Time Warner Cable Inc. (TWC) reported robust first-quarter 2012 financial results, with both the top line and bottom line beating the Zacks Consensus Estimate. There are primarily three reasons for this solid performance: (1) newly acquired entities, e.g. Insight, NewWave, and NeviSite enhanced the company’s overall financials. Besides, growth rate of revenue exceeds the growth rate of operating expenses (2) increasing demand for residential high-speed Internet services (3) continuation of strong performance of the company’s Business Services segment.
Quarterly GAAP net income was $382 million or $1.20 per share compared with a net income of $325 million or 93 cents per share in the prior-year quarter. First-quarter 2012 adjusted (excluding special items) EPS of $1.30 handily beats the Zacks Consensus Estimate of $1.22. Total revenue in the reported quarter increased 6.4% year over year to $5,134 million, surpassing the Zacks Consensus Estimate of $5,121 million.
Quarterly adjusted operating income before depreciation and amortization (OIBDA) climbed 8.2% year over year to $1,873 million. GAAP operating income grew 6.9% year over year to $1,042 million. During the first quarter of 2012, Time Warner Cable repurchased 4.8 million shares for a total consideration of $353 million. In the reported quarter, the company also paid $179 million in dividends.
During the first quarter of 2012, Time Warner Cable generated $1,383 million of cash from operations compared with $1,570 million in the prior-year quarter. Free cash flow in the previous quarter was $718 million compared with $927 million in the year-ago quarter.
At the end of the first quarter of 2012, Time Warner Cable had $2,629 million in cash & marketable securities compared with $5,177 million at the end of 2011. Total debt at the end of the reported quarter was $26,838 million compared with $24,320 million at the end of 2011. At the end of the first quarter of 2012, debt-to-capitalization ratio was 0.76 compared with 0.76 at the end of 2011.
Residential Services Segment
Quarterly total revenue was $4,433 million, up 4.1% year over year. Within the segment, video revenue was $2,711 million, up 1.9% year over year. High-speed data revenue was $1,199 million, up 9.6% year over year. Voice revenue was $508 million, up 3% year over year. Other revenue was $15 million, up 36.4% year over year.
Business Services Segment
Quarterly revenue was $429 million, up 37.5% year over year. Within the segment, video revenue was $76 million, up 10.1% year over year. High-speed data revenue was $208 million, up 24.6% year over year. Voice revenue was $63 million, up 50% year over year. Wholesale transport revenue was $41 million, up 28.1% year over year. Other revenue was $41 million compared with a mere $2 million in the year-ago quarter.
Advertising Segment
Advertising revenue increased 7.1% year over year to $211 million.
Other Segment
Other revenue was $61 million, up 3.4% year over year.
Subscriber Statistics
At the end of the first quarter of 2012, Residential Video subscribers’ base was 12.468 million. Time Warner Cable lost 94,000 residential video subscribers organically but added 673,000 new clients through acquisitions. Commercial Video subscribers’ base was 185,000. The company lost 4,000 commercial video subscribers organically but added 10,000 new customers through acquisitions.
Residential High-speed Data subscribers’ base was 10.716 million. Time Warner Cable added 214,000 residential High-Speed Data subscribers organically coupled with an additional 548,000 clients through acquisitions. Commercial High-speed Data subscribers’ base was 420,000. The company added 13,000 commercial High-speed Data subscribers organically coupled with an additional 20,000 subscribers through acquisitions.
Residential voice subscribers’ base was 4.945 million. Time Warner Cable added 112, 000 residential voice subscribers organically along with an additional 289,000 clients through acquisitions. Commercial voice subscribers’ base was 184,000. The company added 12,000 commercial voice subscribers organically together with an additional 10,000 voice clients through acquisitions.
In the previous quarter, Time Warner Cable gained 352,000 Triple play subscribers totaling 4.190 million, added 260,000 Double play subscribers totaling 5.184 million, and also gained 235,000 Single play subscribers to 5.980 million.
Recommendation
After Comcast Corp. (CMCSA), Time Warner Cable is the second largest cable MSO in the U.S. We reiterate our long-term Neutral recommendation on Time Warner Cable. Currently, the company enjoys a Zacks #2 Rank (Buy) on the stock.
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