Altice USA (NYSE: ATUS) today reports results for the second quarter ended June 30, 2023.
Dennis Mathew, Altice USA Chairman and Chief Executive Officer, said: "I am pleased with the progress we are making as we act with discipline and focus to execute on our mission for Optimum to be the connectivity provider of choice across all the communities we serve. In the second quarter we achieved sustainable operational and financial improvements across the business, with significant achievements in our customer experience and field operations translating into higher customer satisfaction metrics and reduced call volume and service visits. Our focus on creating better experiences for our customers while driving down costs resulted in stronger broadband net add performance in the quarter compared to the prior year. Our best-in-class products and networks continued with the launch of our 8 Gig symmetrical Fiber Internet service, cementing Optimum as the nation’s largest 8 Gig internet provider. Our strategy to provide the best products, the best networks, and the best customer and employee experiences, through operational execution and financial discipline, is leading to better trends across the business, and I am optimistic that the achievements in the quarter are leading indicators of a return to sustainable broadband and cash flow growth."
Key Financial Highlights
- Total Revenue declined -5.6% YoY in Q2 2023 to $2.32 billion, including Residential revenue decline of -5.7% YoY, Business Services revenue decline of -1.9% YoY and News & Advertising revenue decline of -14.8% YoY.
- Net income attributable to stockholders was $78.3 million in Q2 2023 ($0.17/share on a diluted basis) compared to $106.2 million in Q2 2022 ($0.23/share on a diluted basis).
- Net cash flows from operating activities were $438.8 million in Q2 2023, compared to $676.3 million in Q2 2022.
- Adjusted EBITDA(1) declined -8.5% YoY in Q2 2023 to $921.7 million, with a margin of 39.7%.
- Cash capital expenditures of $473.4 million in Q2 2023 represented 20.4% of revenue (11.4% of revenue excluding fiber-to-the-home (FTTH) and new builds) and were down -2.4% YoY.
- Operating Free Cash Flow(1) decreased -14.1% YoY to $448.3 million in Q2 2023.
- Free Cash Flow (Deficit)(1) was ($34.6) million in Q2 2023.
Q2-23 Summary Financials | Three Months Ended June 30, | Six Months Ended June 30, | |||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||
Revenue | $2,324,274 | $2,463,014 | $4,618,252 | $4,884,911 | |||
Net income attributable to Altice USA, Inc. stockholders | 78,300 | 106,174 | 104,165 | 302,725 | |||
Adjusted EBITDA(1) | 921,742 | 1,007,068 | 1,790,133 | 1,998,798 | |||
Capital Expenditures (cash) | 473,445 | 485,126 | 1,056,342 | 877,497 | |||
Revenue Growth and Adjusted EBITDA Detail | Q2-23 | |
Total Revenue YoY | (5.6)% | |
Residential Revenue(2) YoY | (5.7)% | |
Business Services Revenue YoY | (1.9)% | |
excluding Sprint early termination revenue(3) | (1.3)% | |
News & Advertising Revenue YoY | (14.8)% | |
excluding political revenue | (8.4)% | |
Adjusted EBITDA YoY | (8.5)% | |
Adjusted EBITDA Margin | 39.7% |
Key Operational Highlights
- Total Broadband Primary Service Units (PSUs): Quarterly broadband net losses were -37k in Q2 2023, compared to -39k broadband net losses in Q2 2022.
- Total Fiber Broadband PSUs: Quarterly Fiber (FTTH) broadband net additions were +40k in Q2 2023, our best quarter for fiber net adds. Fiber broadband net adds were driven by both higher fiber gross additions and increased migrations of existing customers. Total fiber broadband customers reached 250k as of the end of Q2 2023.
- Optimum Mobile has approximately 264k mobile lines as of the end of Q2 2023, adding +16k mobile net additions in Q2 2023 (+35k net additions excluding customers receiving free service(4)), reaching 5.8% penetration of the Company's total broadband customer base.
- Residential revenue(2)declined -5.7% YoY in Q2 2023 to $1.84 billion.
- Residential revenue per customer relationship(5)declined -2.8% YoY in Q2 2023 to $137.44, mostly due to the loss of higher ARPU video customers.
- Business Services revenue of $364.7 million was down -1.9% YoY in Q2 2023. SMB / Other revenue was down -2.0% YoY in Q2 2023. Lightpath revenue was down -1.4% YoY in Q2 2023. Lightpath revenue decline is driven by Sprint early termination revenue(2) in the prior period of approximately $2.3 million; excluding this early termination revenue, Lightpath revenue would have grown +1.1% in Q2 2023.
- News and Advertising revenue was down -14.8% YoY to $113.5 million in Q2 2023, or down -8.4% excluding political revenue.
