STAMFORD, Conn., April 28,
2023 /PRNewswire/ -- Charter Communications, Inc.
(along with its subsidiaries, the "Company" or "Charter") today
reported financial and operating results for the three months ended
March 31, 2023.
- First quarter total residential and small and medium business
("SMB") Internet customers increased by 76,000. As of March 31, 2023, Charter served a total of 30.5
million residential and SMB Internet customers.
- First quarter total residential and SMB mobile lines increased
by 686,000. As of March 31, 2023,
Charter served a total of 6.0 million mobile lines.
- As of March 31, 2023, Charter had
a total of 32.2 million residential and SMB customer relationships,
which excludes mobile-only relationships.
- First quarter revenue of $13.7
billion grew by 3.4% year-over-year, driven by residential
revenue growth of 2.5%, other revenue growth of 34.0%, primarily
driven by higher mobile device sales, and commercial revenue growth
of 2.4%.
- Net income attributable to Charter shareholders totaled
$1.0 billion in the first
quarter.
- First quarter Adjusted EBITDA1 of $5.4 billion grew by 2.6% year-over-year.
- First quarter capital expenditures totaled $2.5 billion and included $890 million of line extensions.
- First quarter net cash flows from operating activities totaled
$3.3 billion, compared to
$3.6 billion in the prior year. The
year-over-year decline was primarily due to a more unfavorable
change in working capital.
- First quarter free cash flow1 of $664 million decreased from $1.8 billion in the prior year, primarily due to
higher capital expenditures mostly driven by Charter's network
expansion and evolution initiatives and a seasonality-driven change
in working capital, excluding the impact of mobile devices.
- During the first quarter, Charter purchased 2.6 million shares
of Charter Class A common stock and Charter Communications
Holdings, LLC ("Charter Holdings") common units for approximately
$1.0 billion.
"In the first quarter, we made significant progress on our three
key initiatives — evolution, expansion and execution," said
Chris Winfrey, President and CEO of
Charter. "Our customer-first strategy is focused on delivering a
differentiated, converged connectivity product that delivers the
fastest speeds and saves customers money, while simultaneously
driving growth and creating long-term value for Charter
shareholders."
1.
|
Adjusted EBITDA and
free cash flow are non-GAAP measures defined in the "Use of
Adjusted EBITDA and Free Cash Flow Information" section and are
reconciled to net income attributable to Charter shareholders and
net cash flows from operating activities, respectively, in the
addendum of this news release.
|
Key Operating
Results
|
|
|
|
Approximate as
of
|
|
|
|
|
March 31,
2023 (d)
|
|
March 31,
2022 (d)
|
|
Y/Y
Change
|
Footprint
(e)
|
|
|
|
|
|
|
Estimated
Passings
|
|
55,885
|
|
54,739
|
|
2.1 %
|
|
|
|
|
|
|
|
Customer
Relationships (f)
|
|
|
|
|
|
|
Residential
|
|
29,996
|
|
30,035
|
|
(0.1) %
|
SMB
|
|
2,215
|
|
2,163
|
|
2.4 %
|
Total Customer
Relationships
|
|
32,211
|
|
32,198
|
|
— %
|
|
|
|
|
|
|
|
Residential
|
|
8
|
|
109
|
|
(101)
|
SMB
|
|
8
|
|
20
|
|
(12)
|
Total Customer
Relationships Quarterly Net Additions
|
|
16
|
|
129
|
|
(113)
|
|
|
|
|
|
|
|
Total Customer
Relationship Penetration of Estimated Passings (g)
|
|
57.6 %
|
|
58.8 %
|
|
(1.2) ppts
|
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (a) (h)
|
|
$
120.56
|
|
$
117.58
|
|
2.5 %
|
Monthly SMB Revenue
per SMB Customer (a) (i)
|
|
$
164.58
|
|
$
165.58
|
|
(0.6) %
|
|
|
|
|
|
|
|
Residential Customer
Relationships Penetration
|
|
|
|
|
|
|
One Product
Penetration (a)(j)
|
|
46.0 %
|
|
45.0 %
|
|
1.0 ppts
|
Two Product
Penetration (a)(j)
|
|
32.8 %
|
|
32.5 %
|
|
0.3 ppts
|
Three or More Product
Penetration (a)(j)
|
|
21.1 %
|
|
22.5 %
|
|
(1.4) ppts
|
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
|
52.5 %
|
|
49.7 %
|
|
2.8 ppts
|
|
|
|
|
|
|
|
Internet
|
|
|
|
|
|
|
Residential
|
|
28,479
|
|
28,301
|
|
0.6 %
|
SMB
|
|
2,030
|
|
1,973
|
|
2.9 %
|
Total
Internet Customers
|
|
30,509
|
|
30,274
|
|
0.8 %
|
|
|
|
|
|
|
|
Residential
|
|
67
|
|
164
|
|
(97)
|
SMB
|
|
9
|
|
21
|
|
(12)
|
Total
Internet Quarterly Net Additions
|
|
76
|
|
185
|
|
(109)
|
|
|
|
|
|
|
|
Video
|
|
|
|
|
|
|
Residential
|
|
14,260
|
|
15,093
|
|
(5.5) %
|
SMB
|
|
646
|
|
628
|
|
2.8 %
|
Total Video
Customers
|
|
14,906
|
|
15,721
|
|
(5.2) %
|
|
|
|
|
|
|
|
Residential
|
|
(237)
|
|
(123)
|
|
(114)
|
SMB
|
|
(4)
|
|
11
|
|
(15)
|
Total Video
Quarterly Net Additions
|
|
(241)
|
|
(112)
|
|
(129)
|
|
|
|
|
|
|
|
Voice
|
|
|
|
|
|
|
Residential
|
|
7,473
|
|
8,465
|
|
(11.7) %
|
SMB
|
|
1,290
|
|
1,288
|
|
0.1 %
|
Total Voice
Customers
|
|
8,763
|
|
9,753
|
|
(10.2) %
|
|
|
|
|
|
|
|
Residential
|
|
(224)
|
|
(156)
|
|
(68)
|
SMB
|
|
4
|
|
6
|
|
(2)
|
Total Voice
Quarterly Net Additions
|
|
(220)
|
|
(150)
|
|
(70)
|
|
|
|
|
|
|
|
Mobile Lines
(k)
|
|
|
|
|
|
|
Residential
|
|
5,782
|
|
3,805
|
|
51.9 %
|
SMB
|
|
196
|
|
132
|
|
48.4 %
|
Total Mobile
Lines
|
|
5,978
|
|
3,937
|
|
51.8 %
|
|
|
|
|
|
|
|
Residential
|
|
666
|
|
357
|
|
309
|
SMB
|
|
20
|
|
16
|
|
4
|
Total Mobile
Lines Quarterly Net Additions
|
|
686
|
|
373
|
|
313
|
|
|
|
|
|
|
|
Enterprise
(l)
|
|
|
|
|
|
|
Enterprise Primary
Service Units ("PSUs")
|
|
288
|
|
274
|
|
4.9 %
|
Enterprise Quarterly
Net Additions
|
|
4
|
|
2
|
|
2
|
|
In thousands, except
per customer and penetration data. See footnotes to unaudited
summary of operating statistics on page 7 of the addendum of this
news release. The footnotes contain important disclosures regarding
the definitions used for these operating statistics. All
percentages are calculated using whole numbers. Minor differences
may exist due to rounding.
