYSE: ATUS) today reports results for the fourth quarter and full year ended December 31, 2020.

Dexter Goei, Altice USA Chief Executive Officer, said: “I could not be more proud of the Altice USA team for its perseverance and dedication during such an unparalleled year. Our team's unrelenting focus on serving both our customers and broader community has allowed us to achieve spectacular results in a number of areas, including record broadband customer gains, solid revenue growth, best-ever Adjusted EBITDA margins and highest-ever annual Free Cash Flow. We also returned $4.8 billion to shareholders for the full year through share repurchases. I am pleased to cap off a tremendous 2020 with yet another strong quarter, which makes us well-positioned for 2021."

Key Financial Highlights

  • Total Revenue grew 2.5% YoY in Q4 2020 to $2.54 billion (or up +3.2% YoY adjusted for anticipated RSN credits(1), and up +3.6% YoY further adjusted for storm credits(2)), driven by Broadband revenue growth of +14.0% YoY and News & Advertising growth of +29.7%. Total revenue grew +1.4% YoY in full-year (FY) 2020 to $9.89 billion (or up +2.4% YoY adjusted for anticipated RSN credits(1), and up +2.6% YoY further adjusted for storm credits(2)).
  • Net income attributable to stockholders was $330.5m in Q4 2020, or $0.60/share on a diluted basis, compared to a net income of $0.3 million, or $0.00/share, in Q4 2019. Net income attributable to stockholders was $436.2m in FY 2020, or $0.75/share, compared to a net income of $138.9 million, or $0.21/share on a diluted basis in FY 2019.
  • Net cash flows from operating activities was $791.5m in Q4 2020, compared to $720.2m in Q4 2019. FY 2020 net cash flows from operating activities was $2.98 billion, compared to $2.55 billion in FY-19.
  • Adjusted EBITDA(3) increased +6.1% YoY in Q4 2020 to $1.15 billion with a margin of 45.4% (growth of +5.8% YoY and a margin of 46.5% ex-mobile, or growth of +6.6% YoY and a margin of 46.3% excluding mobile, RSN credits, and storms(4)). Adjusted EBITDA increased +3.5% YoY in FY 2020 to $4.41 billion with a margin of 44.6% (growth of +4.2% YoY and a margin of 45.7% ex-mobile, or growth of +4.8% YoY and 45.4% margin excluding mobile, RSN credits and storms).
  • Cash capex of $344.6 million in Q4 2020 represented 13.6% of revenue, and was up 6.7% YoY due to the timing of capex spend in 2020 and storm reconstruction outlays in Q4 2020. Cash capex of $1.07 billion in FY 2020 represented 10.9% of revenue and was down -20.8% YoY partly due to delayed permitting in the Company’s FTTH rollout.
  • Operating Free Cash Flow(3) for Q4 2020 increased +5.8% YoY to $806.4 million. Operating Free Cash Flow for FY 2020 increased +14.8% YoY to $3.34 billion, reflecting Adjusted EBITDA growth and lower capital spending on a YoY basis.
  • Free Cash Flow(3) increased 12.5% YoY in Q4 2020 to $446.9 million. FY 2020 free cash flow increased +59.0% YoY to $1.91 billion, representing the highest-ever annual Free Cash Flow.
  • Share repurchases were approximately $3.0 billion in Q4 2020 and $4.8 billion in FY 2020.
  • FY 2021 Financial Outlook: The Company expects revenue and Adjusted EBITDA growth for 2021, cash capex to be between $1.3 to $1.4 billion for the year, and share repurchases of $1.5 billion. The Company expects leverage at year-end 2021 to be less than 5.3x (L2QA net debt to Adjusted EBITDA) for its CSC Holdings, LLC debt silo, with a target of 4.5x-5.0x L2QA EBITDA over time.

Q4 and FY-20 Summary Financials

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

($k)

 

2020

 

2019

 

2020

 

2019

Revenue

 

$2,535,421

 

$2,474,549

 

$9,894,642

 

$9,760,859

Net income attributable to Altice USA, Inc. stockholders

 

330,472

 

329

 

436,183

 

138,936

Adjusted EBITDA(3)

 

1,150,980

 

1,085,000

 

4,414,814

 

4,265,471

Capital Expenditures (cash)

 

344,578

 

322,795

 

1,073,955

 

1,355,350

Revenue and Adjusted EBITDA Detail

 

Q4-20

 

FY-20

 

 

 

 

 

Total Revenue Growth YoY

 

+2.5%

 

+1.4%

Adj. for RSN credits

 

+3.2%

 

+2.4%

Adj. for RSN and storm credits

 

+3.6%

 

+2.6%

 

 

 

 

 

Residential Revenue Growth YoY

 

+0.8%

 

+0.1%

Adj. for RSN credits

 

+1.7%

 

+1.3%

Adj. for RSN and storm credits

 

+2.2%

 

+1.6%

 

 

 

 

 

Business Services Revenue Growth YoY

 

-0.1%

 

+1.8%

Adj. for RSN credits

 

+0.2%

 

