10-QPeriod: Q3 FY2017

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 26, 2017For Securities:CHTR

Summary

Charter Communications, Inc. reported revenue of $10.46 billion for the third quarter of 2017, a 4.2% increase year-over-year. For the nine-month period, revenue grew significantly by 65.4% to $31.0 billion, largely due to the impact of the Time Warner Cable and Bright House Networks acquisitions completed in May 2016. Net income attributable to Charter shareholders saw a substantial decrease, falling to $48 million ($0.19 per diluted share) in Q3 2017 from $189 million ($0.69 per diluted share) in Q3 2016. This decline was influenced by increased interest expenses, depreciation, and amortization related to the recent large-scale acquisitions, as well as higher transition and integration costs. The company continues to integrate the acquired businesses, focusing on the rollout of its Spectrum pricing and packaging (SPP) and all-digital platform. While customer relationships grew overall, the company experienced a slight decrease in video customers, offset by significant growth in Internet and commercial services. Charter also continued its share repurchase program, signaling confidence in its financial position and future prospects despite increased debt levels post-acquisition.

Financial Highlights

49 data points
Beta

Revenue

$10.46B

Net Income

$48.00M

0.5% Net Margin

EPS (Diluted)

$0.19

Total Assets

$148.23B

Cash & Equivalents

$2.16B

Free Cash Flow

$515.00M

Financial Statements
Beta
Revenue$10.46B
Operating Expenses$9.55B
Operating Income$909.00M
Net Income$48.00M
EPS (Basic)$0.19
EPS (Diluted)$0.19
Shares Outstanding (Basic)253.92M
Shares Outstanding (Diluted)258.34M

Key Highlights

  • 1Revenue increased by 4.2% to $10.46 billion for Q3 2017, driven by growth in Internet and commercial businesses.
  • 2Net income attributable to Charter shareholders decreased to $48 million in Q3 2017 from $189 million in Q3 2016, impacted by acquisition-related expenses and debt.
  • 3Total customer relationships grew to 26.99 million as of September 30, 2017, up from 25.92 million in the prior year.
  • 4Residential Internet customers increased by 1.265 million year-over-year.
  • 5Long-term debt increased significantly to $66.06 billion as of September 30, 2017, from $59.72 billion at year-end 2016.
  • 6The company repurchased approximately $3.5 billion of its Class A common stock in the third quarter of 2017.
  • 7Integration of Time Warner Cable and Bright House Networks is progressing with the rollout of SPP and all-digital platform.

Frequently Asked Questions

The primary driver of Charter's revenue growth in the third quarter of 2017 was the increase in residential Internet customers and commercial business customers, alongside price adjustments. The nine-month revenue growth was significantly boosted by the completion of the Time Warner Cable and Bright House Networks acquisitions in May 2016.

The decrease in net income was primarily due to higher interest expenses resulting from increased debt levels following the major acquisitions, increased depreciation and amortization expenses related to the acquired assets, and ongoing transition and integration costs associated with combining the legacy companies. Additionally, the prior year's nine-month period benefited from a significant income tax benefit.

Charter has a significant amount of debt, largely due to its major acquisitions. The company aims to manage this through a combination of free cash flow generation, cash on hand, availability under its credit facilities, and potential future refinancing transactions. They also focus on maintaining target leverage ratios and have continued a share repurchase program, suggesting confidence in their ability to manage their financial obligations.

Charter is focused on integrating the acquired businesses by rolling out its Spectrum pricing and packaging (SPP) and transitioning to an all-digital platform across the combined service areas. They are also centralizing corporate functions, managing field operations regionally, and aiming to insource customer care centers to improve customer service and operational efficiency.