Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Altice USA Inc (ATUS, Financial) reported $2.2 billion in revenue and $867 million in adjusted EBITDA for Q2 2024, showing improved financial discipline.
- The company saw growth in fiber, mobile, and B2B businesses, with a healthy broadband customer base of 4.4 million customers.
- Customer satisfaction metrics have significantly improved, with transactional NPS growing by 34 points and relationship NPS by 18 points over the last two years.
- Optimum fiber was recognized for having the fastest and most reliable Internet speeds in New York and New Jersey, and was named the best Internet service provider in the mid-Atlantic region by PCMA.
- The company has successfully implemented AI tools to enhance customer experience and operational efficiency, leading to fewer truck rolls and service calls.
Negative Points
- Total revenue declined by 3.6% year over year, with residential revenue down by 4.4% due to a smaller customer base and continued losses of video subscribers.
- The company faces competitive and macro pressures, including higher interest rates, higher inflation, and increased competition, particularly in the West footprint.
- Q2 free cash flow was negative $41 million, impacted by higher cash taxes and operational expenses.
- Broadband subscriber net losses were 51,000 in the quarter, driven by seasonal university disconnects, competitive pressures, and the impact of the ACP sunsetting.
- The company has a high leverage ratio of 7.2 times the last two quarters annualized adjusted EBITDA, indicating significant debt levels.
Q & A Highlights
Q: Can you give us an idea of the current run rate savings from the truck rolls and the call center in bounds? And then as a follow-up, where do you think you are as far as integrating AI in your business for efficiencies and so forth?
A: Dennis Mathew (CEO): We're seeing significant improvements with 1.7 million fewer calls and 235,000 fewer truck rolls. We're leaning into self-installs and proactive communication, which is driving savings and improving customer experience. We're investing these savings back into the business, particularly in AI tools for our retention and care agents to manage call volumes and provide tailored offers. Marc Sirota (CFO): We've kept operational costs flat while making these investments. We're in the early innings with AI, but it's already helping guide operations and maintain video ARPU.
Q: Can you talk to some of the moving pieces we should be mindful of for the back half and how we should think about the full year EBITDA?
A: Marc Sirota (CFO): We expect year-over-year EBITDA declines to moderate due to operational improvements and investments in customer experience and network. We're focused on long-term sustainable EBITDA growth, driven by disciplined use of AI and tailored customer interactions.
Q: Can you provide more specifics on how ACP impacted broadband performance in the second quarter and your expectations for the second half?
A: Dennis Mathew (CEO): We saw nominal churn increase from ACP sunsetting, but managed it well with tailored offers and packages. The main impact was a slowdown in gross adds in the low-income segment. We believe we have the right products and services to compete long-term.
Q: Can you quantify the change in broadband retention and net adds in any of the green shoot cohorts?
A: Dennis Mathew (CEO): We're seeing meaningful stabilization in churn, particularly in markets with fiber overbuilders. Speed rightsizing and mobile bundling are improving customer satisfaction and loyalty. We're also seeing improved performance in towns where we've implemented hyper-local strategies.
Q: Can you help us think about the migration rate on the fiber side and how it might change in the back half of the year?
A: Dennis Mathew (CEO): In Q2, 60% of fiber net adds were migrations. We've solved technical issues and aim to accelerate migrations in the second half by integrating strategies into all customer interaction channels.
Q: Can you give us some color on your expectations for advertising revenue in the second half?
A: Marc Sirota (CFO): Excluding one-time items, we grew over 2% in Q2. We expect strong political advertising in the second half, leading to double-digit full-year growth in news and advertising revenue.
Q: Can you update us on the pace of incremental fiber builds in both your eastern and western footprint?
A: Dennis Mathew (CEO): In the East, about 70% is overbuilt by fiber competitors, mainly Verizon. In the West, about 40% is overbuilt, with AT&T and other fiber overbuilders. Fixed wireless availability varies by region, with T-Mobile being the primary competitor in the East.
Q: Can you provide an update on your overbuilding efforts and what you're seeing from competitors?
A: Dennis Mathew (CEO): We're on track to launch in New Jersey later in Q3. We're focusing on cost-effective builds and new passings, particularly in fast-growing towns in the West. We're also seeing continued overbuild activities from competitors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