+2.0%

Adj. for RSN and storm credits

 

+0.6%

 

+2.3%

 

 

 

 

 

News & Advertising Revenue Growth YoY

 

+29.7%

 

+9.1%

 

 

 

 

 

Adjusted EBITDA Growth YoY

 

+6.1%

 

+3.5%

Excluding mobile

 

+5.8%

 

+4.2%

Excluding mobile and storm credits

 

+6.6%

 

+4.8%

 

 

 

 

 

Adjusted EBITDA Margin

 

45.4%

 

44.6%

Excluding mobile

 

46.5%

 

45.7%

Excluding mobile, RSN and storm credits

 

46.3%

 

45.4%

Organic 2020 Residential customer net additions

 

 

 

 

 

 

 

 

 

Residential customer relationships (000s)

Q1

 

Q2

 

Q3

 

Q4

 

FY-20

Reported net additions

35.1

 

53.0

 

7.7

 

(15.1)

 

80.7

Less: FCC Pledge and NJ Order >90 Day

0.0

 

18.1

 

4.4

 

(22.4)

 

0.0

Less: Storm-affected >90 Day

0.0

 

0.0

 

0.0

 

9.2

 

9.2

Adjusted net additions (excluding >90 Day)

35.1

 

34.9

 

3.4

 

(1.9)

 

71.5

Additional storm disconnects

 

 

 

 

6.2

 

5.2

 

11.4

Adjusted + additional storm disconnects

35.1

 

34.9

 

9.6

 

3.3

 

82.9

 

 

 

 

 

 

 

 

 

 

Broadband customers (000s)

Q1

 

Q2

 

Q3

 

Q4

 

FY-20

Reported net additions

50.1

 

70.4

 

26.0

 

(4.3)

 

142.1

Less: FCC Pledge and NJ Order >90 Day

0.0

 

17.9

 

4.3

 

(22.1)

 

0.0

Less: Storm-affected >90 Day

0.0

 

0.0

 

0.0

 

8.7

 

8.7

Adjusted net additions (excluding >90 Day)

50.1

 

52.6

 

21.7

 

9.1

 

133.5

Additional storm disconnects

 

 

 

 

5.8

 

4.8

 

10.6

Adjusted + additional storm disconnects

50.1

 

52.6

 

27.5

 

13.9

 

