Shaw Communications Management Discusses Q3 2012 Results - Earnings Call Transcript

Shaw Communications (SJR)

Q3 2012 Earnings Call

June 28, 2012 3:30 pm ET

Executives

Bradley S. Shaw - Chief Executive Officer, Director and Member of Executive Committee

Jay Mehr - Senior Vice President of Operations

Jim Cummins - Vice-President of Operations Ontario & Quebec

Paul W. Robertson - Group Vice President of Broadcasting and President of Shaw Media

Analysts

Phillip Huang - UBS Investment Bank, Research Division

Vince Valentini - TD Securities Equity Research

Jeffrey Fan - Scotiabank Global Banking and Market, Research Division

Glen Campbell - BofA Merrill Lynch, Research Division

Robert Goff - Byron Capital Markets Ltd., Research Division

Drew McReynolds - RBC Capital Markets, LLC, Research Division

Gregory W. MacDonald - Macquarie Research

Matthew Niknam - Goldman Sachs Group Inc., Research Division

Maher Yaghi - Desjardins Securities Inc., Research Division

Presentation

Operator

Welcome to Shaw Communications Fiscal 2012 Third Quarter Conference Call. Today's call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. [Operator Instructions] Before we begin, management would like to remind listeners that comments made during today's call will include forward-looking information, and there are risks that actual results could differ materially. Please refer to the company's publicly filed documents for more details on assumptions and risks.

Mr. Shaw, I will now turn the call over to you.

Bradley S. Shaw

Thank you, operator, and thanks to everyone for joining us today to discuss our third quarter results for fiscal 2012. With me today are members of the senior management team, including Peter Bissonnette, President; Steve Wilson, Chief Financial Officer; Jay Mehr, Senior Vice President of Operations; Jean Brazeau, Senior Vice President of Regulatory; Michael D'Avella, Senior Vice President of Planning; Paul Robertson, President of Shaw Media; and Jim Cummins, Group Vice President, Shaw Satellite Operations.

Earlier today, we released our Q3 results, and I'll make some brief remarks before we open the call for questions. We believe that results are consistent with the messages we delivered back in April. During the quarter, we focused on discipline, sustainable and profitable customer initiatives. And our Q3 financial performance reflects improvements, in line with our strategic approach regarding operational activities. We delivered on our commitment to reduce our cable cost structure, and our cable EBITDA margin for the 3-month period improved by 370 basis points to 47.5% compared to a quarter ago. Our free cash flow was over $200 million in Q3, and year-to-date free cash flow from our consolidated assets totals almost $380 million.

We continue to make good progress on our strategic priorities and investments, including our Wi-Fi and DNU projects. Our network is a strategic and differentiated advantage, and we continue to make the necessary investments to ensure that this position of leadership is maintained and enhanced. Our broadband product is superior to competitive alternatives, and this represents the foundation for our future success within our Residential Consumer business. Wi-Fi continues to gain attention and credibility regarding its role within the wireless broadband ecosystem, and we are pleased with the results of our network at this stage of the build. Going forward, as additional scale is created, we will begin to actively market this additional Wi-Fi service to Shaw customers.

Our improved user interface, DreamGallery, is currently being tested in 2 markets. And this will be widely deployed by the end of this year. This software is backwards-compatible with approximately 700,000 boxes we currently have deployed across our footprint. We believe this new and modern approach to our guide will be embraced by a large number of our existing customers.

Our Media business continues to be resilient even as the advertising market remains weak. Our portfolio of specialty channels continues to outperform, and our media team has done an exceptional job in proactively reducing costs. Shaw Direct continued to generate attractive amounts of free cash flow, and we recently have announced the strategic partnership with Xplornet and a new VOD service utilizing adaptive streaming technology. Both of these should create incremental revenue opportunities going forward.

Our activities are focused on improving the long-term profitability of our assets, and we will continue to implement cost savings, execute on operational efficiencies and prudently manage our capital investments. We remain confident about the free cash profile of our consolidated assets, and we believe our operating focus is the right strategy to create long-term value for all of our stakeholders.

Thanks to everyone for joining us today. And operator, you can open up the phone for questions, please.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Phillip Huang from USB (sic) [UBS].

Phillip Huang - UBS Investment Bank, Research Division

Just wanted to -- first, I just wanted to clarify were there one-time type of drivers that impacted your Internet subscriber loss this quarter aside from your pull-back promos and also the ongoing competitive intensity? And then I have a follow-up.

Jay Mehr

Phillip, it's Jay. I don't think there's anything that you would consider to be a one-time driver in the Internet numbers.

Bradley S. Shaw

Yes, I think so. But just goes to our focus in our disciplined approach to the market, and it's reflective in that. As we said, we're focused on the long term. And this is not a chase for numbers to the quarter end. And everything we're doing is tactically in regards to creating long-term value and maintaining our base. So I think you're somewhat seeing that, reflective in that.

Jay Mehr

And just building on what Brad is saying, the -- I think to the extent that there is a one-time factor, there likely was a pull forward in Q2 effect just with the level of aggressiveness that we had in our office in Q2. And I think you've probably seen some of that happen there.

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