AOL TW beats targets with growth of subs

Apr 23, 2001  •  Post A Comment

Wall Street greeted AOL Time Warner’s better-than-expected first-quarter earnings with guarded optimism, warning that the advertising market and economy could worsen and that the company’s evolving business model may not be a panacea for other struggling media concerns.
“The model works and is delivering in a tough environment,” Merrill Lynch analysts Jessica Reif Cohen and Henry Blodget said in a report issued last Thursday.
AOL Time Warner’s financials were bolstered not just by more than $750 million in cost-cutting and by leveraging of new infrastructure, but also by selling its subscribers and space across all of its media platforms in a tough economic environment.
“With an estimated 25 percent of its revenue coming from advertising-related businesses, AOL Time Warner is in an advantageous position relative to its peers,” the analysts said. “The bulk of its growth this year will come from AOL subscription services, providing stable and relatively predictable revenue streams in a time of economic uncertainty.”
Time Warner Cable added 400,000 digital subscribers and 237,000 high-speed subscribers in the quarter and posted earnings growth (before interest, taxes, depreciation and amortization) of better than 15 percent to $768 million, making it the first cable operator to see its earnings rise in more than seven years, said Richard Bilotti, analyst at Morgan Stanley Dean Witter.
First-quarter cable system revenues rose 12 percent to $1.6 billion.
The other primary growth operation is AOL, which posted a 35 percent increase in cash flow to $684 million on a 17 percent increase in revenues to $2.1 billion in the first quarter on the addition of more than 2 million online subscribers to more than 29 million.
Overall, AOL Time Warner reported first-quarter earnings growth of 20 percent to $2.1 billion on a 9 percent increase in overall revenues to about $9 billion. Even free cash flow grew 400 percent to $651 million in the period as cash earnings per share beat Wall Street analysts’ expectations by 3 cents a share to 23 percent per share, 20 percent over the previous year.
The biggest boost came from growth in total subscriptions (mainly AOL and Time Warner Cable) to 133 million worldwide. Revenue growth was led by a 9 percent increase in subscriptions to $3.9 billion and a 10 percent increase in advertising and commerce to $2.1 billion.
The company’s cable and broadcast networks posted $449 million in cash flow, up 34 percent, on a 6 percent rise in first-quarter revenues to $1.7 billion.
The WB Network contributed $5 million to $10 million to the parent company’s bottom line last quarter.