144.1

Key Operational Highlights

  • Total unique Residential customer relationships grew +2.5% YoY in Q4 2020 on a reported basis (+1.8% YoY organically), or +2.3% YoY adjusted to exclude subscribers who were affected by Hurricanes Laura and Delta and have balances outstanding that are more than 90 days past due ("storm-affected greater than 90-day subscribers"), or +2.6% YoY further adjusted to exclude additional storm disconnects(5). Reported unique Residential customers net losses were -15k in Q4 2020. Adjusted for the retention activity of subscribers formerly covered by the FCC Pledge and the New Jersey Executive Order ("FCC Pledge and NJ Order"), as well as excluding storm-affected greater than 90-day subscribers, Residential customer net losses would have been -2k. Further adjusted to exclude additional storm disconnects, adjusted Residential customer net additions would have been +3k in Q4 2020, an improvement compared to a net loss of -5k in Q4 2019. FY 2020 reported unique Residential customer net additions were +81k, +72k excluding storm-affected greater than 90-day subscribers or +83k further adjusted for additional storm disconnects(6). FY 2020 ending Residential customer relationships include Service Electric Cable T.V. of New Jersey, Inc. ("Service Electric") which contributed +34k Residential customer relationships in Q3 2020.
  • Residential Broadband RGUs: Reported quarterly broadband net additions were -4k in Q4 2020, or +9k adjusted for the retention of subscribers formerly covered by the FCC Pledge and NJ Order, and excluding storm-affected greater than 90-day subscribers, or +14k further adjusted to exclude additional storm disconnects(5), representing an improvement compared to +7k broadband net additions in Q4 2019. Reported Residential Broadband organic net additions were +142k in FY 2020 (or +172k inclusive of Service Electric). Excluding storm-affected greater than 90-day subscribers, FY 2020 broadband net additions would have been +133k, or +174k inclusive of Service Electric and further adjusted to exclude additional storm disconnects, representing the best-ever year for broadband net additions since Altice USA's inception, compared to +72k in FY 2019(5).
  • Residential Video RGUs: Reported quarterly video net losses were -74k in Q4 2020, or -76k adjusted for the retention of subscribers formerly covered by the FCC Pledge and NJ Order, and excluding storm-affected greater than 90-day subscribers, or -74k further adjusted to exclude storm disconnects(5), compared to -44k in Q4 2019. Reported organic Residential Video net losses were -237k in FY 2020 (or -218k inclusive of Service Electric). Excluding storm-affected greater than 90-day subscribers, FY 2020 video net loss would have been -241k, or -218k inclusive of Service Electric and excluding additional storm disconnects(5), compared to -107k in FY 2019
  • Residential revenue per customer relationship in Q4 2020 was down -1.8% YoY to $140.09 (or down -0.9% YoY to $141.35 adjusted for anticipated RSN credits), vs. $142.65 in Q4 2019. Adjusted for the FCC Pledge and NJ Order, and storm-affected greater than 90-day subscribers, residential revenue per customer relationship was down -0.6% YoY to $141.83. Reported Residential revenue per customer relationship in FY 2020 was down -1.3% YoY to $142.11 (or approximately flat at -0.1% to $143.82 adjusted for anticipated RSN credits), vs. $143.98 in FY 2019. Adjusted for the FCC Pledge and NJ Order, and excluding storm-affected greater than 90-day subscribers, residential revenue per customer relationship was flat YoY at $143.97.
  • Total Residential revenue grew +0.8% YoY in Q4 2020 (or grew +1.7% YoY adjusted for anticipated RSN credits and +2.2% YoY further adjusted for storm credits). Total Residential revenue grew +0.1% YoY in FY 2020 (or grew +1.3% YoY adjusted for anticipated RSN credits and +1.6% YoY further adjusted for storm credits).
  • Business Services revenue was down -0.1% YoY in Q4 2020 (or +0.2% YoY adjusted for anticipated RSN credits and +0.6% YoY further adjusted for storm credits) with Lightpath growing +2.6% YoY and SMB / Other revenue down -1.0% YoY. Business Services revenue grew +1.8% YoY in FY 2020 (or +2.0% YoY adjusted for anticipated RSN credits and +2.3% YoY further adjusted for storm credits). Lightpath continues to gain momentum in the education, government and healthcare verticals, driven by elevated connectivity needs during the pandemic.
  • News and Advertising revenue increased +29.7% YoY in Q4 2020, driven mainly by the ongoing recovery in local advertising and an increase in political advertising in the quarter (News and Advertising revenue grew +3.5% YoY ex-political). Cheddar website traffic was up +90% in Q4 2020 YoY with a user base increase of +112% YoY. For FY 2020 News and Advertising revenue growth was +9.1% YoY, buoyed by a strong political cycle.
  • Altice Mobile has approximately 169k mobile lines through December 31, 2020 since the commercial launch in September 2019 (+7k net additions in Q4 2020 and +101k net additions in FY2020, generating revenue of $20.2 million for the quarter and $78.1 million in FY 2020), reaching 3.6% penetration of Altice USA's residential customer base. At the end of January 2021, approximately 90% of Altice Mobile customers have migrated onto the T-Mobile network from the Sprint network, leading to a 15% reduction in dropped calls.
  • Increased network usage and demand for higher broadband speeds: In Q4 2020, the Company saw an increase of +47% YoY in average data usage per customer to approximately 468 GB per month (approximately 591 GB per month for broadband-only customers). The pace of broadband speed upgrades remains elevated, up +70% YoY. The average broadband speeds taken by Altice USA’s customer base has more than doubled in the past three years to 283 Mbps at the end of Q4 2020. Over 55% of our broadband customers remain on plans with download speeds 200 Mbps or less, representing a sizable opportunity to continue to upgrade speeds.
  • Increase in 1 Gig broadband sell-in: 1 Gig broadband capability is available across 92% of Altice USA's consolidated footprint. In Q4 2020, 1 Gig sell-in to new customers increased to 41% where 1 Gig services are available, up from 29% in Q3 2020. Less than 8% of the total customer base currently take Gigabit speeds, representing a significant growth opportunity for the Company.
  • FTTH strategy and update: At the end of Q4 2020, Altice USA covered nearly 1 million homes with FTTH technology available for service, with FTTH sell-in to new customers increasing to 58% in areas where FTTH is available in Q4, up from 44% in Q3. The fiber sell-in rate for 1 Gig was 67% at the end of 2020. The Company remains positive on the future of its FTTH deployment initiatives and confident in delivering both capex and opex efficiencies following the completion of its FTTH build.
  • Increase in new-builds: Altice USA has been accelerating the pace of its network edge-outs, organically adding 146k homes passed in 2020 across its entire footprint, with another approximately 70k homes passed from the acquisition of Service Electric in the third quarter of 2020. The Company is seeing strong momentum in growing customer penetration, typically reaching approximately 40% within a year of rollout in new-build areas, and this remains a focus area for growth.

Financial Outlook

For the full year 2021, the Company expects:

  • Revenue: Growth
  • Adjusted EBITDA: Growth
  • Cash capital expenditures: $1.3 to $1.4 billion
  • Year-end leverage target (CSC Holdings, LLC debt silo): < 5.3x net debt / Adjusted EBITDA (L2QA basis)
  • Share repurchases: $1.5 billion

The Company expects to return to a leverage target of 4.5x - 5.0x net debt / Adjusted EBITDA (L2QA basis) for its CSC Holdings, LLC debt silo over time.

