10-QPeriod: Q3 FY2018

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 26, 2018For Securities:CHTR

Summary

Charter Communications, Inc. reported solid revenue growth for the nine months ended September 30, 2018, driven primarily by an increase in residential Internet and commercial business customers, coupled with price adjustments and the successful launch of its mobile service. While overall revenue saw a 4.6% increase year-over-year, the company's net income attributable to Charter shareholders significantly improved, reaching $934 million compared to $342 million in the prior year period. This improvement reflects strong operational performance, partly offset by increased interest expenses and mobile service launch costs. Financially, the company maintained a substantial debt load, with long-term debt totaling $69.1 billion. However, it demonstrated robust operating cash flow, generating $8.6 billion for the nine-month period, and maintained adequate liquidity with approximately $612 million in cash and cash equivalents and significant availability under its credit facilities. Capital expenditures remained high, reflecting ongoing investments in infrastructure and service enhancements, including the all-digital transition and the new mobile offering.

Financial Highlights

49 data points
Beta

Revenue

$10.89B

Net Income

$493.00M

4.5% Net Margin

EPS (Diluted)

$2.11

Total Assets

$146.09B

Cash & Equivalents

$612.00M

Free Cash Flow

$686.00M

Financial Statements
Beta
Revenue$10.89B
Operating Expenses$9.51B
Operating Income$1.38B
Net Income$493.00M
EPS (Basic)$2.14
EPS (Diluted)$2.11
Shares Outstanding (Basic)230.55M
Shares Outstanding (Diluted)233.61M

Key Highlights

  • 1Total revenues increased by 4.6% to $32.4 billion for the nine months ended September 30, 2018, compared to the same period in 2017.
  • 2Net income attributable to Charter shareholders surged to $934 million for the nine months ended September 30, 2018, a significant increase from $342 million in the prior year.
  • 3Operating cash flow remained strong, with $8.6 billion generated in the first nine months of 2018.
  • 4Long-term debt stood at $69.1 billion as of September 30, 2018, indicating a continued reliance on debt financing.
  • 5Capital expenditures were $6.7 billion for the nine months ended September 30, 2018, reflecting investments in infrastructure, the all-digital transition, and the new mobile service.
  • 6The company launched its mobile service, Spectrum Mobile, in the second quarter of 2018, contributing $17 million in revenue during the nine-month period.
  • 7Despite revenue growth, free cash flow decreased by $1.6 billion for the nine months ended September 30, 2018, primarily due to unfavorable changes in working capital and increased capital expenditures.

Frequently Asked Questions

Charter's revenue growth is primarily driven by an increase in residential Internet and commercial business customers, along with strategic price adjustments and the recent launch of its mobile service, Spectrum Mobile.

Charter maintains a substantial long-term debt, but manages it through strong operating cash flow and access to credit facilities. The company also actively refinances its debt and uses cash for strategic purposes like stock repurchases. Its leverage ratio was 4.5 times as of September 30, 2018.

The launch of Spectrum Mobile has contributed to revenue growth, generating $17 million in the first nine months of 2018. However, it also led to increased operating costs and a reduction in free cash flow, impacting Adjusted EBITDA by approximately $118 million for the nine-month period.

Charter is involved in ongoing legal proceedings, including patent infringement cases with Sprint and investigations by New York state authorities. Notably, the New York Public Service Commission (PSC) has issued orders related to Charter's merger conditions, directing it to potentially cease operations in New York, although discussions are underway to resolve these matters. While Charter believes these actions are without merit, an adverse outcome could potentially be material.