10-QPeriod: Q2 FY2019

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 26, 2019For Securities:CHTR

Summary

Charter Communications, Inc. reported solid revenue growth of 4.5% to $11.3 billion for the second quarter of 2019, and 4.8% for the first six months to $22.5 billion, driven by increases in residential Internet and commercial business customers. While video customer numbers saw a slight decline, revenue in this segment remained stable due to price adjustments. The company's internet segment showed robust growth, with significant customer additions and revenue increases. The launch and expansion of its mobile service contributed positively to overall revenue, though it also impacted Adjusted EBITDA and free cash flow due to associated growth costs. Financially, Charter demonstrated improved profitability with Net Income Attributable to Charter Shareholders rising to $314 million for the quarter and $567 million for the first six months. This was supported by a slight decrease in depreciation and amortization and effective cost management, although interest expense increased due to higher average debt outstanding. The company also managed its capital expenditures effectively, with a notable decrease year-over-year, leading to a significant increase in Free Cash Flow to $1.1 billion for the quarter and $1.8 billion for the first six months. Charter maintains ample liquidity with substantial cash on hand and available credit facilities, allowing it to fund operations, capital expenditures, and strategic initiatives such as share repurchases.

Financial Highlights

48 data points
Beta

Revenue

$11.35B

Net Income

$314.00M

2.8% Net Margin

EPS (Diluted)

$1.39

Total Assets

$146.09B

Cash & Equivalents

$696.00M

Free Cash Flow

$1.16B

Financial Statements
Beta
Revenue$11.35B
Operating Expenses$9.81B
Operating Income$1.54B
Net Income$314.00M
EPS (Basic)$1.41
EPS (Diluted)$1.39
Shares Outstanding (Basic)222.39M
Shares Outstanding (Diluted)225.94M

Key Highlights

  • 1Revenue increased by 4.5% to $11.3 billion for Q2 2019, driven by growth in residential Internet and commercial customers.
  • 2Internet revenue saw a substantial increase of 8.8% ($4.1 billion for Q2 2019) driven by customer growth and price adjustments.
  • 3Net income attributable to Charter shareholders increased to $314 million for Q2 2019, up from $273 million in the prior year period.
  • 4Free Cash Flow significantly improved, reaching $1.1 billion for Q2 2019, a substantial increase from $804 million in Q2 2018, due to decreased capital expenditures and higher Adjusted EBITDA.
  • 5Capital expenditures decreased significantly by 33.4% to $1.6 billion for Q2 2019, reflecting the completion of major integration and digital conversion projects.
  • 6The company launched and expanded its mobile service, contributing $158 million in revenue for Q2 2019, though impacting short-term profitability and cash flow.
  • 7Long-term debt remains substantial at $71.8 billion, with increased interest expense noted due to higher average debt outstanding.

Frequently Asked Questions

Charter's revenue growth is primarily driven by an increase in residential Internet subscribers and commercial business customers, coupled with strategic price adjustments across its services. The recent launch and ongoing expansion of its mobile service also contributes to revenue.

Charter Communications has a significant debt load. The company is managing this by utilizing its strong free cash flow, maintaining available credit facilities, and engaging in refinancing activities. They are also strategically managing debt maturities and exploring debt repurchases. However, interest expense has increased due to higher average debt outstanding.

Charter's mobile service, Spectrum Mobile, has started contributing to revenue, generating $158 million in the second quarter of 2019. However, the growth and launch of this service have negatively impacted Adjusted EBITDA and Free Cash Flow in the short term due to associated operating costs and working capital requirements, although management expects long-term benefits.

Yes, capital expenditures have significantly decreased in the first half of 2019 compared to the prior year. This reduction is attributed to the completion of major projects such as the all-digital conversion and the integration of TWC and Bright House, as well as the rollout of DOCSIS 3.1 technology. Management expects these lower levels of capital expenditure to continue.