|
As of March 31, 2023, Charter had 30.0 million
residential customer relationships.
First quarter residential Internet customers increased
by 67,000, compared to an increase of 164,000 customers during
the first quarter of 2022. Spectrum Internet®
delivers the fastest Internet and WiFi download speeds in the
nation.1 Charter offers Spectrum
Internet products with speeds up to 1 Gbps across its
entire footprint and is on plan to evolve its network to offer
symmetrical and multi-gig speeds across its entire footprint over
the next three years at a lower cost and more quickly than its
competitors. Charter's Advanced WiFi, a managed WiFi service that
provides customers an optimized home network while providing
greater control of their connected devices with enhanced security
and privacy, became available to SMB customers in March, and is now
available to all Spectrum Internet customers. At the end of
the first quarter, over 40% of Charter's residential Internet
customers have Charter's Advanced WiFi. In the first quarter,
Charter completed the deployment of Mobile Speed Boost to all
Advanced WiFi routers. In October
2022, Charter introduced Spectrum One, which brings
together Spectrum Internet, Advanced WiFi and Unlimited
Spectrum MobileTM. Spectrum One products
work better together, provide the fastest connectivity, offer more
reliable and secure online connections and save customers
significant money.
Residential video customers decreased by 237,000 in the first
quarter of 2023, compared to a decline of 123,000 in the first
quarter of 2022, partly driven by downgrades following a January
pass through of higher programming expense. As of March 31,
2023, Charter had 14.3 million residential video customers.
Charter plans to begin deploying Xumo-branded streaming devices in
late 2023.
During the first quarter of 2023, residential wireline voice
customers declined by 224,000, compared to a decline of 156,000 in
the first quarter of 2022. As of March 31, 2023, Charter had
7.5 million residential wireline voice customers.
During the first quarter of 2023, Charter added 666,000
residential mobile lines, compared to growth of 357,000 during the
first quarter of 2022. Spectrum Mobile is available to all
new and existing Spectrum Internet customers and offers the
fastest overall speeds,2 with plans that include 5G
access and taxes and fees and do not require contracts. Spectrum
One and Spectrum Mobile are central to Charter's
converged network strategy to provide consumers a differentiated
connectivity experience with highly competitive, simple data plans
and pricing.
First quarter 2023 residential revenue per residential
customer totaled $120.56, and
increased by 2.5% compared to the prior year period, given
promotional rate step-ups, rate adjustments and the accelerated
growth of Spectrum Mobile, partly offset by a higher mix of
non-video customer relationships and a higher mix of lower priced
video packages within Charter's video customer base.
SMB customer relationships grew by 8,000 in the first quarter of
2023, while first quarter 2022 SMB customer relationships grew by
20,000. Enterprise PSUs grew by 4,000 in the first quarter of 2023
versus 2,000 added in the first quarter of 2022.
Charter continues to work with federal, state and local
governments to bring Spectrum Internet to unserved and
underserved communities. During the first quarter of 2023, Charter
activated 44,000 subsidized rural passings.
1.
|
Based on Ookla's
Speedtest Global Index median fixed download speeds for Q1
2023.
|
2.
|
Fastest Overall Speed
claim based on Global Wireless Solutions' combined cellular and
WiFi speed test results in Spectrum service area where WiFi is
available. Cellular speeds vary by location.