Balance Sheet Review

For the quarter and year ended December 31, 2020:

  • Consolidated net debt for Altice USA at the end of Q4 and FY 2020 was $24,619 million on a reported basis(7). This represents consolidated L2QA (last two quarters annualized) net leverage of 5.4x (5.6x last-twelve months or "LTM") EBITDA at the end of Q4 and FY 2020.
  • Net debt for CSC Holdings, LLC was $23,195 million at the end of Q4 and FY 2020(7). CSC Holdings, LLC's L2QA net leverage was 5.3x (5.5x LTM) EBITDA. The weighted average cost of debt for CSC Holdings, LLC was 4.7% as of the end of Q4 and FY 2020 and the weighted average life was 6.5 years.
  • Net debt for Cablevision Lightpath LLC was $1,425 million at the end of Q4 and FY 2020(7). Cablevision Lightpath LLC's L2QA net leverage was 6.5x (6.6x LTM) EBITDA. The weighted average cost of debt for Cablevision Lightpath LLC was 4.3% as of the end of Q4 and FY 2020 and the weighted average life was 6.7 years.

Additional Highlights and Announcements

Successful Tender Offer and Share Repurchases

On November 23, 2020 Altice USA launched a modified “Dutch auction” tender offer to repurchase up to $2.5 billion of its Class A common stock. Following the completion of the tender offer, the Company successfully repurchased 64,613,479 shares of Class A common stock at $36.00 per share, for a total of approximately $2.3 billion. These shares represented approximately 18.2% of the Company’s issued and outstanding shares of Class A common stock (or 12.0% of the Company’s total outstanding shares including both Class A and Class B common stock) as of the expiration date of the tender, December 21, 2020.

For the three months ended December 31, 2020, Altice USA repurchased an aggregate of 87.3 million shares for a total purchase price of approximately $3.0 billion, at an average price of $34.21. As of December 31, 2020, Altice USA had 476,469,575 combined Class A and Class B shares outstanding.

Closing of Sale of 49.99% of Lightpath Fiber Enterprise Business to Morgan Stanley Infrastructure Partners and Appointment of New Management Team

In December 2020, Altice USA closed the previously announced sale of 49.99% of its Lightpath fiber enterprise business to Morgan Stanley Infrastructure Partners (MSIP) based on an implied enterprise value of $3.2 billion. Altice USA retains a 50.01% interest in Lightpath and maintains control of the company. Accordingly, the Company continues to consolidate the operating results of the Lightpath business.

On January 14, 2020, Lightpath announced the appointment of Chris Morley as chief executive officer. Mr. Morley has more than 20 years of experience in the communications infrastructure and telecommunications industry, most recently serving as senior operating advisor for Stonepeak Infrastructure Partners. Additional executive appointments included two well-respected industry executives in Chief Revenue Officer Doug Dalissandro, formerly the chief revenue officer for Lightower Fiber Networks, and Chief Strategy Officer David Mayer, formerly the general counsel and executive vice president of business development for Lightower.

Altice USA's Community Response to COVID-19

In 2020, Altice USA took a number of steps during the pandemic to support both its customers and community, as well its employees. These initiatives include:

  • Offering Altice Advantage broadband service for free to households with K-12 and/or college students without home Internet access.
  • Signing the FCC’s “Keep Americans Connected” Pledge, which provided relief to residential and business customers facing hardships.
  • Creating a $10 million "Community Relief Program" aimed at supporting the recovery efforts of small and medium-sized business customers (SMBs) across the Company’s footprint.
  • Philanthropic partnerships with numerous organizations, including DonorsChoose to fund classroom projects across the Altice USA service areas, as well as national and local affiliates of Boys and Girls Clubs of America, and Feeding America.
  • Collaborating with large hospital systems, schools and government agencies to ensure they have the connectivity services they need to assist their communities, including waiving fees for first responders and other critical entities.
  • Providing outdoor WiFi hotspots in the Optimum territory for both customers and non-customers to ensure connectivity.
  • Establishing employee programs to ensure safe business continuity, including enhanced employee and customer safety protocols, and work-remote solutions.
  • Raising awareness of local businesses that are still operating through a "We're Open" campaign on News 12 and recognizing those who were supporting our local communities through a “Hey Neighbor” campaign on Optimum.
  • Providing free airtime for public service announcements (PSAs) to health, community and government officials to educate customers on how to stay safe and healthy.
  • Providing around-the-clock, enhanced local news coverage across our News12 and Cheddar platforms to keep our viewers up-to-date.
 

Altice USA Consolidated Operating Results

(In thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

 

 

 

Broadband

$

942,030

 

 

$

826,454

 

 

$

3,689,159

 

 

$

3,222,605

 

Video

904,251

 

 

968,959

 

 

3,670,859

 

 

3,997,873

 

Telephony

110,430

 

 

145,767

 

 

468,777

 

 

598,694

 

Business services and wholesale

362,223

 

 

362,409

 

 

1,454,532

 

 

1,428,532

 

News and Advertising

192,857

 

 

148,649

 

 

519,205

 

 

475,904

 

Mobile

20,183

 

 

18,090

 

 

78,127

 

 

21,264

 

Other

3,447

 

 

4,221

 

 

13,983

 

 

15,987

 

Total revenue

2,535,421

 

 

2,474,549

 

 

9,894,642

 

 

9,760,859

 

