Altice USA, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Altice USA Q3 2020 results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Mr. Nick Brown. Thank you. Please go ahead, sir.

Hello, everyone, and thank you for joining. In a moment, I'll hand you over to our TCUSA CEO, Dexter Gay, and CFO, Mike Brough, who will take you through the presentation, and then we'll move to Q&A. As today's presentation may contain forward-looking statements, please read the disclaimer on page two. Dexter, please go ahead.

Thanks, Nick, and hello, everyone. Before we begin, I once again want to thank to take the opportunity to thank the LCCUSA team. I'm very proud of the ongoing commitment displayed by our employees in navigating this uniquely difficult time. And we delivered another great quarter together. Starting with a summary on slide three, total revenue was flat year over year due to the adjustments for anticipated nine months of regional sports network credits. If not for this revenue adjustment, we would have grown 3% in Q3. I'll come back to this in a moment. Separately, this quarter, our business was impacted by Hurricane Isaias in the New York tri-state area and Hurricane Laura, which mostly hit Louisiana and the Gulf Coast. We mainly saw disruptions from downed power lines and damaged cable strands, interrupting service for some of our customers, for which we have issued customer credits. Further adjusting revenue for these storm credits, underlying revenue growth would have been a strong 3.7% in the third quarter, a significant acceleration from growth in the first half of the year. Our revenue outperformance was driven by broadband revenue growth of 15.6% year-over-year. We saw strong demand for our broadband services with net additions of 26,000, even with the storm disruptions, or 32,000 adjusted for storms. Our acquisition of Service Electric, which closed in July, contributed another 30,000 additional customers in the quarter. Contributing to this growth was our successful completion of the one gig rollout at Optimum, making one gig service available across the entire New York tri-state area. In business services, we continue to see resilience amongst both our SMB and Lightpath Enterprise customers. In news and advertising, we had a strong recovery helped by political revenue and improved local advertising. Our strong performance led to an acceleration in adjusted EBITDA growth to 5.5% year-over-year, or 6.3% year-over-year ex mobile, and up to 7.7% further adjusting for the storm's impact. Our free cash flow of $458 million was up 176% year-over-year, helping us deliver $1.46 billion in free cash flow year-to-date, which is already well ahead of the $1.2 billion generated for the full year of 2019. We continue to take advantage of the attractive valuation in our share price, completing approximately $450 million in share repurchases in Q3, totaling just over $1.8 billion year-to-date through the third quarter. We have raised our target guidance to $2 billion or higher share repurchase for the full year from $1.7 billion previously. On the outlook more broadly, we continue to expect revenue and adjusted EBITDA growth this year. We maintain our CapEx guide of less than $1.3 billion and target year-end net leverage of 4.5 to 5 times. To wrap up this summary, I want to say we remain incredibly optimistic about the strength of our core business, and we continue to focus on opportunities to drive value for shareholders. Starting to slide four, you can see our underlying revenue growth remains strong in this environment, demonstrating the defensiveness of our business. Total revenue was flat at minus 0.2% year-over-year. The RSN revenue credits of $79 million booked this quarter represent an estimate of what we expect to refund to customers when we realize rebates from the RSNs due to fewer games being delivered year-to-date because of Major League Baseball's decision to shorten the season. These RSN credits did not impact reported EBITDA nor cash flow since we will have a corresponding reduction in programming costs. In Q4, we anticipate further RSN credits to reflect a corresponding impact on the last three months of the year, which we expect to be approximately one-third of the amount we recorded in Q3. And the Q3 number, again, was a year-to-date number for the entire year. Excluding these RSN credits, we achieved 3% total revenue growth in the third quarter. Further excluding the impact of storm credits, which totaled about $16 million this quarter, total revenue growth would have been 3.7%. Residential revenue declined 1.6% year over year, including the RSN credits, but would have grown 2.3% adjusted for that, or 3% further adjusted for the storm credits. Business services grew at 1.3% year over year, but would have grown 1.8% adjusting for the RSN credits, and 2.4% further adjusted for the storm credits. We are also extremely pleased with the recovery in news and advertising, where revenue grew 5.2% year over year. All in all, we are very pleased with the results, and we continue to believe that our businesses are well positioned in this