|
First Quarter Financial
Results
|
(in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
|
%
Change
|
Revenues:
|
|
|
|
|
|
Internet
|
$ 5,718
|
|
$ 5,452
|
|
4.9 %
|
Video
|
4,254
|
|
4,346
|
|
(2.1) %
|
Voice
|
373
|
|
391
|
|
(4.6) %
|
Mobile service
(a)
|
497
|
|
387
|
|
28.3 %
|
Residential
revenue
|
10,842
|
|
10,576
|
|
2.5 %
|
Small and medium
business (a)
|
1,091
|
|
1,070
|
|
2.0 %
|
Enterprise
|
682
|
|
661
|
|
3.1 %
|
Commercial
revenue
|
1,773
|
|
1,731
|
|
2.4 %
|
Advertising
sales
|
355
|
|
383
|
|
(7.2) %
|
Other
(a)
|
683
|
|
510
|
|
34.0 %
|
Total
Revenues
|
$
13,653
|
|
$
13,200
|
|
3.4 %
|
|
|
|
|
|
|
Net income attributable
to Charter shareholders
|
$ 1,021
|
|
$ 1,203
|
|
(15.2) %
|
Net income attributable
to Charter shareholders margin
|
7.5 %
|
|
9.1 %
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(b)
|
$ 5,350
|
|
$ 5,213
|
|
2.6 %
|
Adjusted EBITDA
margin
|
39.2 %
|
|
39.5 %
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$ 2,464
|
|
$ 1,857
|
|
32.7 %
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$ 3,323
|
|
$ 3,647
|
|
(8.9) %
|
Free cash flow
(b)
|
$
664
|
|
$ 1,800
|
|
(63.1) %
|
|
See page 1 of the
addendum of this news release for a GAAP reconciliation of Adjusted
EBITDA and free cash flow and page 7 of the addendum of this news
release for footnotes. The footnotes contain important
disclosures regarding the definitions used for these financial
results. All percentages are calculated using whole numbers.
Minor differences may exist due to rounding.
|
Revenues
First quarter revenue increased by 3.4% year-over-year to
$13.7 billion, driven primarily by
growth in residential, other and commercial revenues.
Residential revenue totaled $10.8
billion in the first quarter, an increase of 2.5%
year-over-year.
Internet revenue grew by 4.9% year-over-year to $5.7 billion, driven by growth in Internet
customers during the last year, promotional rate step-ups, reduced
bundled discounts and rate adjustments, partly offset by lower
bundled revenue allocation.
Video revenue totaled $4.3 billion
in the first quarter, a decrease of 2.1% compared to the prior year
period, driven by a higher mix of lower priced video packages
within Charter's video customer base and a decline in video
customers during the last year, partly offset by promotional rate
step-ups and video rate adjustments that pass through programmer
rate increases.
Voice revenue totaled $373
million in the first quarter, a decrease of 4.6% compared to
the first quarter of 2022, driven by a decline in wireline voice
customers over the last twelve months, partly offset by voice rate
adjustments.
First quarter mobile service revenue totaled $497 million, an increase of 28.3%
year-over-year, driven by mobile line growth and higher bundled
revenue allocation.
Commercial revenue increased by 2.4% year-over-year to
$1.8 billion, driven by SMB and
enterprise revenue growth of 2.0% and 3.1% year-over-year,
respectively. First quarter 2023 SMB revenue growth was driven by
customer relationship growth. Enterprise revenue excluding
wholesale increased by 7.3% year-over-year, mostly reflecting PSU
growth.
First quarter advertising sales revenue of $355 million decreased by 7.2% compared to the
year-ago quarter, primarily driven by lower political revenue.
Excluding political revenue in both periods, advertising sales
revenue decreased by 2.1% year-over-year, due to lower local and
national advertising revenue, partly offset by higher advanced
advertising revenue.
Other revenue totaled $683 million
in the first quarter, an increase of 34.0% compared to the first
quarter of 2022, primarily driven by higher mobile device
sales.
Operating Costs and Expenses
First quarter programming costs decreased by $178 million, or 6.0% as compared to the first
quarter of 2022, reflecting fewer video customers and a higher mix
of lower cost packages within Charter's video customer base, partly
offset by contractual programming rate increases and renewals.
First quarter 2023 programming costs include $50 million of favorable adjustments, which is
similar in size to sports network rebates and other favorable
adjustments in the prior year period.
Other costs of revenue increased by $220
million, or 19.9% year-over-year, primarily driven by higher
mobile device sales and other mobile direct costs.
Costs to service customers increased by $136 million, or 6.9% year-over-year. The
year-over-year increase in costs to service customers was primarily
driven by adjustments to job structure, pay and benefits to build a
more skilled and longer tenured workforce resulting in lower
frontline employee attrition compared to 2022, and additional
activity to support the accelerated growth of Spectrum
Mobile, partly offset by productivity improvements.
Sales and marketing expenses increased by $66 million, or 7.6% year-over-year, primarily
due to higher staffing across sales channels and the accelerated
growth of Spectrum Mobile.
Other expenses increased by $72
million, or 6.7% as compared to the first quarter of 2022,
primarily due to higher labor costs.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled
$1.0 billion in the first quarter of
2023, compared to $1.2 billion in the
first quarter of 2022. The year-over-year decrease in net income
attributable to Charter shareholders was primarily driven by higher
interest expense and other non-operating costs and expenses, partly
offset by higher Adjusted EBITDA.
Net income per basic common share attributable to Charter
shareholders totaled $6.74 in the
first quarter of 2023 compared to $7.05 during the same period last year. The
decrease was primarily the result of the factors described above,
partly offset by the benefit of an 11.3% decrease in basic weighted
average common shares outstanding versus the prior year period.
Adjusted EBITDA
First quarter Adjusted EBITDA of $5.4 billion grew by 2.6% year-over-year,
reflecting growth in revenue and operating expenses of 3.4% and
3.9%, respectively.
Capital Expenditures
Capital expenditures totaled $2.5
billion in the first quarter of 2023, compared to
$1.9 billion during the first quarter
of 2022. The increase was primarily driven by higher spend on line
extensions, which totaled $890
million in the first quarter of 2023, compared to
$541 million in the prior year
quarter, driven by Charter's subsidized rural construction
initiative and continued network expansion across residential and
commercial greenfield and market fill-in opportunities. First
quarter capital expenditures excluding line extensions totaled
$1.6 billion, compared to
$1.3 billion in the first quarter of
2022, primarily driven by higher spend on upgrade/rebuild
(primarily network evolution), customer premise equipment and
support capital.
