Altice USA, Inc.

Thank you for standing by and welcome to the Altice USA first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Thank you. I would now like to turn the conference over to Mr. Nick Brown. Sir, please begin.

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

Hello everyone. Before we begin, I once again want to express my gratitude for the hard work and commitment shown by the LTC USA team with our employees continuing to navigate the pandemic effectively together. We've had a great start to the year delivering strong financial and customer growth in the first quarter, which positioned us well for the rest of the year. As such, we are confident in reiterating our financial outlook for 2021. Starting with slide three, reported revenue grew 1.2% year over year. Adjusted to exclude customers' past due payments greater than 90 days in the prior quarter, in other words, for customers we consider to be current or paying, adjusted broadband net ads were 20,000 and adjusted residential customer net additions were 8,000. In addition, this quarter we reached a fantastic milestone for passing over 1 million homes with fiber to the home. Furthermore, our product suite continues to expand. Just this week we launched our smart Wi-Fi 6 service to further drive an enhanced connectivity experience. Turning to financials, we grew adjusted EBITDA 4.2%, achieving adjusted EBITDA margin of 43.4% or foul losses. We also delivered our best-ever first quarter free cash flow performance, generating over half a billion dollars of free cash flow, which grew 82% year over year. This supported incremental share of purchases of $523 million in Q1. Finally, earlier this month, we successfully completed the acquisition of the very fast-growing cable business Morris Broadband, which will nicely complement the organic growth we're seeing across the company. Turning to slide four, you can see that our revenue growth remains strong in this environment, again, highlighting the defensiveness of our business. Total revenue growth grew 1.2% year over year in the first quarter, 1.3% supported by the exceptional customer growth we saw last year. Business services continues to be resilient, growing 0.7% with early signs of recovery coming from positive reopening trends at both our light path and SMB businesses. Finally, news and advertising was flat year over year at minus 0.4%, which is truly remarkable results given the tough comparison to Q1 of last year pre-pandemic. Turning to slide five, we've seen a normalization in our customer and broadband growth following a record year in 2020. On a reported basis, we had a net loss of 1,000 residential customer relationships, Remember, in the fall, we were impacted by the combination of three hurricanes, Delta, Laura, and Isaiah, and in the first quarter, by the Texas winter freeze, resulting in about 9,000 customers in our customer count at the end of Q4, whose bills were passed due more than 90 days, which is when we would usually disconnect those customers. Payment plans and cash payments, these customers became current in Q1. On an adjusted or current basis, including those storm-affected climates, We realized customer net additions of 8,000 in Q1, which as in prior quarters, we believe is the best measure of our underlying performance. We gained 12,000 residential customers in the first quarter on a reported basis and 20,000 broadband additions adjusting for the former storm affected customers who are now current again. Overall, we're very pleased with the subscriber activity we saw in the first quarter, including very strong and above expected retention and payment trends from past two customers who became current in the fourth quarter. One thing to touch on is regulatory. New York State may implement new legislation which could prevent us from disconnecting some customers that are past due on their bills, very similar to the New Jersey Executive Order and FCC Pledge, which we managed very effectively last year. We have built all the tools to administer this type of legislation signed by the governor. This could mean, if passed, there will be likely continued customer and financial impact starting in Q2, in the same vein as the New Jersey order and the FCC pledge last year. In that case, we would continue to report customer figures on both a reported basis and an adjusted or what we would consider current or paying basis for any customers over 90 days. Additionally, we will be participating in the FCC Emergency Broadband Benefits or EBB program, which provides a discount of up to $50 per month towards broadband service for certain eligible customers. This gives us cautious optimism that we will continue to see a favorable payment trend across our get past any residual noise from the storms and the New Jersey order in the first half, including a second quarter that tends to be a seasonally weaker one. We expect more of a tailwind to customer growth in the second half of the year, especially as we see more benefit from our accelerated pace of edge outs. We continue to expect the customer growth for the full year in 2021 to be at least in line with or better than 2019 and 2018 levels, not including approximately 30,000 more broadband customers, which we added in the second quarter. On video, we continue to see lower video attach rates in our base and continue to expect video net losses to be similar to 2020. We remain focused on customer retention of existing video customers and believe this is a combination with lower video attach rates and the mixed shift towards broadband only will only be accretive to margins over time. I also want to briefly touch on our mobile customer trends. We reached 174,000 lines at the end of Q1, which is equivalent to 3.7 penetration of our residential customer base. Our tiered data plans continue to gain traction with about 70% of our gross ads now taking our one gig and three gig plans in Q1. These tiered plans, along with our right size unlimited prices, are helping us drive much better gross margins as we continue to focus on profitability. Substantially, all of our customer devices have now been migrated to the T-Mobile network, delivering a premium network experience, which has helped us reduce churn by 20% compared to the prior quarter and will also help us further reduce costs. For the full year, we expect mobile EBITDA losses to continue to improve year on year. Turning to slide six, we continue to see our network performing very well, even with the heavier usage trends persisting into the beginning of this year. Average monthly data usage per customer was up 39% year over year. Focusing on our only broadband customer base, data usage has now reached over 600 gigabytes per customer per month, which is 26% higher than the average for our entire customer base. particularly as we're seeing elevated levels of video streaming activity. We see no signs of this data consumption growth slowing down and feel really well positioned with the quality of our network to meet this customer demand. Our recent smart Wi-Fi 6 launch is the latest development in improving the customer experience, including three times faster Wi-Fi speeds, a more reliable connection with less interference, and support for a lot more devices in the home. In tandem with this data usage growth, we are continuing to see more and more customers taking faster and faster broadband speeds. 