10-QPeriod: Q2 FY2020

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 31, 2020For Securities:CHTR

Summary

Charter Communications, Inc. reported solid revenue growth of 3.1% for the second quarter of 2020, reaching $11.7 billion, driven primarily by an increase in residential Internet subscribers and growth in its mobile service. Net income attributable to Charter shareholders more than doubled to $766 million, up from $314 million in the prior year's quarter, reflecting improved operational efficiencies and favorable revenue trends. The company's Adjusted EBITDA also saw a healthy increase of 7.3% to $4.5 billion, underscoring operational strength. Despite the positive financial performance, Charter highlighted the ongoing impact of the COVID-19 pandemic, noting that while its network services have remained uninterrupted and seen increased demand, there are lingering uncertainties regarding customer payment capabilities and potential incremental churn. The company continues to invest in its network and expand its service offerings, particularly in mobile, which is contributing to revenue growth but also to higher operating costs and a reduction in Adjusted EBITDA and free cash flow for that segment. Overall, the company demonstrated resilience and growth in a challenging economic environment.

Financial Highlights

48 data points
Beta

Revenue

$11.70B

Net Income

$766.00M

6.5% Net Margin

EPS (Diluted)

$3.63

Total Assets

$145.14B

Cash & Equivalents

$2.10B

Free Cash Flow

$1.65B

Financial Statements
Beta
Revenue$11.70B
Operating Expenses$9.73B
Operating Income$1.97B
Net Income$766.00M
EPS (Basic)$3.72
EPS (Diluted)$3.63
Shares Outstanding (Basic)205.78M
Shares Outstanding (Diluted)210.91M

Key Highlights

  • 1Total revenues increased by 3.1% to $11.7 billion in Q2 2020, driven by growth in residential Internet and mobile services.
  • 2Net income attributable to Charter shareholders more than doubled year-over-year, reaching $766 million.
  • 3Adjusted EBITDA grew by 7.3% to $4.5 billion, indicating strong operational performance.
  • 4Residential Internet customers saw significant growth, increasing by 2.1 million year-over-year.
  • 5Mobile lines grew substantially, reaching 1.7 million as of June 30, 2020, up from 0.5 million in the prior year.
  • 6The company incurred $85 million in waived receivables due to the FCC's Keep Americans Connected Pledge.
  • 7Capital expenditures were $1.9 billion for the quarter, primarily focused on customer premise equipment and scalable infrastructure.

Frequently Asked Questions

Charter's revenue growth in Q2 2020 was primarily driven by an increase in residential Internet customers and the expansion of its mobile service offering. Price adjustments and growth in small and medium business customers also contributed.

The COVID-19 pandemic has led to increased demand for Charter's Internet services, supporting revenue growth. However, the company also incurred $85 million in waived receivables due to the Keep Americans Connected Pledge and anticipates potential incremental churn and bad debt due to economic impacts on customer payment capabilities. The pandemic has also influenced advertising sales revenue, which decreased.

Charter Communications has a significant debt load, with approximately $77.8 billion in principal amount of debt as of June 30, 2020. This includes credit facility debt, investment grade senior secured notes, and high-yield senior unsecured notes. The company is actively managing its debt through refinancing and has a target leverage ratio of 4 to 4.5 times net debt to Adjusted EBITDA.

Charter's mobile business is experiencing significant growth, with mobile lines increasing from approximately 518,000 to 1,697,000 year-over-year. While this has substantially increased revenues, it also has negatively impacted Adjusted EBITDA and free cash flow due to growth costs and device-related cash flow timing.