Time Warner Cable Adds 54,000 Video Subs in Fourth Quarter, Earnings Beat Estimates

Courtesy of Time Warner Cable
Time Warner Cable CEO Rob Marcus

Charter Communications has agreed to acquire the cable operator, led by chairman and CEO Rob Marcus.

Time Warner Cable on Thursday reported lower fourth-quarter earnings that exceeded Wall Street expectations and confirmed pay TV subscriber gains that capped its best year in terms of subscriber growth.

The cable operator, which has agreed to be acquired by Charter Communications, had confirmed early in the year that it had reached full-year residential subscriber growth in 2015, its first year of growth since 2006. It had also said that it was its best ever year in terms of subscriber performance and included customer relationship net additions of 618,000 and video subscriber net additions of 32,000.

The company, led by chairman and CEO Rob Marcus, on Thursday reported quarterly earnings of $486 million, or $1.70 per share, compared with $554 million, or $1.95 a share, in the year-ago period. Adjusted earnings, which exclude costs related to mergers and acquisitions, amounted to $517 million, or $1.80 per share, compared with $577 million in the year-ago period, or $2.03. That beat Wall Street expectations as analysts had on average forecast a profit of $1.78 per share for the fourth quarter.

Revenue rose 4.9 percent to $6.07 billion in the fourth quarter, while full-year revenue was up 3.9 percent to $23.70 billion. The company said that was the highest fourth-quarter and full-year growth rate in five years.

Time Warner Cable confirmed that it added 54,000 residential pay TV subscribers in the latest quarter and 4,000 business service video subscribers. It ended 2015 with 10.82 million residential video subscribers. Big cable operators have seen improved subscriber momentum, while telecom and satellite TV firms have seen weaker trends.

Time Warner Cable cited higher programming costs and "significant investment during 2015 to improve customer experience and expand [our] network" as items weighing on the bottom line. Programming costs rose 9.7 percent in the fourth quarter and 9.8 percent for all of 2015, to $5.82 billion. In addition to higher carriage fees for networks, the company also cited "higher content costs at SportsNet LA, a regional sports network carrying the Los Angeles Dodgers’ baseball games and other sports programming."

The cable giant also detailed merger-related costs for the fourth quarters of 2015 and 2014 of $49 million and $35 million, respectively. Restructuring costs were $2 million and $3 million for those periods, respectively, while merger-related costs for the full years of 2015 and 2014 came in at $183 million and $198 million and restructuring costs were $20 million and $27 million. Comcast last year abandoned its plans to acquire TWC amid regulators' opposition. Charter, in which John Malone's Liberty Media owns a big stake, then swooped in.

“I’m incredibly proud of everything we achieved this quarter and in 2015," said Marcus. "We made our network more reliable, our products more compelling and our customer service better. And, importantly, our subscriber improvement over the last eight quarters, including our record subscriber performance in 2015, has begun to show up in our financial results."

He added: "As we begin 2016, we intend to continue to improve the customer experience and build value for our shareholders."

Some quarters are more fun to report on than others, Marcus said in starting off the company’s earnings conference call. “This one is fun,” he said.

While the CEO said the company wouldn’t provide guidance while regulators review the planned sale to Charter, he said that TWC’s residential operation is “well positioned” for 2016 and beyond. "2015 was an incredible year. Despite the many merger-related distractions, our team has delivered with single-minded determination. We are a much stronger company than we were two years ago, and we got great momentum."

Management also predicted continued subscriber growth and improved financial growth in 2016.