Time Warner Cable (TWC)

Q2 2011 Earnings Call

July 28, 2011 8:30 am ET


Glenn Britt - Chairman and Chief Executive officer

Tom Robey - IR

Robert Marcus - President and Chief Operating Officer


John Hodulik - UBS Investment Bank

Jessica Cohen - BofA Merrill Lynch

Craig Moffett - Sanford C. Bernstein & Co., Inc.

Laura Martin - Needham & Company, LLC

Richard Greenfield - BTIG, LLC

Bryan Kraft - Evercore Partners Inc.

Benjamin Swinburne - Morgan Stanley

Jason Bazinet - Citigroup Inc

Stefan Anninger - Crédit Suisse AG

Douglas Mitchelson - Deutsche Bank AG

Jason Armstrong - Goldman Sachs Group Inc.



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Hello, and welcome to the Time Warner Cable Second Quarter 2011 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable Investor Relations. Thank you. You may begin.

Tom Robey

Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2011 Second Quarter Earnings Conference Call. This morning, we issued a press release detailing our 2011 second quarter results.

Before we begin, there are several items I need to cover. First, we refer to certain non-GAAP measures, including operating income before depreciation and amortization or OIBDA. In addition, we refer to adjusted OIBDA and adjusted OIBDA less capital expenditures. Definitions and schedules setting out reconciliations of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release or our trending schedules.

Second, today's announcements includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations and beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to various factors, including economic, business, competitive, technological, strategic and/or regulatory changes that could affect our business. These factors are discussed in more detail in Time Warner Cable's SEC filings, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Time Warner Cable is under no obligation, and in fact, expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. And finally, today's press releases, trending schedules, presentation slides and related reconciliation schedules are available on our company's website at timewarnercable.com/investors. A replay of today's call will be available beginning approximately 2 hours after the call has ended and will run through midnight Eastern Time, August 2.

And with that covered, I'll thank you and turn the call over to Glenn. Glenn?

Glenn Britt

Good morning, and thanks for joining us. Before I begin, I want to welcome our new CFO, Irene Esteves, who joined us a couple of weeks ago and is here with us today. Irene is rapidly coming up on the learning curve, and you can expect to hear from her on the third quarter call. In the meantime, Rob Marcus will cover the financial results one last time this morning.

I'm pleased to report that our core business is healthy despite competitive pressures and the continuing weakness in the economy. We're continuing to make investments in our Residential and Business Services to drive growth. Second quarter revenue and adjusted OIBDA each grew by more than 4% year-over-year. We generated a record $1.1 billion of OIBDA, less CapEx, which drove very strong free cash flow, and our earnings per share growth topped 30%. We returned more than $1 billion to shareholders in the second quarter.

Our Business Services results were very strong. And with the addition of NaviSite in the most recent quarter, Business Services revenue growth was 35%. NaviSite has won a couple of very significant contracts since the acquisition closed in April, reinforcing our enthusiasm for the acquisition. Growth in Residential Services moderated in the second quarter, driven by seasonal weakness in subscriber net additions and accentuated by the weak economy and the intensity of competition.

While we're working on enhancements to our products at the high end, we're also looking at lower cost alternatives to address a growing affordability problem amongst low-income customers. But were focused not just on products, we recognize that we also need to do a much better job of telling our story to consumers.

There's several important trends and developments I'd like to highlight this morning. The Broadband business continues to benefit from the accelerating usage trends. We're seeing more demand for our higher speeds and pricing remains strong. As Broadband becomes increasingly important to our customers, we think we can create additional value by making it available to them everywhere. We're continuing to deploy Wi-Fi capabilities in Los Angeles. And we're exploring how we might sell broadband packages that would bundle our wireline service with Wi-Fi and wireless service for a single attractive price. You'll be hearing more about our plans in the coming months.

In video, technology is giving us the opportunity to dramatically improve the utility of our products. The second release of our iPad app is a great example. We now have over 100 live channels, and the ability to use the iPad as a remote control using an enhanced program guide. The next version, which is a month or so away, will bring full keyboard-enabled search and we're hard at work bringing similar functionality to many other popular consumer electronics devices such as Smart TVs. We're investing in our businesses, so that they remain strong and competitive. We recently announced the pending construction of a new data center on our Charlotte, North Carolina campus. That facility will enable us to more rapidly deploy video, high-speed data, voice and business services by having storage and network elements in a shared environment. It will also house 1 of 2 national super headends.

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