environment. Turning to slide five, we once again delivered strong subscriber results. LTC USA added 8,000 unique residential customers in the quarter, including 26,000 residential broadband customers, compared to a year ago when we reported flat unique customers and 15,000 residential broadband additions. The storms had a negative impact of about 6,000 So in the absence of these storms, we would have grown customer relationships by 14,000 with over 32,000 broadband net ads. The impact of Hurricane Delta in October, which hit Louisiana area right after Hurricane Laura, is likely to have similar customer impact in Q4, given the severity of the damage in the region of Delta compounding on Laura. Note that these figures exclude Service Electric, which added another 34,000 customers to our base, including 30,000 broadband customers in the quarter. The adjusted subscriber results shown here exclude customers who would have otherwise been disconnected in adherence with our normal disconnect policy of greater than 90 days. In the absence of the FCC pledge and New Jersey executive order. Making these adjustments, we still would have reported 5,000 customer relationship net ads and 23,000 broadband net ads. We continue to benefit from increased market share gains, including from DSL and mobile-only households. In summary, we feel extremely good about the underlying momentum and our customer growth matrices. Slide 6 provides a more detailed breakdown of the bridge between our reported and adjusted customer matrices. We have been really pleased with their progress in retaining pledge customers, and as of the end of Q3, we only had a small number of customers remaining on the pledge. Recall that last quarter, we had about 10,000 customers on the pledge who were past due on their payment by greater than 90 days. We are now below 3,000 as we had success in various retention initiatives implemented to retain the customers and begin receiving payments again. On video, we saw an accelerated pace of disconnect compared to the prior year. This was mostly due to lower gross ad video attachments, as well as disconnecting the video products for some of our customers associated with the pledge and the New Jersey executive order as we worked through our various retention programs. Turning to slide seven, we continue to see our network performing very well, even with heavier usage during the pandemic. Our broadband speed upgrades remain elevated up 45% year over year. Average monthly data usage per customer was up 44% year-over-year, averaging approximately 420 gigabytes per customer per month in Q3. And our broadband-only customers used nearly 530 gigabytes of data per month. 29% of our gross additions took one gigabit broadband speed in areas where it was available, up from 24% in the second quarter. And we remain very optimistic about the one gig opportunities. And following the commercial launch of our Fiverr double and triple offerings, I'm pleased to say our Fiverr sell-in rates, the portion of gross additions taking Fiverr to the home in areas where it's available, is already at 44%, up from 28% in Q2 2020, ending the quarter with just over 16,000 customers and representing an enormous growth and cost-saving opportunity. Additionally, 60% of our Fiverr gross ads are taken to one gig product, which is a higher proportion of customers taking the one gig on our HFC plant, representing a great monetization opportunity. To summarize, we're very pleased with our network performance, and we remain focused on continuously monitoring and upgrading our network to support demand. Turning to slide eight, we are pleased to announce that we complete our one gig rollout this quarter with one gig services now available across 100% of the optimum footprint. We more than doubled one gig availability year over year to 92% of our consolidated LTC USA footprint, up from 76% at the end of the second quarter. Our one gig customer penetration increased to 5.7% in Q3, up from 3.7% in Q2. And we continue to see a lot of room to drive penetration, upselling customers to higher speed tiers. Increasing one gig availability across the rest of Optimum's footprint through the rest of 2020 increases our broadband opportunity to continue to upsell to higher speeds. Our average download speeds continue to increase to 262 megabits. But about 60% of our base today still only have internet speeds of 200 megabits or lower, representing a meaningful opportunity for us to continue to deliver faster speeds to customers. Turning to slide nine, we want to remind you once more of our long-term network strategy. We are focused on upgrading our existing network, new build edge outs, and pursuing additional footprint expansion opportunities. In addition to completing our 1 gig DOCSIS 3.1 upgrade across the optimum footprint, we have now passed over 900,000 homes passed today ready for service for FTTH, and we're targeting upgrading the entire optimum footprint, which totals about 5 million homes passed. to further improve the customer experience, significantly reduce cost longer term, and drive revenue growth as