Charter currently expects full year 2023 capital expenditures,
excluding line extensions, to be between $6.5 billion and $6.8
billion. Charter expects 2023 line extensions capital
expenditures to be approximately $4
billion. The actual amount of capital expenditures in 2023
will depend on a number of factors including, but not limited to,
the pace of Charter's network evolution and expansion initiatives,
supply chain timing and growth rates in Charter's residential and
commercial businesses.
Cash Flow and Free Cash Flow
During the first quarter of 2023, net cash flows from operating
activities totaled $3.3 billion,
compared to $3.6 billion in the prior
year quarter. The year-over-year decrease in net cash flows from
operating activities was primarily due to a more unfavorable change
in working capital, partly offset by higher Adjusted EBITDA.
Free cash flow in the first quarter of 2023 totaled $664 million, compared to $1.8 billion during the same period last year.
The year-over-year decrease in free cash flow was primarily driven
by a decrease in net cash flows from operating activities and an
increase in capital expenditures.
Liquidity & Financing
As of March 31, 2023, total principal amount of debt was
$97.8 billion and Charter's credit
facilities provided approximately $3.3
billion of additional liquidity in excess of Charter's
$534 million cash position.
In February 2023, CCO Holdings,
LLC and CCO Holdings Capital Corp. jointly issued $1.1 billion of 7.375% senior unsecured notes due
2031 at par. The net proceeds were used for general corporate
purposes, including repaying certain indebtedness, funding buybacks
of Charter Class A common stock and Charter Holdings common units
and to pay related fees and expenses.
In February 2023, Charter
Operating entered into an amendment to its credit agreement to
replace London Interbank Offering Rate ("LIBOR") as the benchmark
rate applicable to the Term B loans with Secured Overnight
Financing Rate ("SOFR") and in March
2023, Charter Operating entered into another amendment to
its credit agreement to incur a new Term B-3 loan with an aggregate
principal amount of $750 million maturing in 2030 concurrently
with the cancellation of certain of Charter Operating's existing
Term B-1 and B-2 loans, among other amendments. Pricing on the new
Term B-3 loan is SOFR plus 2.25%. After giving effect to the
amendments, the aggregate principal amount of Term B-1 loans is
$2.3 billion with pricing
unchanged at SOFR plus 1.75% and the aggregate principal amount of
Term B-2 loans is $3.1 billion
with pricing unchanged at SOFR plus 1.75%.
Share Repurchases
During the three months ended March 31, 2023, Charter
purchased 2.6 million shares of Charter Class A common stock and
Charter Holdings common units for approximately $1.0 billion.
Webcast
Charter will host a webcast on Friday, April 28, 2023 at
8:30 a.m. Eastern Time (ET) related
to the contents of this release.
The webcast can be accessed live via the Company's investor
relations website at ir.charter.com. Participants should go to the
webcast link no later than 10 minutes prior to the start time to
register. The webcast will be archived at ir.charter.com two hours
after completion of the webcast.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 2023, which will be posted on the "Results
& SEC Filings" section of the Company's investor relations
website at ir.charter.com, when it is filed with the Securities and
Exchange Commission (the "SEC"). A slide presentation to accompany
the conference call and a trending schedule containing historical
customer and financial data will also be available in the "Results
& SEC Filings" section.
Use of Adjusted EBITDA and Free Cash Flow
Information
The Company uses certain measures that are not defined by U.S.
generally accepted accounting principles ("GAAP") to evaluate
various aspects of its business. Adjusted EBITDA and free cash flow
are non-GAAP financial measures and should be considered in
addition to, not as a substitute for, net income attributable to
Charter shareholders and net cash flows from operating activities
reported in accordance with GAAP. These terms, as defined by
Charter, may not be comparable to similarly titled measures used by
other companies. Adjusted EBITDA and free cash flow are reconciled
to net income attributable to Charter shareholders and net cash
flows from operating activities, respectively, in the Addendum to
this release.
Adjusted EBITDA is defined as net income attributable to Charter
shareholders plus net income attributable to noncontrolling
interest, net interest expense, income taxes, depreciation and
amortization, stock compensation expense, other income (expenses),
net and other operating (income) expenses, net, such as special
charges and (gain) loss on sale or retirement of assets. As such,
it eliminates the significant non-cash depreciation and
amortization expense that results from the capital-intensive nature
of the Company's businesses as well as other non-cash or special
items, and is unaffected by the Company's capital structure or
investment activities. However, this measure is limited in that it
does not reflect the periodic costs of certain capitalized tangible
and intangible assets used in generating revenues and the cash cost
of financing. These costs are evaluated through other financial
measures.
Free cash flow is defined as net cash flows from operating
activities, less capital expenditures and changes in accrued
expenses related to capital expenditures.
Management and Charter's board of directors use Adjusted EBITDA
and free cash flow to assess Charter's performance and its ability
to service its debt, fund operations and make additional
investments with internally generated funds. In addition, Adjusted
EBITDA generally correlates to the leverage ratio calculation under
the Company's credit facilities or outstanding notes to determine
compliance with the covenants contained in the facilities and notes
(all such documents have been previously filed with the SEC). For
the purpose of calculating compliance with leverage covenants, the
Company uses Adjusted EBITDA, as presented, excluding certain
expenses paid by its operating subsidiaries to other Charter
entities. The Company's debt covenants refer to these expenses as
management fees, which were $374
million and $342 million for
the three months ended March 31, 2023 and 2022,
respectively.
About Charter
Charter Communications, Inc. (NASDAQ:CHTR) is a leading
broadband connectivity company and cable operator serving more than
32 million customers in 41 states through its Spectrum brand. Over
an advanced communications network, the Company offers a full range
of state-of-the-art residential and business services including
Spectrum Internet®, TV, Mobile and Voice.
