10-QPeriod: Q1 FY2017

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:CHTR

Summary

Charter Communications, Inc. reported a significant shift from a net loss in the first quarter of 2016 to a net income of $155 million in the first quarter of 2017, largely driven by the completion of the Time Warner Cable and Bright House Networks acquisitions. Total revenues saw a substantial increase of 302% year-over-year due to these acquisitions. While operating costs and expenses also increased proportionally, the company demonstrated strong operational performance with Adjusted EBITDA growing by 314% to $3.65 billion. The company also generated positive free cash flow of $1.14 billion in Q1 2017, a significant improvement from a negative $61 million in the prior year's quarter. Despite the positive financial results, investors should note the substantial debt load of over $61 billion, a consequence of the large-scale acquisitions. The company's strategic focus remains on integrating the acquired businesses, expanding its Spectrum pricing and packaging, and investing in network upgrades. Management is confident in the company's liquidity and its ability to fund operations and growth initiatives, with ample cash on hand and available credit facilities.

Financial Highlights

49 data points
Beta

Revenue

$10.16B

Net Income

$155.00M

1.5% Net Margin

EPS (Diluted)

$0.57

Total Assets

$149.44B

Cash & Equivalents

$2.92B

Free Cash Flow

$1.29B

Financial Statements
Beta
Revenue$10.16B
Operating Expenses$9.22B
Operating Income$941.00M
Net Income$155.00M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)269.00M
Shares Outstanding (Diluted)273.20M

Key Highlights

  • 1Reported net income of $155 million in Q1 2017, a substantial turnaround from a net loss of $188 million in Q1 2016.
  • 2Total revenues surged by 302% to $10.16 billion, primarily due to the integration of Time Warner Cable and Bright House Networks.
  • 3Adjusted EBITDA increased by 314% to $3.65 billion, reflecting improved operational efficiency and scale post-acquisitions.
  • 4Generated positive free cash flow of $1.14 billion in Q1 2017, a significant improvement from a negative $61 million in the prior year.
  • 5Total debt remains substantial at $61.3 billion, underscoring the high leverage following recent transactions.
  • 6Continued investment in capital expenditures, totaling $1.56 billion, focused on network upgrades and integration efforts.
  • 7The company repurchased approximately $799 million of its Class A common stock during the quarter, signaling confidence and returning value to shareholders.

Frequently Asked Questions

The primary driver was the completion of the acquisitions of Time Warner Cable (TWC) and Bright House Networks in May 2016. These transactions significantly expanded Charter's scale and customer base, leading to a substantial increase in revenues and a positive net income, reversing the net loss reported in the prior year's quarter.

Charter Communications carries a significant debt load of over $61 billion. The company is focused on managing this debt through a combination of generating positive free cash flow, utilizing existing cash on hand, maintaining access to credit facilities, and exploring future refinancing transactions to extend maturities or reduce principal. Their target leverage ratio is 4 to 4.5 times at the corporate level.

Capital expenditures in Q1 2017 totaled $1.56 billion, primarily focused on customer premise equipment, scalable infrastructure, line extensions, network upgrades/rebuilds, and support capital. These investments are crucial for integrating the newly acquired businesses, enhancing the all-digital platform, and supporting growth in residential and commercial services.

Charter is actively working to integrate the operations, marketing, sales, and product development of the legacy companies. This includes transitioning to their 'Spectrum pricing and packaging' model across acquired markets, insourcing customer service and field operations, and consolidating IT and network operations. The company expects these integration efforts to drive improved operational efficiency and financial results over time.