we upsell. In Sunlink, about 80% of our homes are one gig enabled over HST, but that means we have a sizable upgrade opportunity remaining with approximately 400,000 homes which can be upgraded for one gig capacity, cost effectively, and further increase our penetration from approximately 30% today on those 400,000 homes. Our network edge-out strategy is focused primarily in our sudden-link footprint, where we have seen extremely strong traction in capturing market share as soon as we roll out new builds. On average, we reach about 40% penetration within 12 months of a new build, a remarkable result that gives us a lot of optimism and comfort in our strategy. We are currently adding 150,000-plus homes passed annually and are focused on increasing the level of new build activity going forward. which will help drive future customer and revenue growth. Finally, an additional footprint expansion opportunities beyond edge-outs, we complete our purchase of Service Electric, which added another 70,000 homes past to our footprint. As I've shared before, we continue to look for other cable M&A opportunities to expand. We have also filed for the upcoming FCC RDOF auction, which starts this week, where we would look for opportunities to invest in network builds in rural areas with partial subsidy by government, should the return on investment be attractive. Turning to our mobile business on slide 10, we launched flexible data plans this quarter, offering our consumers the flexibility to choose any of our three very affordable tiered data plans at 1 gig for $12, 3 gigs for $20, or unlimited at $40 per month. Our mix and match capability will accommodate customers and families with all types of data usage needs. We added 18,000 mobile net additions for the third quarter, ending the quarter with 162,000 lines. Our momentum remains slowed by retail store closures due to the pandemic, with nearly half of our stores still closed, but we have managed to reach 3.5% penetration as a percentage of our total unique residential customer base. We remain focused on improving customer experience and broadening our product offerings with a continued expansion of our handset lineup and launching our 5G service. We continue to see an early indication of churn reduction in mobile during stay-at-home and remain excited about the opportunity for further churn reduction from bundling with our cable offerings. On slide 11, turning to business services, we saw resilience and recovery in both our SMB and LightPath businesses. Total business services revenue grew 1.3%, or 1.8% adjusted for $2 million in RSN credits, and 2.4% if we further adjust for the storm credits. LightPath grew 2.6%, and SMB and other grew 0.8% year-over-year. At LightPath, we continue to see increased sales and customer engagement to the education, healthcare, and government verticals, and a benefit from shorter sales cycles due to the work from home. We also launched our SD-WAN product suite, which helped contribute to nearly 49% revenue growth in our managed services offerings year over year. In our SMB business, Q3 represented the first quarter this year that we saw positive net additions in the SMB space. Our e-commerce sales activities have increased, which lowers our cost of customer acquisition. Obviously, there is still uncertainty from a potential second wave of shutdowns in our markets. However, we remain very pleased with this business services performance and recovery throughout this challenging year, performing better than we expected. We continue to expect a close to our light path transaction in the fourth quarter following regulatory approval. Turning to our news and advertising business on slide 12, we're extremely pleased to report revenue growth of 5.2% year-over-year in Q3. Even without the incremental contribution from political ad sales this quarter on a year-over-year basis, the trajectory of recovery in our news and advertising business has improved. Advertising revenue ex-political declined only 6.6% year-over-year in Q3, compared to a decline of 15.6% in Q2. In addition to the boost from political, we saw a recovery in local advertising from its trough in April. October has seen a further increase in advertising revenue to the highest monthly level year-to-date. We continue to benefit from positive viewership trends with 42% increase in Cheddar website traffic since pre-pandemic, an increase in users of 64%, and a 35% increase in News 12 TV viewership on a year-over-year basis. Sports are starting to come back as well, which is a positive for advertising expense. However, we still anticipate pressure in the national brand and segment of our business and continue to assess market conditions. Year-to-date, our news and advertising business is now flat, and we are cautiously optimistic that we can achieve flat revenue for the full year, but this continues to depend a lot on many factors, including whether we can see a full comeback of sports the remainder of this year and avoid further protracted lockdowns. And with that, I'll turn this over to Mike to discuss the financials in more detail.