Cablevision’s profits sink 65 percent in Q3
Cablevision’s shares were smarting this morning after the cable operator reported that its profit dipped 65 percent in the third quarter, but the company’s revenues did get a boost from the inclusion of the former Bresnan Communications customers.
After its earnings report was issued earlier today, Cablevisions’ shares were down 13 percent. On the plus side, Cablevision’s revenues grew 8 percent to $1.67 billion, which met the average analyst projection.
Net income was down to $39.3 million, or 14 cents per share, from $112.1 million, or 37 cents per share, a year ago. Industry analysts had predicted an average of 32 cents per share for the nation’s fifth-largest cable operator.
Cablevision CEO and President Jim Dolan pointed out a couple of anomalies that impacted the company’s third-quarter numbers, including $16 million in costs associated with Hurricane Irene, as well as the continued slump in new home construction.
While the inclusion of the former Bresnan customers helped the bottom line, Cablevision’s expenses increased due to higher programming and sales and marketing costs. In this morning’s conference call, Dolan also noted that the third quarter was a historically weak season for the company.
Cablevision’s adjusted operating cash flow (AOCF) growth was $539 million, compared with analyst projections of $601 million, but excluding Bresnan and Hurricane Irene, it was down 4 percent from the same quarter a year ago.
“Not all of our results in the quarter are where we want them,” Dolan said. “By many measures, we’ve built the most successful cable television company in the nation and have set nearly every industry benchmark for sales, customer retention, penetration and financial performance. Continuing to build on this historical performance has become more challenging in a highly competitive environment, which is compounded by economic pressures, including a significant decline in housing activity. However, we are addressing the challenge and in many ways have been preparing for it for several years. We have taken pioneering steps to develop products and enhance our services for customers without straining their wallets.
“Historically, Cablevision has confronted challenges in a constantly evolving business over multiple business cycles. We are highly confident that the spirit of service, innovation and execution will guide us as we move forward.”
Cablevision chief operating officer Tom Rutledge said several other factors have impacted the company’s quarter-over-quarter revenue growth during the fiscal year, including the fallout from the fourth quarter carriage dispute with Fox Networks, “which led us to take a smaller revenue increase than planned to stabilize the customer base over the long term.”
On the other hand, Cablevision benefitted from the third-quarter strike at Verizon.
Cablevision, which competes toe-to-toe with Verizon and satellite video providers across its New York metro footprint, lost 19,000 video customers in the third quarter, which was actually under analysts’ average estimate of 26,000. In the same quarter a year ago, Cablevision lost 24,500 video subscribers.
While Time Warner Cable reported yesterday that it lost 8,000 phone subscribers in the third quarter, Cablevision added 38,000 voice subscribers. Thanks in part to a new triple-play promotion, Cablevision’s high-speed data customers increased by 17,000.
Rutledge said on the call this morning that the net subscriber changes for voice, video and data subscribers marked improvements over last year’s third quarter and this year’s second quarter.
“These improvements were accomplished largely by continuing the strategies which we’ve been successful with in the past,” he said. “We’ve introduced a new triple-play package highlighted by a faster high-speed data service, Boost Plus, and we’ve marketed heavily throughout our operating areas to reinforce the value of our products and services.
“Our aggressive win-back strategy continues. As of Sept. 30, our win-back total is more than 45 percent of customers who once tried FiOS.”
Cablevision is working on retaining and adding subscribers with new features and services. Rutledge said that since the deal was announced a month ago to give Cablevision subscribers access to Turner Networks programming outside of their homes, more than 100,000 customers have registered for the free service. Additionally, Cablevision has 560,00 Apple devices – iPads, iPhones and iPad Touches – using its Optimum app.
On the programming front, Cablevision has launched 19 new international premium channels this year, for a total of 85 international channels.
Cablevision’s Optimum Lightpath commercial services division posted a 6 percent year-over-year revenue growth for a total of $77.5 million. Rutledge said Optimum Lightpath continued to make inroads with new clients, including increasing its presence in the New Jersey Public School District by 26 percent.