Cablevision Third-Quarter Video Subs, Profit Decline
UPDATED: The cable operator, controlled by the Dolan family, saw its video subscriber base decline by 19,000 customers, and its stock dropped 12.5 percent.
NEW YORK - Cablevision Systems on Friday reported a lower third-quarter profit and said it lost 19,000 video subscribers in the latest period.
In the year-ago period, the cable operator had lost 24,500 video subs, and in the second quarter it had lost 23,000, meaning subscriber momentum improved in the latest period. The subscriber declines were also less pronounced than Wall Street observers had predicted.
The news came a day after Time Warner Cable said it continued to lose video subs in the latest quarter, but fewer than a year earlier - the first time in about two years that it had noted such an improvement. Analysts lauded better-than-expected subscriber trends, but were disappointed by the weaker-than-projected financials.
Cablevision, controlled by the Dolan family, said Friday that its third-quarter earnings amounted to $39.6 million, compared with $112.4 million in the year-ago period, down 65 percent, even though revenue rose 8 percent to $1.67 billion, driven by the acquisition of Bresnan Communications.
Among the drags on the bottom line, which came in below Wall Street estimates, were about $16 million in costs related to Hurricane Irene, $3 million in debt extinguishment costs and write-offs of deferred financing costs, which the company didn't have in the year-ago period, higher interest expense and $95 million in investment losses.
Cablevision said it added 17,000 broadband subscribers and 38,000 telephony customers. After its slight decline in video subs, the firm had 3.26 million video customers at the end of September.
Cablevision shares declined 12.5 percent at $15.14.
"Our cable operations reported improved subscriber metrics that included increases in both high-speed data customers and voice lines, while the company continued to generate healthy free cash flow," said CEO James Dolan. "As we are operating in a challenging environment, we are continuing our efforts to capitalize on the strength of our network and products and on building our business for the long-term."
"We believe that a higher level of marketing spend during the Verizon strike in August played a significant part in the [operating cash flow] weakness and positively impacted subscriber net adds, which exceeded our estimates and consensus estimates," Evercore Partners analyst Bryan Kraft said.
Echoed Wells Fargo analyst Marci Ryvicker: "This is a very mixed quarter with financials missing and share repurchases lower than expectations while [subscribers] beat. We believe both the weaker financials and superior subscriber metrics are a result of higher acquisition and retention spending."
On a conference call, Cablevision management said it continues to push for reforms in retransmission consent fee negotiations with content providers. Amid recent talk about potential moves by pay TV operators to introduce more a la carte programming offers, the company said it doesn't expect the current business model to change much over the near-term.