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Time Warner Cable (TWC)

Q1 2011 Earnings Call

April 28, 2011 8:30 am ET


Glenn Britt - Chairman and Chief Executive Officer

Robert Marcus - President, Chief Operating Officer and Acting Chief Financial Officer

Tom Robey - IR


Craig Moffett - Sanford C. Bernstein & Co., Inc.

Jessica Cohen - BofA Merrill Lynch

Richard Greenfield - BTIG, LLC

Laura Martin - Needham & Company, LLC

Benjamin Swinburne - Morgan Stanley

Vijay Jayant - Citadel Securities, LLC

James Ratcliffe - Barclays Capital

Marci Ryvicker - Wells Fargo Securities, LLC

Douglas Mitchelson - Deutsche Bank AG

Tuna Amobi - S&P Equity Research



Hello, and welcome to the Time Warner Cable First Quarter 2011 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objection, you may disconnect at this time. Now, I'll turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable Investor Relations. You may begin.

Tom Robey

Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2011 First Quarter Earnings Conference Call. This morning, we issued a press release detailing our 2011 first quarter results.

Before we begin, there are several items I need to cover. First, we refer to certain non-GAAP measures, including operating income before depreciation and amortization or OIBDA. In addition, we refer to adjusted OIBDA and adjusted OIBDA less capital expenditures. Definitions and schedules setting out reconciliations of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release or our trending schedules.

Second, today's announcements includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations and beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to various factors, including economic, business, competitive, technological, strategic and/or regulatory changes that could affect our business.

These factors are discussed in detail in Time Warner Cable's SEC filings, including its most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Time Warner Cable is under no obligation to, and in fact, expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

And finally, today's press releases, trending schedules, presentation slides and related reconciliation schedules are available on our company's website at timewarnercable.com/investors. A replay of today's call will be available beginning approximately 2 hours after the call has ended and will run through midnight Eastern Time, May 3.

And with that covered, I'll thank you and turn the call over to Glenn. Glenn?

Glenn Britt

Good morning,, and thank you for joining us. We're off to a good start in 2011, with first quarter revenue growth of 5% and Adjusted OIBDA growth of almost 4%. Products ARPU growth was strong across the board and subscription performance displayed seasonal strengths.

I'm particularly pleased with the performance of our high-speed data product, both product mix and ARPU growth trends continue to be very favorable. And since quarter end, we have crossed the 10 million subscriber threshold. High-speed data is quickly becoming the anchor product in the eyes of our customers.

B2B growth continued to accelerate and we're pleased with our progress in this space. Our advertising business coming off dramatic growth rates in 2010 continue to grow its revenue at double digit rates. We continue to generate a lot of free cash flow. And in the first quarter, we used our cash to repurchase shares and pay an increased dividend, returning nearly $1 billion to our shareholders.

This is really exciting time in our business. New technology is making it possible for us to provide a better video experience to our customers, one that gives them more control. Nowhere is this more evident than in our iPad app, which we launched last month to overwhelmingly positive consumer reviews. In its first month, 360,000 iPad users downloaded the app. We started with 30 linear channels simulcast over our cable network and we now have more than 70 channels. By year end, we plan to offer nearly all of the linear cable channels, as well as broadcast channels in several of our biggest cities and a lot of on-demand content.

I want to emphasize that our iPad app is not a oneoff product. Rather, we are investing in a development process and a development team that will introduce new capabilities to our customers in rapid succession.

In the next month or so, we're planning to release an update that will add remote control capability and the ability to remotely program DVRs. The consumer electronics industry is embracing the idea of devices such as smart TVs, with built-in intelligence and 2-way communications capability, all built in IP standards. The technology that we're using to simulcast videos to iPads will eventually feed all of these devices and over time, it is mainly to a world without set tops, which we think could enable a much better customer experience.

However, without ignoring our traditional video environment built MPEG MPEG and analog standards, later this year, we're planning to launch a new navigation application, which will be hosted in our network instead of in our set-tops, providing a much more intuitive and graphically-rich search environment for millions our customers using our set-top boxes.

Turning to the B2B space, we recently closed on the NaviSite acquisition. We expect NaviSite to jumpstart our ability to sell managed and cloud-based services into the small and medium business space. By bundling their services with our primary offerings, we hope to attract new customers, increase ARPU and reduce churn.

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