August 17, 2007

Insight's 2nd Quarter Hums

Telephony a highlight as company boosts subs across all services and explores a possible sale

By Shirley Brady

Insight Communications reported 2nd quarter earnings today, with a 3% annual growth rate in basic subscribers (to 1.34 million) and a net loss of 3,000 basic subscribers, which it called "the best Q2 performance in the company's history."

The Midwest-focused operator recorded 2.85 million total revenue generating units on June 30, an increase of 13% over year-ago figures, and 1.42 million total customer relationships (subscribers to one or more services), an increase of 49,000 over the previous year.

"Our outstanding operating performance demonstrates our continued ability to grow RGUs at a high rate, with record second quarter results in total RGUs, basic and telephone," commented Insight's CEO Michael Willner in the 2nd quarter earnings release. "Importantly, this operating performance is now being fully reflected in our financial results with adjusted OIBDA growth of 20%" (over 2nd quarter 2006) to $141.4 million, he added.

As expected, Willner didn't update analysts on its quarterly earnings call this morning on the progress of the company's sale. "We are currently in the process of reviewing certain strategic alternatives for the company, which include a number of different options for us," he commented. "That review is not complete yet and we deem it inappropriate to comment further at this time."

Time Warner Cable CFO John Martin confirmed earlier this month that TWC is interested in Insight, which is being shopped by Carlyle Group, its owner. Comcast will acquire 684,000 Insight subscribers by the end of this year, when the companies dissolve their joint venture.

The company posted a 2nd quarter net gain of 18,900 high-speed Internet customers—down from 19,700 HSI net sub gains in Q2 last year—for 674,900 total HSI subscribers, or 28% penetration of its HSI homes passed.

Insight reported a net gain of 7,700 digital subscribers—down from 11,700 in the year-ago quarter—for 661,500 total digital subs, or 52% penetration of its digital universe.

Telephone was a highlight, with a net gain of 29,400 phone customers in the quarter—up from 7,500 a year ago—for 177,200 phone subscribers, or 9% of its telephony footprint. Insight activated eight new telephony markets in the 2nd half of 2006 and January '07.

As of June 30, 98% of Insight customers were passed by two-way, 750 MHz or higher capacity upgraded network.

Revenue for the quarter totaled $355.5 million, an increase of 14% over the prior year. High-speed Internet service revenue increased 25% over Q2 '06; basic cable revenue increased 6%, due to end-of-year student disconnects; digital cable revenue increased 25%.

Average monthly revenue (ARPU) per basic subscriber was $88.27 in the quarter (from $79.65 a year ago), while digital ARPU increased $1.58 in the quarter.

Free cash flow on June 30 stood at $47.7 million, compared to -$8.4 million on June 30 of last year, marking an increase of $56.1 million in 12 months.