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CHTR Q3 2016 Results - Result Call Transcript

<font color="#ffff00">-==- proudly presents Charter Communications, Inc. Charter Communications, Inc. I would like to take this opportunity to welcome everyone to Charter's Investor Call for the third quarter of 2016. Now I would like to hand over the conversation to Mr. Stefan Anninger. <font color="#ffff00">-==- proudly presents

Welcome to Charter's third quarterly 2016 investors' meeting. Prior to proceeding, I would like to recall that there are a number of risks and other warnings in our SEC submissions, such as our most recent power of attorney and Forms 10-K and 10-Q. All forward-looking information reflects management's current views only and Charter assumes no responsibility to publicly rework or modify any forward-looking information or to make any forward-looking assessments in the future. However, Charter does not undertake any responsibility to publicly release any forward-looking information.

Those non-GAAP statutory metrics may not be consistent with metrics with similar securities used by other entities. With the exception of the third Quarter of 2016 and unless otherwise stated, all client and finance information referenced in this release is deemed to be transaction information as if it had been entered into at the beginning of the earliest benchmark year.

Also, please be aware that all rates of increase noted in this conference call and presentations are annualized unless otherwise stated. I am joined by Tom Rutledge, Chairman and Chief Executive Officer, and Chris Winfrey, our CFO. Charter Communications, Inc. At the end of September, we began implementing our Time Warner Cable brand management strategies, covering Texas and California.

Our processes include introducing new products - new prices and packages - and renaming our products Spectrum. It is our expectation that by the beginning of next year we will be going through all Cable and Bright House Life Insurance products by next year, with clients and capital gains following over the course of the year as they have with Pre-Deal Charter.

For small and medium-sized businesses, we will introduce the complete Spectrum SMB price structure and package as well as Time Warner Cable and Bright House passages in mid-2017. As in the consumer segment, we will provide SMB product offerings that are better than what telecoms are offering at lower rates and drive consumer expansion as we have done with the Pre-Deal Charter since the introduction of SMB price and package in early 2015.

Therefore, we will be investing more in each client operation and thus provide higher-value work. This higher-value work pushes deals out of the organization and lowers the cost of deals per dollars of sales and client relationships. Our strategy's operational and financials results have been shown under the Pre-Deal Charter and we anticipate similar results for the newcomer.

Over the next two years, we will also be completing the fully digitized transitions at Time Warner Cable and Bright House. After all, portability continues to be an area with great opportunities for the Charter and the wider wire and cable industries. Our short-term objectives in the area of transportation are to achieve more subscriber satisfaction and prolong subscriber lives by providing an attractive package of products.

Prior to forwarding the call to Chris Winfrey, who will discuss the quarterly in more detail, I wanted to emphasize that we had a very robust fiscal year. Revenues increased by more than 7% and EBITDA by more than 14% year-on-year, partly due to our ability to leverage synergy effects that quickly benefit our P&L, but also to the continuing strengthening of our Legacy Charter businesses.

The third quarter client results were more contradictory to the good results at Legacy Charter and Bright House, but higher migrations and upgrades in the Time Warner Cable market as we anticipated as Time Warner Cable was marketing the advertising prices. Pending the introduction of our Spectrum prices and packages in the recently purchased services, we still anticipate a higher level of charge and downgrade where Time Warner Cable was the operating company.

The results before the deals Charter continues to mirror the multi-year effect of our business planning, which includes a 6.2% increase in retail and SME customers over the last 12 month, with 9.7% increase in online customers, 70,000 new videos and 7.2% sales without counting on rates up. Our expansion strategy is therefore working and our integrations are continuing as planned or ahead of time.

What we have seen inside or outside has not altered our confidence in our long-term commercial opportunity and our future outlook for our Group. Charter Communications, Inc. Customers that you see in today's material are still using old enterprise definition. In a few quarters' timeframes, we will summarize our client information and trend plans with the same shared definition.

Previously, certain takesaways, penetrations and ARPU remain important for the trend of inheritance entities, but are less useful in comparison of one entities with another. In the third three months, overall client activity increased year-on-year by 5.1%, of which 4.5% was in the case of legacy TWC, 6.2% in the case of legacies charter and 5th place. Nine percent at Lawrence Bright House.

Last year, TWC private home movie clients decreased by approximately 0.5%, Pre-Deal Charter increased its private home movie client franchise by 1.2% and Bright House dropped approximately 2.6% of its private home movie clients. Quarter on quarter performances of videocustomers increased year over year for Pre-Deal Charter and Bright House, while net losses for TWC videoclips were 54,000 less than a year earlier, mainly due to an increased videodowngrade business due to legacies price and packing problems.