Operating expenses:

 

 

 

 

 

 

 

Programming and other direct costs

831,119

 

 

847,653

 

 

3,340,442

 

 

3,300,528

 

Other operating expenses

581,435

 

 

598,274

 

 

2,264,473

 

 

2,300,398

 

Restructuring and other expense

2,394

 

 

33,888

 

 

91,073

 

 

72,978

 

Depreciation and amortization (including impairments)

511,754

 

 

567,459

 

 

2,083,365

 

 

2,263,144

 

Operating income

608,719

 

 

427,275

 

 

2,115,289

 

 

1,823,811

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net

(313,461

)

 

(376,497

)

 

(1,350,341

)

 

(1,530,850

)

Gain (loss) on investments and sale of affiliate interests, net

263,760

 

 

(4,718

)

 

320,061

 

 

473,406

 

Gain (loss) on derivative contracts, net

(204,467

)

 

21,273

 

 

(178,264

)

 

(282,713

)

Gain (loss) on interest rate swap contracts

10,119

 

 

7,833

 

 

(78,606

)

 

(53,902

)

Loss on extinguishment of debt and write-off of deferred financing costs

 

 

(84,207

)

 

(250,489

)

 

(243,806

)

Other income, net

2,300

 

 

1,117

 

 

5,577

 

 

1,183

 

Income (loss) before income taxes

366,970

 

 

(7,924

)

 

583,227

 

 

187,129

 

Income tax benefit (expense)

(30,701

)

 

9,255

 

 

(139,748

)

 

(47,190

)

Net income

336,269

 

 

1,331

 

 

443,479

 

 

139,939

 

Net income attributable to noncontrolling interests

(5,797

)

 

(1,002

)

 

(7,296

)

 

(1,003

)

Net income attributable to Altice USA stockholders

$

330,472

 

 

$

329

 

 

$

436,183

 

 

$

138,936

 

Basic net income per share

$

0.61

 

 

$

 

 

$

0.75

 

 

$

0.21

 

Diluted net income per share

$

0.60

 

 

$

 

 

$

0.75

 

 

$

0.21

 

 

 

 

 

 

 

 

 

Basic weighted average common shares

544,705

 

 

635,029

 

 

581,057

 

 

660,384

 

Diluted weighted average common shares

548,572

 

 

640,839

 

 

583,689

 

 

662,541

 

 

Altice USA Consolidated Statements of Cash Flows

(In thousands)

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income

$

443,479

 

 

$

139,939

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization (including impairments)

2,083,365

 

 

2,263,144

 

Gain on investments and sale of affiliate interests, net

(320,061

)

 

(473,406

)

Loss on derivative contracts, net

178,264

 

 

282,713

 

Loss on extinguishment of debt and write-off of deferred financing costs

250,489

 

 

243,806

 

Amortization of deferred financing costs and discounts (premiums) on indebtedness

91,127

 

 

106,214

 

Share-based compensation expense

125,087

 

 

105,538

 

Deferred income taxes

75,512

 

 

14,931

 

Decrease in right-of-use asset

45,995

 

 

46,581

 

Provision for doubtful accounts

65,965

 

 

91,520

 

Other

34,079

 

 

18,558

 

Change in assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

Accounts receivable, trade

(50,747

)

 

(91,718

)

Prepaid expenses and other assets

8,330

 

 

(60,854

)

Amounts due from and due to affiliates

3,594

 

 

(7,857

)

Accounts payable and accrued liabilities

(118,388

)

 

(144,894

)

Deferred revenue

(39,977

)

 

(10,384

)

Liabilities related to interest rate swap contracts

104,051

 

 

30,338

 

Net cash provided by operating activities

2,980,164

 

 

2,554,169

 

Cash flows from investing activities:

 

 

 

Capital expenditures

(1,073,955

)

 

(1,355,350

)

Payment for acquisitions, net of cash acquired

(149,973

)

 

(172,269

)

Other, net

3,502

 

 

2,150

 

Net cash used in investing activities

(1,220,426

)

 

(1,525,469

)

 

 

 

 

Altice USA Consolidated Statements of Cash Flows (continued)

(In thousands)

 

2020

 

2019

Cash flows from financing activities:

 

 

 

Proceeds from long-term debt

8,019,648

 

 

9,160,229

 

Repayment of long-term debt

(6,194,804

)

 

(8,159,914

)

Proceeds from collateralized indebtedness, net

 

 

93,000

 

Principal payments on finance lease obligations

(43,083

)

 

(8,980

)

Purchase of shares of Altice USA, Inc. Class A common stock, pursuant to a share repurchase program and Tender Offer

(4,816,379

)

 

(1,686,873

)

Proceeds from the sale of a noncontrolling interest in Lightpath, net of expenses

880,197

 

 

 

Additions to deferred financing costs

(48,523

)

 

(23,583

)

Proceeds from stock option exercises

14,348

 

 

3,209

 

Contributions from (distributions to) noncontrolling interests, net

12,498

 

 

(1,000

)

Other

(4,947

)

 

(500

)

Net cash used in financing activities

(2,181,045

)

 

(624,412

)

Net increase (decrease) in cash and cash equivalents excluding effect of exchange rate changes

(421,307

)

 

404,288

 

Effect of exchange rate changes on cash and cash equivalents

(2,167

)

 

(1,166

)

Net increase (decrease) in cash and cash equivalents

(423,474

)

 

403,122

 

Cash, cash equivalents and restricted cash at beginning of year

702,160

 

 

299,038

 

Cash, cash equivalents and restricted cash at end of year

$

278,686

 

 

$

702,160

 

 

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, 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, interest income, depreciation and amortization (including impairments), share-based compensation expense or benefit, restructuring expense or credits and transaction expenses.