For small and medium-sized companies, Spectrum
Business® delivers the same suite of broadband products
and services coupled with special features and applications to
enhance productivity, while for larger businesses and government
entities, Spectrum Enterprise provides highly customized,
fiber-based solutions. Spectrum Reach® delivers tailored
advertising and production for the modern media landscape. The
Company also distributes award-winning news coverage and sports
programming to its customers through Spectrum Networks. More
information about Charter can be found at
corporate.charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This communication includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, regarding, among other things, our plans,
strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations as
reflected in or suggested by these forward-looking statements are
reasonable, we cannot assure you that we will achieve or realize
these plans, intentions or expectations. Forward-looking
statements are inherently subject to risks, uncertainties and
assumptions including, without limitation, the factors described
under "Risk Factors" from time to time in our filings with the
SEC. Many of the forward-looking statements contained in this
communication may be identified by the use of forward-looking words
such as "believe," "expect," "anticipate," "should," "planned,"
"will," "may," "intend," "estimated," "aim," "on track," "target,"
"opportunity," "tentative," "positioning," "designed," "create,"
"predict," "project," "initiatives," "seek," "would," "could,"
"continue," "ongoing," "upside," "increases," "grow," "focused on"
and "potential," among others. Important factors that could
cause actual results to differ materially from the forward-looking
statements we make in this communication are set forth in our
annual report on Form 10-K, and in other reports or documents that
we file from time to time with the SEC, and include, but are not
limited to:
- our ability to sustain and grow revenues and cash flow from
operations by offering Internet, video, voice, mobile, advertising
and other services to residential and commercial customers, to
adequately meet the customer experience demands in our service
areas and to maintain and grow our customer base, particularly in
the face of increasingly aggressive competition, the need for
innovation and the related capital expenditures;
- the impact of competition from other market participants,
including but not limited to incumbent telephone companies, direct
broadcast satellite ("DBS") operators, wireless broadband and
telephone providers, digital subscriber line ("DSL") providers,
fiber to the home providers and providers of video content over
broadband Internet connections;
- general business conditions, unemployment levels and the level
of activity in the housing sector and economic uncertainty or
downturn;
- our ability to obtain programming at reasonable prices or to
raise prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents and
distribution requirements);
- our ability to develop and deploy new products and technologies
including consumer services and service platforms;
- any events that disrupt our networks, information systems or
properties and impair our operating activities or our
reputation;
- the effects of governmental regulation on our business
including subsidies to consumers, subsidies and incentives for
competitors, costs, disruptions and possible limitations on
operating flexibility related to, and our ability to comply with,
regulatory conditions applicable to us;
- the ability to hire and retain key personnel;
- our ability to procure necessary services and equipment from
our vendors in a timely manner and at reasonable costs including in
connection with our network evolution and rural construction
initiatives;
- the availability and access, in general, of funds to meet our
debt obligations prior to or when they become due and to fund our
operations and necessary capital expenditures, either through (i)
cash on hand, (ii) free cash flow, or (iii) access to the capital
or credit markets; and
- our ability to comply with all covenants in our indentures and
credit facilities, any violation of which, if not cured in a timely
manner, could trigger a default of our other obligations under
cross-default provisions.
All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
this cautionary statement. We are under no duty or obligation
to update any of the forward-looking statements after the date of
this communication.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
|
(dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
Net income attributable
to Charter shareholders
|
$
1,021
|
|
$
1,203
|
Plus: Net income
attributable to noncontrolling interest
|
162
|
|
186
|
Interest expense,
net
|
1,265
|
|
1,060
|
Income tax
expense
|
374
|
|
345
|
Depreciation and
amortization
|
2,206
|
|
2,294
|
Stock compensation
expense
|
208
|
|
147
|
Other, net
|
114
|
|
(22)
|
Adjusted EBITDA
(b)
|
$
5,350
|
|
$
5,213
|
|
|
|
|
Net cash flows from
operating activities
|
$
3,323
|
|
$
3,647
|
Less: Purchases
of property, plant and equipment
|
(2,464)
|
|
(1,857)
|
Change in accrued
expenses related to capital expenditures
|
(195)
|
|
10
|
Free cash flow
(b)
|
$
664
|
|
$
1,800
|
|
The above schedule is
presented in order to reconcile Adjusted EBITDA and free cash flow,
non-GAAP measures, to the most directly comparable GAAP measures in
accordance with Section 401(b) of the Sarbanes-Oxley
Act.
