charter communications 2Q07_Slides


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charter communications 2Q07_Slides

  1. 1. Charter Communications 2Q07 Earnings Call August 2, 2007 1
  2. 2. Cautionary Statement Regarding Forward Looking Statements This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the quot;Securities Actquot;) and Section 21E of the Securities Exchange Act of 1934, as amended (the quot;Exchange Actquot;), regarding, among other things, our plans, strategies and prospects, both business and financial. Charter will not undertake to revise forward-looking projections to reflect events after this date. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under “Risk Factors” from time to time in our filings with the Securities and Exchange Commission (“SEC”). Many of the forward-looking statements contained in this presentation may be identified by the use of forward-looking words such as quot;believe,quot; quot;expect,quot; quot;anticipate,quot; quot;should,quot; quot;planned,quot; quot;will,quot; quot;may,quot; quot;intend,quot; quot;estimated,quot; quot;aim,quot; quot;on track,quot; quot;target,quot; quot;opportunityquot; and quot;potential,quot; among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this presentation are set forth in reports or documents that we file from time to time with the SEC, and include, but are not limited to: –the availability, in general, of funds to meet interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash flows from operating activities, further borrowings or other sources and, in particular, our ability to be able to provide under the applicable debt instruments such funds (by dividend, investment or otherwise) to the applicable obligor of such debt; –our ability to comply with all covenants in our indentures and credit facilities, any violation of which could trigger a default of our other obligations under cross-default provisions; –our ability to pay or refinance debt prior to or when it becomes due and/or refinance that debt through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position; –competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers and DSL providers; –difficulties in introducing and operating our telephone services, such as our ability to adequately meet customer expectations for the reliability of voice services, and our ability to adequately meet demand for installations and customer service; –our ability to sustain and grow revenues and cash flows from operating activities by offering video, high-speed Internet, telephone and other services and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition; –our ability to obtain programming at reasonable prices or to adequately raise prices to offset the effects of higher programming costs; –general business conditions, economic uncertainty or slowdown; and –the effects of governmental regulation, including but not limited to local and state franchise authorities, on our business. All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this presentation. Unless otherwise stated, all results are pro forma which reflect the sales of certain systems in 2006 and 2007 as if such transactions had occurred as of January 1, 2006. 2
  3. 3. Executing on Key Metrics Double-digit revenue and adjusted EBITDA growth for Consistent Strategies 3 consecutive quarters Best 2Q RGU net adds in 5 years Leveraging Foundation 12.6% ARPU growth • Bundle driving ARPU • Telephone supporting growth Continuing Momentum in bundled customers 3
  4. 4. RGUs Drive Financial Growth Total RGUs 8.2% Y/Y 12,000,000 Growth Revenue Adj EBITDA Y/Y Growth Y/Y Growth 11,000,000 12% 11% 11% 10,000,000 10% 9% 8% 9,000,000 2Q06 3Q06 4Q06 1Q07 2Q07 6% 5% 2Q RGU net adds 4% 166,300 47% 2% 175,000 150,000 0% 125,000 2Q06 112,800 2Q07 100,000 75,000 50,000 4 2Q06 2Q07
  5. 5. Advanced Services Support Video Growth Total video RGUs Advanced services expanding: 99,700 8,500,000 Net Gain Y/Y 50% Y/Y increase in customers with advanced set top boxes HD/DVR available to 85% digital 8,000,000 customers 2Q07 VOD revenue up 28% Y/Y 7,500,000 2Q06 3Q06 4Q06 1Q07 2Q07 HD OnDemand content launched Video $52.69 $55.38 ARPU 2Q07 video ARPU increased 5.1% Y/Y 5
  6. 6. HSI Reinforces the Bundle Strategy 2Q07 HSI net adds 70,000 16% 60,300 HSI net adds increase nearly 16% 60,000 51,900 50,000 HSI revenues increase 21% Y/Y in 2Q07 40,000 5.6% ARPU increase Y/Y in 2Q07 30,000 2Q06 2Q07 HSI penetration increased to 24% YTD HSI net adds from 21% Y/Y 190,000 183,900 17% Growth supported by increased speed 180,000 and content 170,000 157,100 75% of customers receive 5Mbps or higher 160,000 150,000 Integrating content across platform 140,000 130,000 2Q06 2Q07 6
  7. 7. Telephone Fueling RGU Growth Telephone net gains and penetration rates remain strong 150,000 125,000 2Q07 Telephone Stats 7.6M Telephone Homes Passed 100,000 700K Telephone Customers 75,000 9% Telephone Penetration (percent of Telephone HP) 50,000 9.5 – 10M Homes Passed Guidance for YE 2008 25,000 2Q06 3Q06 4Q06 1Q07 2Q07 2Q07 annualized penetration rate 7% Annualized penetration rate: Represents annualized quarterly net telephone additions as a percentage of homes passed at the 7 beginning of that period.