We believe Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company. 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 the Company’s 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 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 Operating Free Cash Flow (defined as Adjusted EBITDA less cash capital expenditures), and Free Cash Flow (defined as net cash flows from operating activities less cash capital expenditures) as indicators of the Company’s financial performance. We believe these measures are two of several benchmarks used by investors, analysts and peers for comparison of performance in the Company’s industry, although they may not be directly comparable to similar measures reported by other companies.

Reconciliation of net income to Adjusted EBITDA and Operating Free Cash Flow

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

Net income

$

336,269

 

 

$

1,331

 

 

$

443,479

 

 

$

139,939

 

Income tax expense (benefit)

30,701

 

 

(9,255

)

 

139,748

 

 

47,190

 

Other income, net

(2,300

)

 

(1,117

)

 

(5,577

)

 

(1,183

)

Loss (gain) on interest rate swap contracts, net

(10,119

)

 

(7,833

)

 

78,606

 

 

53,902

 

Loss (gain) on derivative contracts, net

204,467

 

 

(21,273

)

 

178,264

 

 

282,713

 

Loss (gain) on investments and sales of affiliate interests, net

(263,760

)

 

4,718

 

 

(320,061

)

 

(473,406

)

Loss on extinguishment of debt and write-off of deferred financing costs

 

 

84,207

 

 

250,489

 

 

243,806

 

Interest expense, net

313,461

 

 

376,497

 

 

1,350,341

 

 

1,530,850

 

Depreciation and amortization (including impairments)

511,754

 

 

567,459

 

 

2,083,365

 

 

2,263,144

 

Restructuring and other expense

2,394

 

 

33,888

 

 

91,073

 

 

72,978

 

Share-based compensation

28,113

 

 

56,378

 

 

125,087

 

 

105,538

 

Adjusted EBITDA

$

1,150,980

 

 

$

1,085,000

 

 

$

4,414,814

 

 

$

4,265,471

 

Capital Expenditures (cash)

344,578

 

 

322,795

 

 

1,073,955

 

 

1,355,350

 

Operating Free Cash Flow

$

806,402

 

 

$

762,205

 

 

$

3,340,859

 

 

$

2,910,121

 

Reconciliation of net cash flow from operating activities to Free Cash Flow:

Net cash flows from operating activities

$

791,503

 

 

$

720,182

 

 

$

2,980,164

 

 

$

2,554,169

 

Capital Expenditures (cash)

344,578

 

 

322,795

 

 

1,073,955

 

 

1,355,350

 

Free Cash Flow

$

446,925

 

 

$

397,387

 

 

$

1,906,209

 

 

$

1,198,819

 

Customer Metrics(11,12) (in thousands, except per customer amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1-19

 

Q2-19

 

Q3-19

 

Q4-19

 

FY-19

 

Q1-20

Q2-20

Q3-20

Q4-20

 

FY-20

Homes passed(8)

8,724.0

 

8,750.4

 

8,769.1

 

8,818.6

 

8,818.6

 

8,834.8

8,880.1

8,987.9

9,034.1

 

9,034.1

Residential

4,539.8

 

4,538.9

 

4,538.6

 

4,533.3

 

4,533.3

 

4,568.4

4,621.4

4,663.5

4,648.4

 

4,648.4

SMB

382.4

 

384.4

 

384.4

 

383.1

 

383.1

 

381.7

375.7

377.5

376.1

 

376.1

Total Unique Customer Relationships(9)

4,922.2

 

4,923.2

 

4,922.9

 

4,916.3

 

4,916.3

 

4,950.1

4,997.1

5,040.9

5,024.6

 

5,024.6

Residential Customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadband

4,152.3

 

4,165.4

 

4,180.3

 

4,187.3

 

4,187.3

 

4,237.4

4,307.8

4,363.5

4,359.2

 

4,359.2

Video

3,276.1

 

3,255.3

 

3,223.4

 

3,179.2

 

3,179.2

 

3,137.5

3,102.9

3,035.1

2,961.0

 

2,961.0

Telephony

2,510.1

 

2,485.8

 

2,446.6

 

2,398.8

 

2,398.8

 

2,359.8

2,337.1

2,279.5

2,214.0

 

2,214.0

Residential ARPU ($)(10)

143.33

 

145.02

 

143.63

 

142.65

 

143.98

 

143.39

144.38

138.16

140.09

 