|
UNAUDITED
ALTERNATIVE PRESENTATION OF ADJUSTED EBITDA
|
(dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
Internet
|
$
5,718
|
|
$
5,452
|
|
4.9 %
|
Video
|
4,254
|
|
4,346
|
|
(2.1) %
|
Voice
|
373
|
|
391
|
|
(4.6) %
|
Mobile service
(a)
|
497
|
|
387
|
|
28.3 %
|
Residential
revenue
|
10,842
|
|
10,576
|
|
2.5 %
|
Small and medium
business (a)
|
1,091
|
|
1,070
|
|
2.0 %
|
Enterprise
|
682
|
|
661
|
|
3.1 %
|
Commercial
revenue
|
1,773
|
|
1,731
|
|
2.4 %
|
Advertising
sales
|
355
|
|
383
|
|
(7.2) %
|
Other
(a)
|
683
|
|
510
|
|
34.0 %
|
Total
Revenues
|
13,653
|
|
13,200
|
|
3.4 %
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
Programming
|
2,799
|
|
2,977
|
|
(6.0) %
|
Other costs of revenue
(a)
|
1,328
|
|
1,108
|
|
19.9 %
|
Costs to service
customers (a)
|
2,095
|
|
1,959
|
|
6.9 %
|
Sales and marketing
(a)
|
946
|
|
880
|
|
7.6 %
|
Other expense (a)
(c)
|
1,135
|
|
1,063
|
|
6.7 %
|
Total operating
costs and expenses (c)
|
8,303
|
|
7,987
|
|
3.9 %
|
|
|
|
|
|
|
Adjusted EBITDA
(b)
|
$
5,350
|
|
$
5,213
|
|
2.6 %
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
|
See footnotes on page
7.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
(dollars in
millions, except per share data)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
REVENUES
|
$
13,653
|
|
$
13,200
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
Operating costs and
expenses (exclusive of items shown separately below)
|
8,511
|
|
8,134
|
Depreciation and
amortization
|
2,206
|
|
2,294
|
Other operating
expenses, net
|
10
|
|
1
|
|
10,727
|
|
10,429
|
Income from
operations
|
2,926
|
|
2,771
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
Interest expense,
net
|
(1,265)
|
|
(1,060)
|
Other income
(expense), net
|
(104)
|
|
23
|
|
(1,369)
|
|
(1,037)
|
Income before income
taxes
|
1,557
|
|
1,734
|
Income tax
expense
|
(374)
|
|
(345)
|
Consolidated net
income
|
1,183
|
|
1,389
|
Less: Net income
attributable to noncontrolling interests
|
(162)
|
|
(186)
|
Net income attributable
to Charter shareholders
|
$
1,021
|
|
$
1,203
|
|
|
|
|
EARNINGS PER COMMON
SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
Basic
|
$
6.74
|
|
$
7.05
|
Diluted
|
$
6.65
|
|
$
6.90
|
Weighted average
common shares outstanding, basic
|
151,438,371
|
|
170,688,127
|
Weighted average
common shares outstanding, diluted
|
153,538,359
|
|
174,500,472
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
(dollars in
millions)
|
|
|
March
31,
|
|
December
31,
|
|
2023
|
|
2022
|
ASSETS
|
(unaudited)
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
534
|
|
$
645
|
Accounts receivable,
net
|
2,851
|
|
2,921
|
Prepaid expenses and
other current assets
|
682
|
|
451
|
Total current
assets
|
4,067
|
|
4,017
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
36,602
|
|
36,039
|
Customer
relationships, net
|
2,479
|
|
2,772
|
Franchises
|
67,366
|
|
67,363
|
Goodwill
|
29,563
|
|
29,563
|
Total investment in
cable properties, net
|
136,010
|
|
135,737
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
4,793
|
|
4,769
|
|
|
|
|
Total
assets
|
$
144,870
|
|
$
144,523
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
10,243
|
|
$
10,555
|
Current portion of
long-term debt
|
1,999
|
|
1,510
|
Total current
liabilities
|
12,242
|
|
12,065
|
|
|
|
|
LONG-TERM
DEBT
|
95,973
|
|
96,093
|
DEFERRED INCOME
TAXES
|
19,030
|
|
19,058
|
OTHER LONG-TERM
LIABILITIES
|
4,723
|
|
4,758
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
Controlling
interest
|
9,418
|
|
9,119
|
Noncontrolling
interests
|
3,484
|
|
3,430
|
Total shareholders'
equity
|
12,902
|
|
12,549
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
144,870
|
|
$
144,523
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
(dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Consolidated net
income
|
$
1,183
|
|
$
1,389
|
Adjustments to
reconcile consolidated net income to net cash flows from operating
activities:
|
|
|
|
Depreciation
and amortization
|
2,206
|
|
2,294
|
Stock
compensation expense
|
208
|
|
147
|
Noncash
interest income, net
|
(3)
|
|
(3)
|
Deferred income
taxes
|
(23)
|
|
38
|
Other,
net
|
104
|
|
(21)
|
Changes in operating
assets and liabilities, net of effects from acquisitions and
dispositions:
|
|
|
|
Accounts
receivable
|
70
|
|
49
|
Prepaid
expenses and other assets
|
(336)
|
|
(185)
|
Accounts
payable, accrued liabilities and other
|
(86)
|
|
(61)
|
Net cash flows from
operating activities
|
3,323
|
|
3,647
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of property,
plant and equipment
|
(2,464)
|
|
(1,857)
|
Change in accrued
expenses related to capital expenditures
|
(195)
|
|
10
|
Other, net
|
(80)
|
|
60
|
Net cash flows
from investing activities
|
(2,739)
|
|
(1,787)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Borrowings of
long-term debt
|
7,104
|
|
6,713
|
Repayments of
long-term debt
|
(6,740)
|
|
(2,954)
|
Payments for debt
issuance costs
|
(18)
|
|
(37)
|
Purchase of treasury
stock
|
(912)
|
|
(3,333)
|
Proceeds from exercise
of stock options
|
2
|
|
1
|
Purchase of
noncontrolling interest
|
(122)
|
|
(416)
|
Distributions to
noncontrolling interest
|
(3)
|
|
(2)
|
Other, net
|
(6)
|
|
(2)
|
Net cash flows
from financing activities
|
(695)
|
|
(30)
|
|
|
|
|
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS
|
(111)
|
|
1,830
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
645
|
|
601
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
534
|
|
$
2,431
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
1,189
|
|
$
982
|
CASH PAID FOR
TAXES
|
$
61
|
|
$
29
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED SUMMARY OF
OPERATING STATISTICS
|
(in thousands,
except per customer and penetration data)
|
|
|
|
Approximate as
of
|
|
|
March 31,
2023 (d)
|
|
December 31,
2022 (d)
|
|
March 31,
2022 (d)
|
Footprint
(e)
|
|
|
|
|
|
|
Estimated
Passings
|
|
55,885
|
|
55,573
|
|
54,739
