Time Warner Cable Shows Strong Subscriber Growth in Q1

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Time Warner Cable Inc. (TWC) reported better-than expected first quarter 2010 financial results. Both the Commercial and Residential subscription revenue grew in the quarter, together with a rebound of the Advertising revenue growth.

Time Warner Cable has done very well with its Digital video subscriber addition. Although the Basic video subscriber base has declined, the churn rate has reduced significantly. Primary Service Units increased by 276,000 to 26.6 million and Bundled subscribers totaled 8.5 million, or 58.2% of total customer relationships at the end of the reported quarter.

Quarterly total revenue of $4.6 billion was an improvement of 5.4% year-over-year and also above the Zacks Consensus Estimate of $4.56 billion. Quarterly GAAP net income was $214 million or 60 cents per share, compared to a net income of $164 million or 48 cents per share in the prior-year quarter. However, first quarter 2010 adjusted (excluding special items) EPS of 82 cents was significantly above the Zacks Consensus Estimate of 74 cents.

Quarterly adjusted operating income before depreciation and amortization was $1.7 billion, up 10.9% year-over-year. This was primarily due to healthy growth in the top-line offset by higher video programming, marketing and voice costs. Quarterly video programming expense was $1.1 billion, (up 5.1% year-over-year), Marketing cost was $151 million (up 7.9% year-over-year), and Voice cost was $162 million (up 6.6% year-over-year). Quarterly GAAP operating income was $850 million, up 18.7% over the prior-year quarter.

During the first quarter of 2010, Time Warner Cable generated $1,386 million of cash from operations, up 21.5% year-over-year. Quarterly free cash flow (cash flow from operations less capital expenditure together with principal payment for capital lease and intangible assets) was $650 million, up 74.7% year-over-year.

At the end of the first quarter 2010, Time Warner Cable had more than $1.32 billion of cash & cash equivalents and $21.14 billion of outstanding debt on its balance sheet compared to $2.02 billion of cash & cash equivalents and $22.33 billion of outstanding debt at the end of the previous year.

Subscription Segment

Total Subscription revenue in the first quarter 2010 was $4,426 million, up 4.9% year-over-year. Within this segment, Video revenue was $2,740 million (up 2.7% year-over-year), High-speed Data revenue was $1,193 million (up 8.4% year-over-year), and Voice revenue was $493 million (up 9.3% year-over-year).

Advertising Segment

Quarterly revenue was $173 million, up 19.3% year-over-year.

Subscriber Statistics

During the first quarter 2010, Time Warner Cable added 102,000 Digital Video subscribers to 8.968 million. The company lost 42,000 Basic Video subscribers to 12.817 million, added 212,000 Residential high-speed data subscribers to 9.206 million, added 9,000 Commercial high-speed data subscribers to 0.304 million, added 86,000 Residential Digital phone subscribers to 4.239 million, and also added 11,000 Commercial Digital phone subscribers to 0.078 million.

During the same quarter, Time Warner Cable added 73,000 Triple play subscribers to 3.521 million, added 82,000 Double play subscribers to 4.982 million, and lost 109,000 Single play subscribers to 6.115 million.