Acquisitions, AT & T Deals Boost Insight

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Revenue and cash flow more than doubled at Insight Communications Co. Inc. in the first quarter ended March 31, largely due to acquisitions and the continued rollout of digital cable and new services.

Revenue in the first quarter was $103.6 million compared with $45.4 million in the same period last year. Insight said its acquisition of cable systems in Kentucky from AT & T Corp. in October accounted for $56.4 million of that revenue increase.

Earnings before interest, taxes, depreciation and amortization, or cash flow, more than tripled in the period to $135.8 million from $43.5 million a year ago. The MSO said the increase was due mainly to a gain of $80.9 million on the sale of joint-venture assets and the results of the Kentucky systems.

However, revenue and cash flow, not including the new acquisition, were relatively flat in the period-an occurrence the company attributed to higher programming costs.

Revenue at its National Systems unit-which includes its Rockford, Ill.; Claremont, Calif.; Griffin, Ga.; and Portland and Scottsburg, Ind., systems-was $10.7 million, up from $9.6 million a year ago. Cash flow at that operation was $4.83 million compared with $4.81 million in 1999.

At its Portland and Scottsburg systems, revenue was $33.5 million compared with $32.9 million a year ago, and cash flow was $16.02 million versus $16.9 million in 1999.

Insight said in a press release that its programming and other operating costs rose 166.8 percent in the first quarter to $35.4 million.

Monthly revenue per subscriber increased by 14 percent in the first quarter to $40.88 from $35.91 in the previous year. Average monthly basic revenue per customer was $29.41 in the first quarter compared with $25.46 in 1999.

In a research report, SG Cowen Securities Corp. analyst Gary Farber said Insight's results were below his expectations, but the company expects its cash-flow margins to improve once it obtains additional programming discounts as a result of its affiliation with AT & T.

During the quarter, Insight signed two letters of intent with AT & T Broadband, the first resulting in Insight contributing its remaining systems not already in a 50-50 joint venture with AT & T to that partnership, called Insight Midwest. AT & T Broadband also contributed an additional 350,000 subscribers, primarily in Illinois, to the partnership.

That deal, expected to close in the fourth quarter, will increase Insight's managed footprint to 1.4 million subscribers.

In the second LOI, AT & T and Insight agreed to deliver an AT & T-branded telephony service throughout Insight's service territories. Insight will be responsible for marketing, servicing and billing for the local phone product, while AT & T installs and maintains the necessary switching equipment and serves as the local-exchange carrier.

Insight plans to launch the service, which will be part of a bundled offering, in its first market by the end of the year.

Nevertheless, Farber lowered his 2000 revenue and cash-flow estimates for Insight and dropped his target price from $33 per share to $26. He maintained his "buy" rating on the stock.

"These results reflected strong consumer demand, high customer satisfaction and substantial incremental revenue per digital home," Insight president and CEO Michael Willner said in a prepared statement. "We look forward to the aggressive deployment of our trailblazing product-a proven winner-throughout our existing company during the second half of 2000."

In the first quarter, Insight expanded its video-on-demand offering in conjunction with Diva Systems Corp. to its Evansville, Ind., system. The MSO had already launched the Diva product in its systems in Rockford and in Columbus, Ohio, late last year.

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