Optimum Communications, Inc. — 2023 Form 10-K Summary
Filing identity: The supplied filing is Altice USA, Inc.’s Form 10-K, not a filing under the name Optimum Communications, Inc. Altice USA markets its services primarily under the Optimum brand. Fiscal year ended December 31, 2023; comparisons below are to 2022 unless stated otherwise. The filing reports annual results, not a standalone fourth-quarter income statement.
Business context and reporting period
Altice USA provides broadband, video, telephony and mobile services, plus business connectivity, news and advertising, across 21 states. At year-end it reported approximately 4.7 million fixed-service customer relationships and 9.6 million network passings. Its FTTH network passed 2.7 million homes and businesses. Altice USA is a holding company; its operating businesses are conducted through subsidiaries. The company reports one operating segment.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $9.237 billion | $9.648 billion | Down $411 million (4%) |
| Operating income | $1.702 billion | $1.803 billion | Down $101 million (6%) |
| Net income attributable to Altice USA stockholders | $53 million | $195 million | Down $141 million |
| Adjusted EBITDA | $3.609 billion | $3.867 billion | Down $258 million (7%) |
| Adjusted EBITDA margin | 39.1% | 40.1% | Down 1.0 percentage point |
| Net cash from operating activities | $1.826 billion | $2.367 billion | Down $541 million (23%) |
| Cash capital expenditures | $1.705 billion | $1.914 billion | Down $209 million (11%) |
| Free cash flow | $122 million | $453 million | Down $331 million (73%) |
| Net interest expense | $1.639 billion | $1.332 billion | Up $307 million (23%) |
Adjusted EBITDA and free cash flow are non-GAAP measures as defined by the company. Free cash flow is operating cash flow less cash capital expenditures.
At December 31, 2023, cash and cash equivalents were $302 million, current assets $835 million and current liabilities $2.308 billion. Total debt, including finance leases, notes payable and supply-chain financing, was approximately $25.1 billion. The CSC Holdings revolving facility had $1.516 billion undrawn and available, subject to covenant limitations. Stockholders’ deficiency was $434 million. No cash dividends were declared in 2023.
Material changes versus 2022
- Residential broadband revenue fell 3% to $3.824 billion; video revenue fell 6% to $3.072 billion; and telephony revenue fell 10% to $300 million. Management attributed the declines mainly to fewer customers.
- Residential customer counts declined: broadband by 114,000, video by 267,000 and telephony by 249,000. Total customer relationships fell by 136,000, while passings increased by 165,000. Overall penetration declined to 49.3% from 51.6%.
- Mobile lines rose by 82,000 to 322,000, and mobile service revenue increased 25% to $77 million. FTTH passings grew by 576,000 to 2.735 million; FTTH relationships increased by 170,000 to 341,000.
- News and advertising revenue declined 14% to $448 million, primarily because of lower political advertising. The company sold Cheddar News in December 2023.
- Programming and other direct costs declined 5%, mainly reflecting fewer video customers, partly offset by contractual programming-rate increases. Other operating expenses declined 3%; the company cited lower share-based compensation and lower rebranding costs, partly offset by labor, repair and utility costs.
- Interest expense increased 23%, primarily because of higher interest rates, despite lower average debt balances. Cash from operations and free cash flow declined substantially.
Outlook, commentary, risks and unusual items
- Outlook: The filing gives no quantified revenue, earnings or cash-flow guidance. Management expects programming rates to continue increasing and capital expenditures to remain significant as it expands FTTH and upgrades HFC. It stated that cash, operating cash flow and available revolving facilities should fund the current operating plan, planned capital expenditures and debt service for the next 12 months, while cautioning that longer-term funding depends on performance and access to capital markets.
- Debt and refinancing: Debt is substantial, includes variable-rate borrowings, and is subject to restrictive covenants. The company reported covenant compliance at year-end. In January 2024, CSC Holdings issued $2.05 billion of 11.75% notes due 2029 to refinance specified term loans and transaction costs. It also announced redemption of $750 million of 5.25% notes due 2024, expecting to use a revolving-facility draw to repay them in February 2024. These post-year-end transactions affect the debt profile but are not included in the December 31, 2023 debt balances.
- Impairment and other items: The company recorded a $163 million goodwill impairment for News and Advertising, citing lower projected cash flows from advertising-market weakness and a higher discount rate. Restructuring, impairments and other operating items totaled $215 million, compared with $130 million in 2022; 2022 included a $112.5 million litigation settlement, of which $47.5 million remained payable by June 30, 2024.
- Legal and regulatory: Two music-copyright lawsuits allege subscriber infringement and seek substantial statutory damages; the company is defending both. Trial in one matter was scheduled for September 2024. The filing also identifies expired franchises in Brookhaven and New York City, operated under temporary or extended authority while renewal processes remain pending.
- Principal business risks: Competition from fiber and fixed-wireless providers, customer attrition, declining video demand, rising programming costs, capital-market access and interest rates, high leverage, network disruptions, cybersecurity, and changing regulation. The Affordable Connectivity Program was expected to exhaust funding in May 2024 absent further congressional funding.
- Audit and controls: KPMG issued an unqualified opinion on the financial statements and on internal control over financial reporting. The goodwill impairment assessment was identified as a critical audit matter.
Most important facts for an investor to verify
- Confirm the issuer and security: this is Altice USA, Inc. (NYSE: ATUS), using the Optimum brand; the request’s company name differs from the filer named in the document.
- Review customer losses and broadband revenue trends, especially whether FTTH additions and mobile growth offset attrition in legacy services.
- Assess cash conversion and investment needs: operating cash flow was $1.826 billion, but free cash flow was $122 million after $1.705 billion of cash capital expenditures.
- Examine debt maturities, variable-rate exposure, covenant headroom and the terms and uses of the January 2024 refinancing; the filing’s year-end debt table does not include those subsequent transactions.
- Evaluate the assumptions behind the $163 million News and Advertising goodwill impairment and whether advertising performance could cause further impairment.
- Track the copyright litigation, franchise renewals, the remaining 2022 settlement payment and the effect of ACP funding expiration on subscribers and revenue.