|
|
|
|
|
|
|
|
Customer
Relationships (f)
|
|
|
|
|
|
|
Residential
|
|
29,996
|
|
29,988
|
|
30,035
|
SMB
|
|
2,215
|
|
2,207
|
|
2,163
|
Total Customer
Relationships
|
|
32,211
|
|
32,195
|
|
32,198
|
|
|
|
|
|
|
|
Residential
|
|
8
|
|
42
|
|
109
|
SMB
|
|
8
|
|
12
|
|
20
|
Total Customer
Relationships Quarterly Net Additions
|
|
16
|
|
54
|
|
129
|
|
|
|
|
|
|
|
Total Customer
Relationship Penetration of Estimated Passings
(g)
|
|
57.6 %
|
|
57.9 %
|
|
58.8 %
|
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (a) (h)
|
|
$
120.56
|
|
$
119.32
|
|
$
117.58
|
Monthly SMB Revenue
per SMB Customer (a) (i)
|
|
$
164.58
|
|
$
165.50
|
|
$
165.58
|
|
|
|
|
|
|
|
Residential Customer
Relationships Penetration
|
|
|
|
|
|
|
One Product
Penetration (a) (j)
|
|
46.0 %
|
|
45.9 %
|
|
45.0 %
|
Two Product
Penetration (a) (j)
|
|
32.8 %
|
|
32.7 %
|
|
32.5 %
|
Three or More Product
Penetration (a) (j)
|
|
21.1 %
|
|
21.3 %
|
|
22.5 %
|
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
|
52.5 %
|
|
51.7 %
|
|
49.7 %
|
|
|
|
|
|
|
|
Internet
|
|
|
|
|
|
|
Residential
|
|
28,479
|
|
28,412
|
|
28,301
|
SMB
|
|
2,030
|
|
2,021
|
|
1,973
|
Total Internet
Customers
|
|
30,509
|
|
30,433
|
|
30,274
|
|
|
|
|
|
|
|
Residential
|
|
67
|
|
92
|
|
164
|
SMB
|
|
9
|
|
13
|
|
21
|
Total Internet
Quarterly Net Additions
|
|
76
|
|
105
|
|
185
|
|
|
|
|
|
|
|
Video
|
|
|
|
|
|
|
Residential
|
|
14,260
|
|
14,497
|
|
15,093
|
SMB
|
|
646
|
|
650
|
|
628
|
Total Video
Customers
|
|
14,906
|
|
15,147
|
|
15,721
|
|
|
|
|
|
|
|
Residential
|
|
(237)
|
|
(145)
|
|
(123)
|
SMB
|
|
(4)
|
|
1
|
|
11
|
Total Video
Quarterly Net Additions
|
|
(241)
|
|
(144)
|
|
(112)
|
|
|
|
|
|
|
|
Voice
|
|
|
|
|
|
|
Residential
|
|
7,473
|
|
7,697
|
|
8,465
|
SMB
|
|
1,290
|
|
1,286
|
|
1,288
|
Total Voice
Customers
|
|
8,763
|
|
8,983
|
|
9,753
|
|
|
|
|
|
|
|
Residential
|
|
(224)
|
|
(232)
|
|
(156)
|
SMB
|
|
4
|
|
(1)
|
|
6
|
Total Voice
Quarterly Net Additions
|
|
(220)
|
|
(233)
|
|
(150)
|
|
|
|
|
|
|
|
Mobile Lines
(k)
|
|
|
|
|
|
|
Residential
|
|
5,782
|
|
5,116
|
|
3,805
|
SMB
|
|
196
|
|
176
|
|
132
|
Total Mobile
Lines
|
|
5,978
|
|
5,292
|
|
3,937
|
|
|
|
|
|
|
|
Residential
|
|
666
|
|
600
|
|
357
|
SMB
|
|
20
|
|
15
|
|
16
|
Total Mobile
Lines Quarterly Net Additions
|
|
686
|
|
615
|
|
373
|
|
|
|
|
|
|
|
Enterprise
(l)
|
|
|
|
|
|
|
Enterprise Primary
Service Units ("PSUs")
|
|
288
|
|
284
|
|
274
|
Enterprise Quarterly
Net Additions
|
|
4
|
|
2
|
|
2
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CAPITAL EXPENDITURES
|
(dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
Customer premise
equipment (a) (m)
|
$
537
|
|
$
469
|
Scalable infrastructure
(a) (n)
|
354
|
|
359
|
Upgrade/rebuild
(a) (o)
|
289
|
|
159
|
Support capital
(a) (p)
|
394
|
|
329
|
Capital expenditures,
excluding line extensions
|
1,574
|
|
1,316
|
|
|
|
|
Subsidized rural
construction line extensions (a)
|
371
|
|
192
|
Other line
extensions (a)
|
519
|
|
349
|
Total line extensions
(a) (q)
|
890
|
|
541
|
Total capital
expenditures
|
$
2,464
|
|
$
1,857
|
|
|
|
|
Capital expenditures
included in total related to:
|
|
|
|
Commercial
services
|
$
367
|
|
$
365
|
Subsidized rural
construction initiative (a) (r)
|
$
391
|
|
$
201
|
Mobile
|
$
77
|
|
$
74
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
FOOTNOTES
|
|
(a)
|
Beginning in the first
quarter of 2023, we removed separate mobile reporting, among
several other changes, to better reflect the converged and
integrated nature of our business and operations. We made the
following changes to our reporting:
|
|
- Residential and small and medium business
("SMB") monthly revenue per customer calculations now include
mobile service revenue
- Residential product penetrations now also
include customers that subscribe to mobile and at least one
additional product
- Residential mobile service revenue previously
included in mobile revenue is now separately reported in
residential revenue
- SMB mobile service revenue previously
included in mobile revenue is now included in SMB revenue
- Mobile equipment revenue previously included
in mobile revenue is now included in other revenue
- Mobile expenses are no longer reported
separately and are included in applicable expense categories
- Other costs of revenue includes regulatory,
connectivity and produced content costs as well as mobile device
costs and direct costs associated with mobile and selling
advertising
- Costs to service customers now also includes
costs related to field operations, network operations and customer
operations for mobile customers but no longer includes costs to
service bulk properties
- Sales and marketing expense, which previously
included sales and marketing for Spectrum Enterprise, Spectrum
Reach and Spectrum Networks as well as costs associated with
selling to and servicing bulk properties, now only consists of
residential and SMB sales and marketing expenses, including sales
and marketing for mobile
- Other expense now also includes sales and
marketing for Spectrum Enterprise, Spectrum Reach and Spectrum
Networks as well as costs associated with selling to and servicing
bulk properties but no longer includes direct costs associated with
selling advertising
- Reclasses within capital expenditure
categories were made to reclassify all costs associated with our
network evolution initiative to upgrade/rebuild
- Line extensions capital expenditures are now
broken out between subsidized rural construction line extensions
and other line extensions
- Subsidized rural construction initiative
capital expenditures subcategory only includes rural construction
projects for which we are receiving subsidies from federal, state
or local governments
|
|
There were no changes
to total revenue, Adjusted EBITDA, capital expenditures or net
income. Prior periods have been revised to conform with the
presentation noted above.
