Insight Posts Solid Second Quarter Results

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Although CEO Michael Willner declined to comment on the ongoing auction of its remaining assets, Insight Communications provided some strong evidence for garnering high sale prices, reporting one of its best second quarters in history Friday.

Insight, which in April agreed to a split its assets with 50% partner Comcast (that deal is expected to close by the end of the year), is in the late stages of an auction for the remaining 650,000 subscribers in Kentucky (Louisville, Lexington, Bowling Green and Covington), Evansville, Ind., and Columbus, Ohio.

According to industry executives familiar with the auction, Insight could attract prices as high as $2.5 billion to $3 billion.

Earlier this month, Time Warner Cable said on a conference call that it was participating in the auction. Other possible suitors in private equity firms and smaller operators like Suddenlink Communications.

On a conference call with analysts to discuss its second quarter results on Aug. 17, privately-held Insight (it has publicly traded debt) said it would not discuss its strategic alternatives and that a review of those alternatives has not been completed. But Willner was more than happy to tout its strong second quarter performance.

“I’m very pleased to be able to do this headline review of our second quarter results, which turned out to be probably the best second quarter we’ve ever had as a company, because we combined our record operating performance with record financial performance,” Willner said on the call. He added that the results show that the plan insight initiated a few years ago to increase operating units to raise its operating leverage “is taking full root now.”

Insight reported 14% revenue growth to $355.5 million and cash flow rose a robust 20% to $141.4 million. Insight lost about 3,000 basic subscribers in the period – besting its second quarter 2006 losses of 4,300 basic customers. Digital subscribers increased by 7,700 customers, high-speed Internet subscribers rose by 18,900 and the company added 29,000 telephone subscribers, its best second quarter telephony growth ever.

Insight appeared to buck the recent trend of big slowdown in high-speed Internet customer growth – its second quarter results were only off by less than 1,000 customers compared to last year. Other larger cable operators – including Comcast, Time Warner Cable and Cablevision Systems – each reported a much larger falloff in HSI growth in the second quarter.

On the conference call, Insight president and chief operating officer Dinni Jain said that the HSI results are probably more of a sign that as the customer base gets larger, the service is more vulnerable to the same seasonal declines inherent in basic video.

“We are increasingly successful in selling products, especially HSI to our student population,” Jain said. “More and more digital and HSI emulate what happens with basic in terms of that trend. Overall our HSI growth is very robust.

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