Customer Metrics (in thousands, except per customer amounts) | |||||||
Q1-22 | Q2-22 | Q3-22 | Q4-22 | FY-22 | Q1-23 | Q2-23 | |
Total Passings(6) | 9,304.9 | 9,363.1 | 9,414.9 | 9,463.8 | 9,463.8 | 9,512.2 | 9,578.6 |
Total Passings additions | 41.6 | 58.2 | 51.8 | 48.8 | 200.5 | 48.4 | 66.4 |
Total Customer Relationships(7)(8) | |||||||
Residential | 4,612.1 | 4,564.2 | 4,514.7 | 4,498.5 | 4,498.5 | 4,472.4 | 4,429.5 |
SMB | 382.9 | 383.1 | 382.5 | 381.2 | 381.2 | 380.9 | 381.0 |
Total Unique Customer Relationships | 4,995.0 | 4,947.3 | 4,897.2 | 4,879.7 | 4,879.7 | 4,853.3 | 4,810.5 |
Residential net additions (losses) | (20.7) | (47.9) | (49.5) | (16.2) | (134.3) | (26.1) | (42.9) |
Business Services net additions (losses) | 1.0 | 0.2 | (0.6) | (1.3) | (0.7) | (0.3) | 0.1 |
Total customer net additions (losses) | (19.8) | (47.7) | (50.1) | (17.5) | (135.0) | (26.4) | (42.7) |
Residential PSUs | |||||||
Broadband | 4,373.2 | 4,333.6 | 4,290.6 | 4,282.9 | 4,282.9 | 4,263.7 | 4,227.0 |
Video | 2,658.7 | 2,574.2 | 2,491.8 | 2,439.0 | 2,439.0 | 2,380.5 | 2,312.2 |
Telephony | 1,951.5 | 1,886.9 | 1,818.9 | 1,764.1 | 1,764.1 | 1,703.5 | 1,640.8 |
Broadband net additions (losses) | (13.0) | (39.6) | (43.0) | (7.7) | (103.3) | (19.2) | (36.8) |
Video net additions (losses) | (73.6) | (84.5) | (82.4) | (52.8) | (293.2) | (58.6) | (68.3) |
Telephony net additions (losses) | (53.7) | (64.7) | (68.0) | (54.8) | (241.1) | (60.6) | (62.7) |
Residential ARPU ($)(5) | 139.00 | 141.36 | 139.24 | 135.86 | 138.83 | 135.32 | 137.44 |
SMB PSUs | |||||||
Broadband | 350.4 | 350.7 | 350.2 | 349.1 | 349.1 | 349.0 | 349.1 |
Video | 102.6 | 101.0 | 99.1 | 97.3 | 97.3 | 95.3 | 93.7 |
Telephony | 216.8 | 215.3 | 214.0 | 212.3 | 212.3 | 210.0 | 208.0 |
Broadband net additions (losses) | 1.1 | 0.3 | (0.5) | (1.1) | (0.2) | (0.1) | 0.1 |
Video net additions (losses) | (1.6) | (1.6) | (1.9) | (1.8) | (6.9) | (2.0) | (1.6) |
Telephony net additions (losses) | (2.0) | (1.6) | (1.3) | (1.7) | (6.5) | (2.3) | (2.0) |
Total Mobile Lines | |||||||
Mobile ending lines | 198.3 | 231.3 | 236.1 | 240.3 | 240.3 | 247.9 | 264.2 |
Mobile ending lines excluding free service(4) | 190.0 | 195.5 | 202.7 | 208.7 | 208.7 | 223.3 | 257.9 |
Mobile line net additions | 11.9 | 33.0 | 4.8 | 4.1 | 53.8 | 7.6 | 16.3 |
Mobile line net additions ex-free service(4) | 3.6 | 5.5 | 7.2 | 6.0 | 22.3 | 14.6 | 34.6 |
Fiber (FTTH) Customer Metrics (in thousands) | |||||||
Q1-22 | Q2-22 | Q3-22 | Q4-22 | FY-22 | Q1-23 | Q2-23 | |
FTTH Total Passings(9) | 1,316.6 | 1,587.1 | 1,908.2 | 2,158.7 | 2,158.7 | 2,373.0 | 2,659.5 |
FTTH Total Passing additions | 145.7 | 270.4 | 321.2 | 250.5 | 987.8 | 214.2 | 286.6 |
FTTH Residential | 80.4 | 103.7 | 134.2 | 170.0 | 170.0 | 207.2 | 245.9 |
FTTH SMB | 0.6 | 0.7 | 1.2 | 1.7 | 1.7 | 2.7 | 3.9 |
FTTH Total customer relationships(10) | 81.0 | 104.4 | 135.3 | 171.7 | 171.7 | 209.9 | 249.7 |
FTTH Residential net additions | 11.1 | 23.3 | 30.5 | 35.8 | 100.7 | 37.2 | 38.6 |
FTTH SMB net additions | 0.2 | 0.2 | 0.4 | 0.6 | 1.4 | 0.9 | 1.2 |
FTTH Total customer net additions | 11.3 | 23.5 | 30.9 | 36.4 | 102.1 | 38.1 | 39.8 |
Fiber Rollout, Multi-Gig Fiber Internet and Network Expansion Update
- Fiber (FTTH) rollout update: As of Q2 2023, the Company has 2.66 million FTTH passings, adding +287k new FTTH passings in the quarter.
- Launch of Optimum 8 Gbps (8 Gig) Symmetrical Fiber. Optimum 8 Gig Fiber is available to 1.7 million passings at the end of Q2 2023. Last year the Company also introduced both Optimum 5 Gbps (5 Gig) and 2 Gbps (2 Gig) Fiber Internet, with symmetrical data speeds up to 5 Gig and 2 Gig respectively in certain portions of its footprint. At the end of Q2 2023, 72% of the Company’s fiber passings in the Optimum East footprint had multi-Gig speeds available to them (1 Gig symmetric speeds are available to 100% of the Company's entire fiber footprint).
- 1 Gbps (1 Gig) broadband or higher speed sell-in to all new customers, where 1 Gig or higher services are available, was 39% in Q2 2023. Approximately 21% of the Residential broadband customer base currently take 1 Gig or higher speeds, representing a significant growth opportunity for the Company.
- Broadband speeds taken on average have nearly doubled in the past three years to 421 Mbps in Q2 2023.
- Broadband-only customer usage averaged 619 GB per month in Q2 2023, which is 23% higher than the average usage of the entire customer base (501 GB per month).
- New build activity update: The Company has been accelerating the pace of its network edg