Overall, our retail banking business with our entire online subscriber pool increased by 1.6 million or 8 million people. In the same time frame, household sales per consumer increased by approximately 1.8%, almost exclusively due to TWC early year rates rises and step-ups that affected volume expansion. Chart 9 shows that our client sales expansion, in combination with our ARPU sales expansion, resulted in 6.7% sales expansion compared to the previous year.

Overall trade revenues, i.e. SMEs and enterprises together, increased by 12. 1%, slightly lower than last year, due to lower mobile mast boom rate and unique NaviSite benefits last year. And without politics, ad revenues increased by around 2%. Overall, the company's third quarterly sales on a proforma basis were up 7.4% year-on-year.

In terms of overall sales for each of our legacy businesses, TWC sales rose 7.7%, with almost half of the housing market still to grow. This was mainly due to the sustained increase in customers. Bright house revenues were growing by 6. 6%, where their Florida stores were continuing to do well.

As part of our total internal cost of sales, we reallocated a number of operational expenses positions between the rows both in the reporting period and in the past. Costs for services decreased by approximately 2%, despite general client sales increases of 5%. 1%, due to lower Legacy Charter servicing transaction levels, the absence of purely digitized activities at TWC in this third quarter compared to the third quarter of last year, and partially due to fewer physically separated purely digitized segments.

In addition, other operating income increased by 7.9%, due to higher personnel and administration charges, which included promotional charges, company disposals and higher IT spending compared to the prior year for Legacy TWC. Included in this increase is further Legacy Charter expansion, without synergy benefits, at a significantly higher pace than turnover expansion. And, without the transaction synergy and mergers and acquisitions and workforce for the TWC all-digital centre in 2015, the Charter's underlying EBITDA is expected to have grown just above the overall turnover increase margin.

Non-synergistic Legacy Charter remains a good indicator of how subscription and financial data will evolve once our Spectrum prices and packages are fully implemented. In the coming quarter, our results of operations will mirror the reversal of certain of our products and package strategy, particularly at TWC, which we believe to be unsustainable due to high advertising launches and annuity rates, high consumer service charges, which include fashion charges, and complexity and stacking of offerings.

It is our aim to make the switch to new prices and packages more profitable. However, TWC's sales are likely to grow at a lower pace until spectrum pricing and packing are fully operational, relational expansion is accelerated and a systemic approaches to roll-offs and retentions is in place. Furthermore, we anticipate that by 2018, similar to the Legacy Charter, we will be spending more OpEx on services and equity on fully digitized applications.

However, what will differ from the legacy charter is that we will have deal synergy and legacy charter operation expansion to fund much of this additional expenditure. Regarding net profit after Chart 11, we achieved net profit of $189 million in the third quarter to which charterholders are entitled, compared to $2 million in the prior year on a pro-forma basis, with our increase supported by higher underlying Adjusted EBITDA and gains on translation gains on our GBP liabilities and related hedges.

Most of this increase was due to higher underlying Adjusted EBITDA following the closing of our deal. Our debt-equity ratio is being reduced quickly and we can exploit this overcapacity in various ways. In the third quarter, we bought back 1. 1 million charter equities for $281 million at an annual weighted market value of approximately $267 per common share. 1. 1 million charter equities were bought back for $281 million at an annual weighted market value of approximately $267 per common share. 1. 1 million charter equities were bought back at an annual weighted market value of approximately $267 per common share. 1. 1 million charter equities were bought back for $281 million at an annual weighted market value of approximately $267 per common share. 1.

Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. If you introduce Spectrum, you have the feeling that an investor is expecting a large loss in relation to ARPU or sales per client relation.

Charter Communications, Inc. and we went through exactly the same procedure. Legacy Charter, for example, had high-priced cartons and inexpensive goods when we went through this in 2012. So the ARPU client elevator may not have been as high as it would have been if you had hit interest, but our rate of increase has accelerated.

I think it' s the bad thing that folks concentrate on when they try to concentrate on the ARPU instead of discussing the increase in client relationships. This is the true value of the expansion policy over the course of your life as compared to how much you can take. Charter Communications, Inc.

Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. Well I don't know if I should get into the thoughts of our boards, but that was the number we had. By the end of the afternoon, it's just an overview of what you think about the company's growing profiles and where the share will be for several years in contrast to the next few month.

Charter Communications, Inc. Well, quite frankly, I don't even recall what the number was like. Charter Communications, Inc. <font color="#ffff00">-==- proudly presents Do you recognize on the side of your coding costs or have you already taken full advantage of the conversion to the Time Warner Cable tariffs?

They said that the final trimester was a little more a normalised figure. On the other hand, your foil - can't remind me of the number that the inourcing shows, it looks as if the inourcing has begun. Charter Communications, Inc. So, there is one thing to speak about, the unique synergism and the other thing is to speak about the expansion path and program costs once you have that synergism over a multi-year timeframe.

