Time Warner Cable Q3 2010 Earnings Call Transcript

Time Warner Cable (TWC)

Q3 2010 Earnings Call

November 04, 2010 8:30 am ET

Executives

Glenn Britt - Chairman, Chief Executive Officer and President

Tom Robey - IR

Landel Hobbs - Chief Operating Officer

Robert Marcus - Chief Financial Officer and Senior Executive Vice President

Analysts

John Hodulik - UBS Investment Bank

Bryan Kraft - Evercore Partners Inc.

Vijay Jayant - Citadel Securities, LLC

Richard Greenfield - BTIG, LLC

Benjamin Swinburne - Morgan Stanley

James Ratcliffe - Barclays Capital

Jason Bazinet - Citigroup Inc

Stefan Anninger - Crédit Suisse AG

Douglas Mitchelson - Deutsche Bank AG

Thomas Eagan - Collins Stewart LLC

Jason Armstrong - Goldman Sachs Group Inc.

Craig Moffett - Bernstein Research

Presentation

Operator

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Hello, and welcome to the Time Warner Cable Third Quarter 2010 Earnings. [Operator Instructions] Now I will turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable, Investor Relations. You may begin.

Tom Robey

Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2010 Third Quarter Earnings Conference Call. This morning, we issued two press releases, one detailing our 2010 third quarter results, and the other announcing our share repurchase program and the declaration of our regular quarterly dividends.

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 announcement 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 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 detail in Time Warner Cable's SEC filings, including its most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Time Warner Cable is under no obligation to, 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 release, trending schedules, presentation slides and related reconciliation schedules are available on our company's web site at timewarnercable.com/investors. A replay of today's call will be available beginning approximately two hours after the call has ended and will run through midnight Eastern Time on August 9.

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

Glenn Britt

Thanks, Tom, and good morning, everyone. We had a good third quarter, in which we grew revenues and adjusted OIBDA roughly 5% and 6%, respectively. ARPU growth was strong. In fact, total ARPU per customer relationship increased almost 7%. Our Commercial Services and Advertising businesses continued to accelerate with year-over-year revenue growth rates of approximately 22% and 23%, respectively.

Consistent with our comments during the quarter, subscriber net adds grew weaker than we've seen before. These results reflect the weak economy, with continuing high rates of unemployment and housing vacancies, as well as a very competitive marketplace. The impact wasn't uniform. Some services fared better than others. Our high speed data product performed the best on a relative basis and our customers continued to choose faster speeds.

In terms of the bottom line, we generated $1 of EPS in the quarter for the first time since becoming a public company. And through the first nine months of the year, we have generated more than $1.6 billion of free cash flow.

When we went public three and a half years ago, we had set out to build a company that is consistent, transparent and shareholder-friendly. We followed through in a series of steps, starting with our separation from Time Warner Inc. and our payment of a $10.9 billion special dividend. Since then, we've been steadfastly committed to a leverage target of 3.25x adjusted OIBDA and we've been consistent in our public statements that as we delevered below 3.25x, we would return capital to our shareholders. In keeping with this strategy, we announced regular dividend this last January with the yield at announcement of 3.7%. Despite strong appreciation of our stock price in the intervening nine months, our yield remains well above our cable and satellite years.

As a result of our continuing progress, we're now positioned to return even more capital to our shareholders. This morning, we announced that our board has authorized a $4 billion share repurchase program. This repurchase program, in conjunction with our regular dividend, once again reflects our confidence in the strength and stability of the company's free cash flows.

In operations, we are redoubling our focus on the customer experience to further improve our competitive position. A number of very exciting products and services that have been in the incubation process are now poised for release. These new capabilities support our 4 Anys framework, that is the notion that our customers want access to any content any time, anywhere and on any device.

Consistent with the anywhere and anytime aspects, we have launched our Remote DVR Manager to much of our footprint including New York City and whole home DVRs available in some systems and will be broadly available by year-end. We're proud to be the first multichannel provider to offer ESPN to our customers via TV Everywhere capability. Last week, we debuted authenticated access to ESPN3 and the ESPN linear feed for customers who subscribe to a video tier that includes ESPN. In the near future, we plan to offer access to ESPN2, ESPNU and the new ESPN goal line and the ESPN Buzzer Beater through the same process. This gives our customers an unprecedented level of access from multiple locations and devices to great live sports content. We plan to add more content from a wide range of networks to our TV Everywhere capability in the near future.

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