142.11

Residential ARPU ex RSN credits($)(10)

 

 

 

 

 

 

 

 

 

 

 

 

143.67

141.35

 

143.82

Consolidated Net Debt as of December 31, 2020

CSC Holdings, LLC (in $m)

Actual Principal

Amount

Coupon / Margin

Maturity

Guaranteed Notes

$1,499

5.500%

2026

Guaranteed Notes

1,310

5.500%

2027

Guaranteed Notes

1,000

5.375%

2028

Guaranteed Notes

1,750

6.500%

2029

Guaranteed Notes

1,100

4.125%

2030

Guaranteed Notes

1,000

3.375%

2031

Senior Notes

1,000

6.750%

2021

Senior Notes

649

5.875%

2022

Senior Notes

750

5.250%

2024

Senior Notes

1,046

7.500%

2028

Senior Notes

2,250

5.750%

2030

Senior Notes

2,325

4.625%

2030

Legacy unexchanged Cequel Notes

4

 

 

Term Loan

2,895

L+2.250%

2025

Term Loan B-3

1,253

L+2.250%

2026

Term Loan B-5

2,978

L+2.500%

2027

Drawn RCF

625

L+2.250%

2021,2024

CSC Holdings Gross Debt

23,433

 

 

CSC Holdings Cash

(238)

 

 

CSC Holdings Net Debt

$23,195

 

 

 

 

 

 

CSC Holdings Undrawn RCF

$1,712

 

 

WACD (%)

4.7%

 

 

Cablevision Lightpath LLC (in $m)

Actual Principal

Amount

Coupon / Margin

Maturity

Senior Secured Notes

$450

3.875%

2027

Senior Notes

415

5.625%

2028

Term Loan

600

L+3.250%

2027

Drawn RCF

L+3.250%

 

Lightpath Gross Debt

1,465

 

 

Lightpath Cash

(40)

 

 

Lightpath Net Debt

1,425

 

 

 

 

 

 

Lightpath Undrawn RCF

$100

 

 

WACD (%)

4.3%

 

 

Altice USA Consolidated (in $m)

Actual

Principal

Amount

Altice USA Consolidated Gross Debt

24,898

Cash

(279)

Total Altice USA Consolidated Net Debt

24,619

Finance leases and other notes

343

Net Debt including finance leases / other

$24,962

 

 

WACD (%)

4.7%

Net Leverage Schedules as of December 31, 2020 (in $m)

 

Lightpath

 

CSC Holdings,

LLC

 

Altice USA

Consolidated

 

 

 

 

 

 

Gross Debt Consolidated(13)

$1,465

 

$23,433

 

$24,898

Cash

(40)

 

(238)

 

(279)

Net Debt Consolidated

$1,425

 

$23,195

 

$24,619

LTM EBITDA

$217

 

$4,198

 

$4,415

L2QA EBITDA

$220

 

$4,336

 

$4,546

Net Leverage (LTM)

6.6x

 

5.5x

 

5.6x

Net Leverage (L2QA)

6.5x

 

5.3x

 

5.4x

Reconciliation to Financial Reported Debt

Actual

Total Debenture and Loans from Financial Institutions (Carrying Amount)

$24,770

Unamortized Financing Costs, Net of Premiums

33

Fair Value Adjustments

95

Gross Debt Consolidated

24,898

Finance leases and other notes

343

Total Debt

25,241

Cash

(279)

Net Debt

$24,962

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 more than 5.0 million residential and business customers across 21 states through its Optimum and Suddenlink brands. The Company operates a4, an advanced advertising and data business, which provides audience-based, multiscreen advertising solutions to local, regional and national businesses and advertising clients. Altice USA also offers hyper-local, national, international and business news through its News 12, Cheddar and i24NEWS networks.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the information under the heading "Financial Outlook". These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this release, including, without limitation, those regarding our intentions, beliefs or current expectations concerning, among other things: our future financial conditions and performance, results of operations and liquidity; our strategy, plans, objectives, prospects, growth, goals and targets; our ability to achieve operational performance improvements; 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 the terms "anticipate", "believe", "could", "estimate", "expect", "forecast", "intend", "may", "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 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 Annual Report on Form 10-K. 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.

____________________

(1)

Adjusted revenue excludes $18.5m ($17.6m in Residential Video and $0.9m in Business Services) in Q4 2020 and $97.2m ($94.3m in Residential Video and $2.9m in Business Services) in FY 2020 of service credits and associated franchise fees that the Company expects to return to customers as a result of regional sports networks ("RSN") affiliate fee credits the Company expects to receive for a minimum number of events not delivered in 2020.

(2)

Storm credits totaled $10.4m in Q4 2020 ($8.7m in Residential and $1.6m in Business Services) and $26.5m in FY 2020 ($22.8m in Residential and $3.7m in Business Services). The net impact of the storms on Adjusted EBITDA was $8.5m in Q4 2020 and $24.4m in FY 2020.