  8. 8. Charter Bundle Catalyst for Success 2Q07 Bundle Customer Mix 42% 17.7% Y/Y growth in bundled customers Triple play ARPU of $125 - $130 Triple play penetration 2Q07 Bundle Revenue Mix 77% of telephone customers 10% of customer relationships 62% 62% 42% of customers contributing nearly two-thirds revenue 8
  9. 9. 2Q07 Financial Performance 2Q07 Results Revenue Summary 2Q Y/Y YTD ($ millions) 2Q07 Growth Growth Double-digit revenue growth Video $858 4% 4% driven by HSI and telephone High-Speed Internet 310 21% 22% Telephone 80 176% 186% ARPU increased 12.6% Commercial 83 12% 14% Other 167 4% 2% HSI revenue driven by customer Total Revenues $1,498 11% 11% growth of 14.7% and a 5.6% Operating Costs and increase in ARPU Expenses 959 11% 10% Adj EBITDA $539 11% 12% Commercial revenue continuing strong growth Cap Ex 281 (6%) 7% Consistent strategies generating improved results 9
  10. 10. Footnotes Unless otherwise stated, all results are pro forma which reflect the acquisition of cable systems in January 2006 and the sales of systems in 2006 and 2007 as if such transactions had occurred as of January 1, 2006. Adjusted EBITDA and pro forma adjusted EBITDA are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is defined as income from operations before special charges, depreciation and amortization, loss on sale or retirement of assets, asset impairment charges, and stock compensation expense. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company’s businesses as well as other non-cash or non-recurring items, and is unaffected by the Company’s capital structure or investment activities. Adjusted EBITDA and pro forma adjusted EBITDA are liquidity measures used by Company management and its Board of Directors to measure the Company’s ability to fund operations and its financing obligations. For this reason, it is a significant component of Charter’s annual incentive compensation program. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing for the Company. Company management evaluates these costs through other financial measures. The Company believes that adjusted EBITDA and pro forma adjusted EBITDA provide information useful to investors in assessing Charter’s ability to service its debt, fund operations, and make additional investments with internally generated funds. In addition, adjusted EBITDA generally correlates to the leverage ratio calculation under the Company’s credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the SEC). For a reconciliation of pro forma adjusted EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measure see the Appendix. 10
  11. 11. Appendix 11
  12. 12. CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES (DOLLARS IN MILLIONS) 2005 2006 2007 Pro Forma Pro Forma Pro Forma 2nd Quarter (a) 2nd Quarter (a) 2nd Quarter (a) Net cash flows from operating activities $ - $ (21) $ (149) Less: Purchases of property, plant and equipment (319) (290) (281) Less: Change in accrued expenses related to capital expenditures 30 (2) (7) Free cash flow (289) (313) (437) Interest on cash pay obligations (b) 379 424 452 Purchases of property, plant and equipment 319 290 281 Change in accrued expenses related to capital expenditures (30) 2 7 Other, net 3 9 18 Change in operating assets and liabilities 81 74 218 Adjusted EBITDA $ 463 $ 486 $ 539 (a) Pro forma results reflect certain sales of cable systems in the third quarter of 2006, January 2007 and May 2007 as if they occurred as of January 1, 2006. (b) Interest on cash pay obligations excludes accretion of original issue discounts on certain debt securities and amortization of deferred financing costs that are reflected as interest expense in our consolidated statements of operations. The above schedules are presented in order to reconcile adjusted EBITDA and free cash flows, non-GAAP measures, to the most directly comparable GAAP measures in accordance with Section 401(b) of the Sarbanes-Oxley Act.