|
(b)
|
Adjusted EBITDA is
defined as net income attributable to Charter shareholders plus net
income attributable to noncontrolling interest, net interest
expense, income taxes, depreciation and amortization, stock
compensation expense, other (income) expenses, net and other
operating (income) expenses, net such as special charges and (gain)
loss on sale or retirement of assets. As such, it eliminates the
significant non-cash depreciation and amortization expense that
results from the capital-intensive nature of our businesses as well
as other non-cash or special items, and is unaffected by our
capital structure or investment activities. Free cash flow is
defined as net cash flows from operating activities, less capital
expenditures and changes in accrued expenses related to capital
expenditures.
|
(c)
|
Other expense excludes
stock compensation expense. Total operating costs and
expenses excludes stock compensation expense, depreciation and
amortization and other operating (income) expenses, net.
|
(d)
|
We calculate the aging
of customer accounts based on the monthly billing cycle for each
account. On that basis, at March 31, 2023, December 31, 2022
and March 31, 2022, customers included approximately 119,800,
144,100 and 132,500 customers, respectively, whose accounts were
over 60 days past due, approximately 42,100, 52,800 and 29,000
customers, respectively, whose accounts were over 90 days past due
and approximately 217,800, 214,100 and 74,500 customers,
respectively, whose accounts were over 120 days past due. Bad
debt expense associated with these past due accounts has been
reflected in our consolidated statements of operations. The
increase in accounts past due is predominately due to pre-existing
and incremental unsubsidized services, including video services,
for those customers participating in government assistance
programs. These customers are downgraded to a fully
subsidized Internet-only service.
|
(e)
|
Passings represent our
estimate of the number of units, such as single family homes,
apartment and condominium units and SMB and enterprise sites passed
by our cable distribution network in the areas where we offer the
service indicated. These estimates are based upon the
information available at this time and are updated for all periods
presented when new information becomes available.
|
(f)
|
Customer relationships
include the number of customers that receive one or more levels of
service, encompassing Internet, video, voice and mobile services,
without regard to which service(s) such customers receive.
Customers who reside in residential multiple dwelling units
("MDUs") and that are billed under bulk contracts are counted based
on the number of billed units within each bulk MDU. Total
customer relationships exclude enterprise and mobile-only customer
relationships.
|
(g)
|
Penetration represents
residential and SMB customers as a percentage of estimated
passings. Penetration excludes mobile-only
customers.
|
(h)
|
Monthly residential
revenue per residential customer is calculated as total residential
quarterly revenue divided by three divided by average residential
customer relationships during the respective quarter and excludes
mobile-only customer relationships.
|
(i)
|
Monthly SMB revenue per
SMB customer is calculated as total SMB quarterly revenue divided
by three divided by average SMB customer relationships during the
respective quarter and excludes mobile-only customer
relationships.
|
(j)
|
One product, two
product and three or more product penetration represents the number
of residential customers that subscribe to one product, two
products or three or more products, respectively, as a percentage
of residential customer relationships, excluding mobile-only
customers.
|
(k)
|
Mobile lines include
phones and tablets which require one of our standard rate plans
(e.g., "Unlimited" or "By the Gig"). Mobile lines exclude
wearables and other devices that do not require standard phone rate
plans.
|
(l)
|
Enterprise PSUs
represents the aggregate number of fiber service offerings counting
each separate service offering at each customer location as an
individual PSU.
|
(m)
|
Customer premise
equipment includes equipment and devices located at the customer's
premise used to deliver our Internet, video and voice services
(e.g., modems, routers and set-top boxes), as well as installation
costs.
|
(n)
|
Scalable infrastructure
includes costs, not related to customer premise equipment or our
network, to secure growth of new customers or provide service
enhancements (e.g., headend equipment).
|
(o)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks, including our network evolution initiative which started
in 2022.
|
(p)
|
Support capital
includes costs associated with the replacement or enhancement of
non-network assets (e.g., back-office systems, non-network
equipment, land and buildings, vehicles, tools and test
equipment).
|
(q)
|
Line extensions include
network costs associated with entering new service areas (e.g.,
fiber/coaxial cable, amplifiers, electronic equipment, make-ready
and design engineering).
|
(r)
|
The subsidized rural
construction initiative subcategory includes projects for which we
are receiving subsidies from federal, state and local governments
(for which separate reporting was initiated in 2022), excluding
customer premise equipment and installation.
|
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SOURCE Charter Communications, Inc.