Business context and reporting period
This is Altice USA, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2023. The filing identifies Optimum as its residential brand; it does not identify Optimum Communications, Inc. as the registrant. Altice USA provides broadband, video, telephony, business, advertising, and mobile services across a network with approximately 9.5 million passings. It reports one operating segment.
Financial performance and condition
Amounts below are in millions of dollars except per-share data and customer metrics.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $2,294 | $2,422 |
| Operating income | $425 | $512 |
| Adjusted EBITDA (non-GAAP) | $868 | $992 |
| Net income attributable to Altice USA stockholders | $26 | $197 |
| Net cash from operating activities | $417 | $600 |
| Capital expenditures, cash basis | $583 | $392 |
| Free cash flow (deficit), as defined by the company | $(166) | $208 |
Operating margin was approximately 18.5% versus 21.2%; Adjusted EBITDA margin was approximately 37.8% versus 41.0%. Net interest expense was $389 million, up from $303 million. Cash and cash equivalents were $220 million at quarter-end. Debt carrying value was approximately $25.0 billion, including current debt of $373 million; the filing reports $644 million of undrawn revolving credit availability, subject to covenant limitations. Total liabilities were $32.5 billion and stockholders’ deficiency was $503 million.
Material changes versus the prior comparable period
- Revenue fell $128 million, or 5.3%. Residential broadband revenue declined 3%, video 8%, and telephony 9%; news and advertising revenue declined 14%. Management cited customer losses and lower average recurring broadband revenue, video subscriber attrition, and weaker linear advertising.
- At March 31, residential broadband customers were 4.264 million, down from 4.373 million a year earlier; video customers were 2.381 million, down from 2.659 million. Total customer relationships declined to 4.853 million from 4.995 million. FTTH passings and FTTH customer relationships increased to 2.373 million and 210,000, respectively.
- Adjusted EBITDA declined 12.4%, while cash capital expenditures rose 49% to $583 million, principally reflecting higher network infrastructure spending. Operating cash flow decreased 31%, and free cash flow turned negative.
- Interest expense increased by $86 million, primarily because of higher interest rates. GAAP net income also reflected volatile fair-value changes: a $192 million investment gain and a $166 million derivative loss in Q1 2023, compared with a $151 million investment loss and a $101 million derivative gain in Q1 2022.
Outlook, risks, contingencies, and unusual items
- Management expects cash, operating cash flows, and revolving-credit availability to support the operating plan, planned capital expenditures, and debt service for the next 12 months. It cautions that longer-term funding depends on operating performance and continued access to capital markets; it may need to refinance, defer spending, sell assets, or take other measures.
- The company continues its FTTH build and expects programming rates to rise. It warns of competition, subscriber and advertising demand, economic conditions, execution and capital-spending risks, substantial indebtedness, interest-rate exposure, and network, cybersecurity, supply-chain, and regulatory risks. No quantified full-year financial guidance is provided in the supplied filing text.
- After quarter-end, CSC Holdings issued $1.0 billion of senior guaranteed notes at 11.25%, due May 15, 2028. Proceeds were used temporarily to repay revolving-credit borrowings.
- In January, the company settled collateralized debt associated with Comcast shares by delivering the shares and related derivatives; it received approximately $50.5 million net cash, including dividends, and recorded a $4.4 million debt-extinguishment gain. Restructuring and other operating items were $29.7 million, chiefly $28.0 million in terminated-employee payments, versus $3.4 million in Q1 2022.
- The company disclosed approximately $7.5 billion of commitments and contingencies not reflected on the balance sheet, primarily programming commitments. It is defending a copyright lawsuit alleging subscriber infringement of more than 7,700 works; management does not expect the matters individually to materially affect operations or financial position, but an individual period’s results or cash flows could be affected.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Altice USA, Inc., not an entity named Optimum Communications, Inc.
- Review subscriber trends and whether broadband revenue and customer losses stabilize, alongside progress and take-up of the FTTH network.
- Assess the sustainability of operating cash flow and the elevated capital-spending plan, including the drivers of negative quarterly free cash flow.
- Check debt maturities, variable-rate exposure, covenant headroom, refinancing needs, and the cost and use of the post-quarter 11.25% note issuance.
- Monitor programming commitments, litigation developments, and other contingencies, and distinguish non-GAAP Adjusted EBITDA from GAAP earnings and cash flow.