This is what really counts, and this is what distinguishes it from Charter, will help us finance many of the investment we make and have a slightly different net increase in the new business. Judging from a programmer overhead line outlook, I estimate the only thing I would tell you is one even though you are stepping into a price list that has nothing to do - that gives you no indication what the gradient was and the percentage of increase could go on to be high on the price list you were stepping into.

Charter Communications, Inc. Charter Communications, Inc. However, one of the benefits of the new business and the new presence is the regional nature taken up in relation to our assets basis, previously Charter was less than a percent of the DMA in most of the countries in which we were active.

The same effect hampers business expansion due to the local natures of many companies and the cross-location institutions that bigger companies have, and the incapacity to operate them effectively when you have a sparse carbon footprint. At the same time, the same effect is being felt in the region. <font color="#ffff00">-==- proudly presents So, if you only refer to your page four paper presenting your data according to the time axis outlined there, it seems that your KPIs should increase from the fourth quarter onwards, although you still have the migration associated with Time Warner Cable, as you said.

After all, according to what I know about the time axis of the Charter of Cultural Patrimony, it was like a six-fourth timeframe for increased outlay. Charter Communications, Inc. Much of what we do for Spectrum prices and packages starts in mid-November and lasts until December. The way it's flowing through the market, and even then it's only half of the purchased floorprint that would have been absorbed by Spectrum's price structure and wrapping.

Now that Spectrum prices and packages have been fully introduced in all stores, I think it is right to look at the shop and look at it in a conservative way. Where we go as Spectrum price setting and packing, we already see a revival of turnover, and it is stuff, and it is what we would be expecting, and it is what we have seen at Charter.

Since these are the various activities you have described on the OpEx page, the graph could look very much like the Charter. Contrary to this will be the fact that we have here deal synergy, which we did not have in the past charter experiences, which will cushion this.

You also have a legacies charter that still accounts for a large part of the floorprint that is rapidly expanding, not just from client relations. And... but because our services deals are declining, our GDP increase, the last times we could really look at it on a fully independent base, far exceeds our sales increase.

It is a client focused transaction exit policy that aims to remove deals from the market. Over the years, we have achieved some ARPU increase in the size of the legacies charter. Charter Communications, Inc. Yeah, it's really the earnings per pass you look at. Charter Communications, Inc.

This will be accomplished through higher up-front emissions per home and higher per capita per capita per consumer. If I could only pursue the introduction of the Spectrum Guide to the Charter of Cultural Patrimony, how would that work? Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc.

Yes, look, we're taking this beyond the historical Charter Footprint, and we're ready to launch next year within the new pricing and packing rollouts, not at the beginning of the year, but more in the mid-year period. It will also be an occasion for our current client list to modify their user interface without changing any of their equipment, depending on their needs and whenever they want.

Charter Communications, Inc. <font color="#ffff00">-==- proudly presents Then, secondly, to partial loses, you said you would see the relocation in the Times Warner Cable through re-packaging and revaluation. Do we have a hunchback that we can overcome, or is this 60,000 number a good number for the future?

Charter Communications, Inc. So on the sub' you said there would be a relocation of the Time Warner Cable features until you have completed the price setting and packing. Charter Communications, Inc. No, we are working on ways of facilitating this at the same time as introducing prices and packages.

So, even if we did not introduce prices and packages, which had a beneficial effect on migration, we have done other things throughout our relationships what is hard during a transitional period, but we make changes wherever we can for the sake of consumers and try to maintain the client basis as we introduce new prices and packages.

I wouldn't say that this quarter's number is a proxies for all coming quarters until prices and packing are introduced. However, prices and packing will be fully introduced by early this year. However, when you look at what we have done at Charter, a significant part of the client basis changes each year into new prices and packages, both through our charter and upgrading activities.

However, we come in both directions, both by making a performance promise in price setting and packing, and by the intelligent things you can do with an established clientele that is wrongly valued to steer it in the right directions. <font color="#ffff00">-==- proudly presents Charter Communications, Inc.

We believe that this will give us a boost to our historical patterns of promotional expansion, as our product will be more valuable to our promotion. Charter Communications, Inc. <font color="#ffff00">-==- proudly presents If you say that it would probably be late 2017 to 2018 before the company is substantive, do you think in relation to before you have a significant number of clients, or will it take you that long to introduce an offer across your whole carbon footprint? What do you think?

Charter Communications, Inc. It' s really all about keeping up the deal I was telling you about and not having a lot of customers. <font color="#ffff00">-==- proudly presents Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc.

Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. Our view is that we have a great deal of great physics at our disposal and that it is below average and that we have enormous potential for further expansion.

Our belief is that we will gain on the basis of our prices, packages and our mixture of products. <font color="#ffff00">-==- proudly presents Charter Communications, Inc. Charter Communications, Inc. Charter Communications, Inc. <font color="#ffff00">-==- proudly presents Charter Communications, Inc.