CHTR

Charter Communications, Inc. (CHTR)

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Charter Communications (CHTR)

Q3 2012 Earnings Call

November 06, 2012 10:00 am ET

Executives

Robin Gutzler

Thomas M. Rutledge - Chief Executive Officer, President and Director

Christopher L. Winfrey - Chief Financial Officer and Executive Vice President

Analysts

Jason B. Bazinet - Citigroup Inc, Research Division

Craig Moffett - Sanford C. Bernstein & Co., LLC., Research Division

Stefan Anninger - Crédit Suisse AG, Research Division

Philip Cusick - JP Morgan Chase & Co, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

James M. Ratcliffe - Barclays Capital, Research Division

Shagun Singh Chadha - CRT Capital Group LLC, Research Division

Amy Yong - Macquarie Research

Vijay A. Jayant - ISI Group Inc., Research Division

Bryan D. Kraft - Evercore Partners Inc., Research Division

Presentation

Operator

Good morning. My name is Keisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Charter Communication Third Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Ms. Gutzler. Ma'am, you may begin.

Robin Gutzler

Thank you, Keisha. Good morning, everyone. Welcome to Charter's 2012 Third Quarter Earnings Call. This morning, we issued a press release over PR Newswire at 8 a.m. Eastern Time detailing our results.

Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, including our most recent Forms 10-K and 10-Q. We will not review those risk factors and other cautionary statements on this call, however, we encourage you to read them carefully.

Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future.

During the course of today's call, we'll be referring to non-GAAP measures as defined and reconciled in this morning's earnings release. These non-GAAP measures, as defined by Charter, may not be comparable to measures with similar titles used by other companies.

In today's earnings release, we reported results in accordance with GAAP, as well as pro forma results for 2011. Pro forma results reflect the acquisition of certain cable systems in 2011 as if they had occurred on January 1, 2011, unless otherwise noted. The year-over-year growth rates we will be referring to this morning are on a pro forma basis.

Joining me on today's call are Tom Rutledge, President and CEO; and Chris Winfrey, our CFO. The presentation that accompanies their comments can be found on our website, charter.com, under Financial Information. The press release and trending schedules are also posted on our website under Investor & News Center.

With that, I'll turn the call over to Tom.

Thomas M. Rutledge

Thank you, Robin. In the third quarter, we made solid progress in implementing our key strategic changes, and our overall results are in line with our expectations.

We grew residential customer relationships by 19,000 during the quarter compared to a loss the last several years, increased primary subscriber units by 48,000 and we generated 3.75% revenue growth. As expected, EBITDA was impacted by the transition to our new operating strategies. Our adjusted EBITDA was effectively flat year-over-year.

We also accelerated capital investment to $488 million in the quarter, reflecting the significant growth opportunity in front of us and the need to create an initial working inventory of CPE.

Before we go further into details about our financial results for the quarter, I'd like to give you an update on how we're changing the way we do business. My goal is to generate more cash flow per home passed and long-term shareholder returns. I started in February, and I'm confident that Charter has all the necessary pieces in place, but we're making some changes to the operating model.

We've revamped our product, changed our offer structure and changed our selling structure, we're going all digital, and to offer a competitive product with clean bandwidth and secure our plan. And we're reorganizing our operations, including the bulk of operating responsibilities at Charter, all of which is intended to give a clear line of ownership, authority and accountability for every aspect of the customer experience.

For example, by centralizing network operations, we'll be able to centrally manage our infrastructure, allowing us to move more quickly to implement product changes uniformly across the network and maintain consistent service quality. We now have a centralized marketing and sales organization clearly focused on bringing in long-term and profitable new customers.

Our regional teams will focus on operations, including installation, service, maintaining quality outside plant and they'll focus exclusively on doing these critical responsibilities well. These are just some of the examples of recent changes, and they will take time to fully implement and have the intended effect. But we have the team in place to do it, and we're making meaningful headway.

We've also launched new pricing and packaging as we entered the third quarter. We simplified and standardized our offering for both our customers and sales agents.

In video, we made the product competitive by increasing our HD offering and provided the right box and the right TV set in each transaction. We also simplified our Internet offering in 2 tiers and increased our base Internet speed to 30 megabits, which is 10x faster than the typical DSL speed and faster than U-verse can currently go.

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