43% of our gross additions took 1 gigabit broadband speeds in areas where it was available, up from 13% a year ago. And we remain very optimistic about 1 gig and multi-gig opportunities. Over 50% of our customer base still now only takes 200 megabits per second or lower, so this represents a multi-year upgrade growth story. Turning to slide seven, the completion of our DOCSIS 3.1 upgrade last year to support one gig availability across 100% of the optimal footprint increased our opportunity to continue to upsell customers to higher broadband speed tiers. Our one gig customer penetration increased to 9.8% in Q1, up from 2.4% a year ago. Doubled in the past three years to 302 megabits per second, And as you can see, this was an accelerating as customers are increasingly buying into and valuing the step up to one gig. Turning to slide eight, we want to focus and to remind you on our long-term fiber network strategy. In Q1, we exceeded 1 million homes passed ready for service or about 20% of our optimum footprint. We are currently on track to pass a half a million homes this year. more in line with 2019 levels before the pandemic slowed down the permitting process in 2020. Following the commercial launch of our fiber double and triple play offerings in the second half of last year, fiber selling rates have picked up to about two-thirds of gross additions, up from just 14% a year ago. This is supporting increased penetration of TTH passings, up to 3.6% now compared to 0.7% We continue to expect accelerated adoption of our FTTH offering, where we really only started offering a more full suite of fiber products, including video, last summer. Today, two-thirds of our fiber gross ads are taking our symmetric one gig product, representing a great opportunity to differentiate our fiber offering and increase our revenue, increasingly appreciating higher upload speeds. As a result, we are already seeing 25% higher customer satisfaction from our installed fiber customer base compared to our HFC cable customers. This is a great indication of a long-term improved customer experience we're expecting from our fiber investment, not to mention the additional long-term OpEx and CapEx efficiencies. Separately, we are simultaneously accelerating our new build deployment, particularly around the edges of the Suddenlink footprint. And our recent Morse broadband transaction opens up even more new build opportunities in North Carolina. We're also continuing to upgrade about 400,000 homes in the Sunling footprint through full upgrades of RF equipment to be up to one gig capable. All in all, we remain very busy on the network and expansion front and expect this to translate to higher net customer additions over time. On slide 9, we want to highlight our success with our recent Service Electric of New Jersey acquisition and the additional opportunities we see in our Morris broadband acquisition. Recall, we also were able to execute on significant margin expansion with our prior Sunlink and Cablevision acquisitions while growing revenues sustainably and embarking on significant network upgrades to support future growth. And our margins would actually be even higher if it were the same. same scale as some of our larger peers on the program assigned. First, on the left, for Service Electric, you can see that based on our estimates, we've already more than doubled Service Electric's adjusted EBITDA margin to less than a year, and we still expect further expansion from here. As we roll out the optimum suite of products and services, we are also targeting increased customer penetration, ARPU, and revenue growth. Morris Broadband on the right has a similar number of customer relationships, but much lower penetration, just about 35% broadband penetration, as well as significant new build growth opportunities in surrounding areas. This is one of the fastest growing cable businesses we've seen in the U.S. market with relatively low margins and a network recently fully upgraded to DOCSIS 3.1. By executing on very similar efficiencies to what we've achieved with Surface Electric, including programming synergies, we are targeting approximately 60% margins by next year. We also get significant tax benefits with the transaction as a transaction structure allowed us to complete step-up basis for the acquired assets. We continue to actively look for additional bolt-on cable M&A opportunities as we believe this to be an extremely creative use of capital given our track record. On slide 10, looking at business services, We have begun to see a recovery in revenue trends across our SMB and light path businesses, including our best month of customer growth in March that we've seen for about 18 months as major markets like Texas and New York have begun reopening. This includes some seasonal businesses like resorts opening earlier than usual to make up for 2020. Business services grew 0.7% year-over-year in Q1, up from about flat in Q4. We continue to see strong demand for higher speed tiers from education and healthcare verticals, driven by remote learning and telehealth solutions, as well as growth in corporate demand to allow for remote work conditions. Our new LightPath management team is already gaining traction and extending beyond its historical enterprise customer focus into strategic wholesale and carried communications infrastructure opportunities. We've also been actively looking at entering into new tier one enterprise markets as an additional growth opportunity and should have more to say here in the coming months. For the full year we expect business services to continue to generate positive revenue growth with recovery picking up more in the back half of the year. Now turning to our news and advertising business on slide 11 we are very pleased we've been able to keep up with revenues flat approximately year over year despite the tougher comps pre-pandemic a year ago and with a sharp drop off in political spend from the end of 2020. We continue to see a recovery in local advertising and the comparisons year over year should be a lot easier to bottom out last year. We anticipate this recovery will continue through this year as markets reopen and business confidence improves and expect to be flattish on the year over year basis, even with a tougher comp in the second half due to political. And now I'll hand you over to Mike to go over the financials in more detail.