Time Warner Cable (TWC) Lags On Q1 Earnings, Revenues

Time Warner Cable Inc. (TWC - Analyst Report) reported dismal financial results in the first quarter of 2015, with both the top and the bottom line missing the respective Zacks Consensus Estimate. Nevertheless, the company added a significant number of video subscribers in the reported quarter for the first time since 2009. Time Warner Cable currently carries a Zacks Rank #3 (Hold).

Quarterly GAAP net income came in at $458 million or $1.59 per share compared with $479 million or $1.70 in the prior-year quarter. Quarterly adjusted (excluding special items) earnings per share of $1.65 were significantly below the Zacks Consensus Estimate of $1.87.

Quarterly total revenue was $5,777 million, up 3.5% year over year but failed to meet the Zacks Consensus Estimate of $5,805 million.

Quarterly adjusted operating income before depreciation and amortization (OIBDA) grew 0.8% year over year to $1,996 million. Meanwhile, operating income declined 0.7% year over year to $1,084 million.

In the reported quarter, Time Warner Cable generated $1,508 million of cash from operations compared with $1,397 million in first-quarter 2014. Free cash flow in the first quarter was $407 million against $629 million in the year-ago quarter.

At the end of the first quarter of 2015, Time Warner Cable had $547 million in cash and marketable securities compared with $707 million at the end of 2014. Outstanding debt stood at $23,286 million as against $22,701 million at end-2014. At the end of the quarter under review, the debt-to-capitalization ratio stood at 0.74, flat sequentially.

Residential Services Segment

Quarterly total revenue was $4,662 million, up 2.1% year over year. Within the segment, video revenues were $2,469 million, down 1% from the prior-year quarter. High-speed data revenues were $1,696 million, up 8.9% year over year. Voice revenues came in at $473 million, down 4.6% year over year. Other revenues were $24 million, up 26.3% from the year-ago quarter.

Subscriber Statistics: In first-quarter 2015, video subscriber count increased by 30,000 to 10.819 million. High-speed data subscribers rose by 315,000 to 11.99 million. Voice subscribers grew by 320,000 to 5.604 million. Single-play subscribers increased 43,000 to 5.673 million while double-play subscribers dropped 136,000 to 4.389 million. The triple-play customer base added 298,000, reaching the total count to 4.654 million. 

Business Services Segment

Quarterly total revenue stood at $781 million, up 16.9% year over year. Within the segment, video revenues were $94 million, up 5.6% year over year. High-speed data revenues were $376 million, up 22.9% year over year. Voice revenues totaled $142 million, up 20.3% from the first quarter of 2014. Wholesale transport revenues were $121 million, up 19.8 year over year. Other revenues came in at $48 million, down 11.1% year over year.

Subscriber Statistics: In first-quarter 2015, video subscribers were 203,000, flat year over year. High-speed data subscribers rose by 13,000 to 591,000. Voice subscribers count improved by 11,000 to 334,000. Single-play count increased by 3,000 to reach 349,000. Double-play subscribers registered growth of 9,000 to 274,000. Triple-play subscribers increased by 2,000 to 78,000. 

Other Operational Segment

Quarterly total revenue was $398 million, down 0.5% year over year. Within the segment, advertising revenues grossed $230 million, down 6.9% year over year. Other revenues totaled $168 million, up 9.8% year over year.

Latest Developments

Recently, Comcast Corp. (CMCSA - Analyst Report) terminated its proposed deal to takeover Time Warner Cable. Owing to strong reservation against it expressed by the regulator Federal Communications Commission and the Department of Justice, Comcast opted out from the $45.2 billion mega merger deal, which has been in the talks for the last 14-month.

Following this, Charter Communications Inc. (CHTR - Analyst Report) is once again exploring options to bid for Time Warner Cable. In this context it was worth noting that Charter Communications had initially expressed its desire to acquire Time Warner Cable and had placed the bid for the same in Jan 2014. However, the company lost to Comcast which had offered a higher bid.

Importantly, another big ticket merger deal of $48.4 billion between telecom behemoth AT&T Inc. (T - Analyst Report) and largest satellite TV operator DirecTV (DTV) is still under FCC scrutiny.