(3)

See “Reconciliation of Non-GAAP Measures” on page 6 of this release. Operating Free Cash Flow defined as Adjusted EBITDA less cash capital expenditures, and Free Cash Flow defined as net cash flows from operating activities less cash capital expenditures.

(4)

Q4 2020 Adjusted EBITDA growth of +5.8% and margin of 46.5% in Q4 2020 exclude approximately $18.9m of losses related to Altice USA’s mobile business in the current period and $20.4m of losses in Q4 2019. Q4 2020 Adjusted EBITDA growth of +6.6% and margin of 46.3% exclude the mobile losses, storm impact of $8.5m and RSN fee credits to revenue of $18.5m. FY 2020 Adjusted EBITDA growth of +4.2% and margin of 45.7% exclude approximately $73.0m of losses related to Altice USA’s mobile business in the current period and $39.4m of losses in FY 2019. FY 2020 Adjusted EBITDA growth of +4.8% and margin of 45.4% exclude mobile losses, storm impact of $24.4m, and RSN fee credits to revenue of $97.2m.

(5)

In Q3-20 and Q4-20 some customers were affected by Hurricanes Laura and Delta, which created a new pool of subscribers in Q4-20 who have balances outstanding that are more than 90 days past due ("storm-affected greater than 90-day"), which is when such customers would have been disconnected under the Company’s ordinary disconnect policies for non-paying customers. In addition, these hurricanes resulted in a net loss of approximately 5k residential customer relationships, 5k residential broadband customers, and 3k residential video customers in Q4-20 ("additional storm disconnects"). For FY-20 additional storm disconnects amounted to 11k residential customer relationships, 11k residential broadband customers, and 5k residential video customers.

(6)

Q4 adjusted customer counts include the retention of customers covered by the FCC Pledge and the New Jersey Executive Order who had balances outstanding that were more than 90 days past due at the end of Q3 2020, who had since been brought current due to a combination of balance forgiveness, cash payments, and payment plans. These customers were previously included in the reported customer numbers in prior quarters but excluded from adjusted customer tallies given their past-due status.

(7)

Net debt, defined as the principal amount of debt less cash, and excluding finance leases and other notes.

(8)

Homes passed represents the estimated number of single residence homes, apartments and condominium units passed by the broadband network in areas serviceable without further extending the transmission lines. In addition, it includes commercial establishments that have connected to our broadband network. Broadband services were not available to approximately 30 thousand homes passed and telephony services were not available to approximately 500 thousand homes passed.

(9)

Total Unique Customer Relationships represent the number of households/businesses that receive at least one of the Company’s fixed-line services. Customers represent each customer account (set up and segregated by customer name and address), weighted equally and counted as one customer, regardless of size, revenue generated, or number of boxes, units, or outlets. Free accounts are included in the customer counts along with all active accounts, but they are limited to a prescribed group. Most of these accounts are also not entirely free, as they typically generate revenue through pay-per-view or other pay services and certain equipment fees. Free status is not granted to regular customers as a promotion. In counting bulk Residential customers, such as an apartment building, we count each subscribing family unit within the building as one customer, but do not count the master account for the entire building as a customer. We count a bulk commercial customer, such as a hotel, as one customer, and do not count individual room units at that hotel.

(10)

ARPU calculated by dividing the average monthly revenue for the respective quarter (fourth quarter for annual periods) derived from the sale of broadband, video and telephony services to Residential customers by the average number of total Residential customers for the same period. "ARPU ex RSN credits" reflects an adjustment back for credits that we currently anticipate will be issued to video customers as a result of credits the Company expects to receive from certain sports programming networks whereby the minimum number of events were not delivered pursuant to the contractual agreements with the networks and related franchise fees.

(11)

Customer metrics do not include Altice Mobile customers.

(12)

Customer metrics for the 2020 periods include customers that have not been disconnected pursuant to the FCC Pledge that the Company made in response to the COVID-19 pandemic and customers that have not been disconnected pursuant to the New Jersey Executive Order No. 126 ("NJ Order") enacted in April 2020 that protects New Jersey residents from disconnection of internet and voice services for non-payment. The following table provides details of these COVID-19 related offers and programs:

Q4-20 Residential Subscriber Detail

Subscribers (000s)

Customers

 

Broadband

 

Video

 

Phone

Reported net additions

(15.1)

 

(4.3)

 

(74.1)

 

(65.5)

less: FCC Pledge >90 day

(3.6)

 

(3.5)

 

(1.3)

 

(1.9)

less: NJ Order >90 day

(18.9)

 

(18.7)

 

(1.1)

 

(7.5)

less: Storm-affected >90 day

9.2

 

8.7

 

4.8

 

2.0

Adjusted net additions (ex. >90 day)

(1.9)

 

9.1

 

(76.5)

 

(58.1)

(13) Principal amount of debt excluding finance leases and other notes.

 

Investor Relations
Nick Brown: +1 917 589 9983 / nick.brown@alticeusa.com
Cathy Yao: +1 347 668 8001 / cathy.yao@alticeusa.com

Communications
Lisa Anselmo: +1 516 279 9461 / lisa.anselmo@alticeusa.com

Source: Altice USA