10-QPeriod: Q1 FY2023

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 28, 2023For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) reported its first-quarter 2023 financial results, showing a modest revenue increase driven by growth in Internet and mobile services, partially offset by declines in Video and Voice. While total revenue rose to $13.65 billion, up 3.4% year-over-year, net income attributable to Charter shareholders decreased to $1.02 billion from $1.20 billion in the prior year, primarily due to higher interest expenses and other income/expense fluctuations. The company continues to invest heavily in network upgrades and expansion, including a significant focus on subsidized rural construction and multi-gigabit speed rollouts. Despite increased capital expenditures, Charter maintained its leverage ratio within its target range. The company also saw substantial growth in mobile lines, underscoring the success of its bundled offerings like Spectrum One, though overall customer relationship growth was relatively flat, indicating a challenging competitive environment with lower customer switching behavior. Investors should note the continued pressure on traditional video and voice services, which are being compensated by gains in high-growth areas like Internet and mobile. The company's substantial debt load remains a key factor, though management highlighted sufficient liquidity and access to capital markets to manage its obligations and fund future investments. The report also details changes in mobile reporting to better reflect its integration into the company's overall service offerings.

Financial Highlights

46 data points
Beta

Revenue

$13.65B

Net Income

$1.02B

7.5% Net Margin

EPS (Diluted)

$6.65

Total Assets

$144.87B

Cash & Equivalents

$534.00M

Free Cash Flow

$859.00M

Financial Statements
Beta
Revenue$13.65B
Operating Expenses$10.73B
Operating Income$2.93B
Net Income$1.02B
EPS (Basic)$6.74
EPS (Diluted)$6.65
Shares Outstanding (Basic)151.44M
Shares Outstanding (Diluted)153.54M

Key Highlights

  • 1Total revenues increased by 3.4% to $13.65 billion, driven by strong performance in Internet and Mobile services.
  • 2Net income attributable to Charter shareholders decreased by 15.2% to $1.02 billion, impacted by higher interest expenses and other income/expense volatility.
  • 3Capital expenditures increased significantly to $2.46 billion, driven by network upgrades, rural construction initiatives, and expansion efforts.
  • 4Mobile lines saw substantial growth, adding 1.97 million lines year-over-year, reaching a total of 5.98 million.
  • 5Customer relationships remained relatively stable, with a slight increase to 32.21 million, reflecting a challenging market with reduced customer churn.
  • 6Free cash flow decreased year-over-year to $664 million from $1.8 billion, primarily due to increased capital expenditures and higher interest payments.
  • 7The company's leverage ratio stood at 4.5 times Adjusted EBITDA as of March 31, 2023, within its target range.

Frequently Asked Questions

Total revenues increased by 3.4% to $13.65 billion. This growth was primarily driven by increases in Internet revenues, up 4.9%, and Mobile service revenues, up 28.3%. These gains were partially offset by declines in Video revenues (-2.1%) and Voice revenues (-4.6%), reflecting a broader industry trend of shifting consumer preferences away from traditional video and voice services towards high-speed internet and mobile solutions.

Net income attributable to Charter shareholders decreased by 15.2% to $1.02 billion. This was largely due to a significant increase in net interest expense, which rose by $205 million to $1.26 billion, reflecting higher weighted-average interest rates and increased debt levels. Additionally, 'Other income (expenses), net' saw a negative swing of $127 million compared to the prior year period, contributing to the decline in net income.

Charter significantly increased its capital expenditures to $2.46 billion in Q1 2023, a rise from $1.86 billion in the prior year. Key investments include upgrades for multi-gigabit speeds across its network, a subsidized rural construction initiative where $391 million was spent, and expansion of its mobile network capabilities, including the build-out of its own 5G network using CBRS spectrum. The company is also investing in customer service platforms and employee development to improve customer experience and retention.

Free cash flow decreased substantially to $664 million in Q1 2023 from $1.8 billion in Q1 2022. This was primarily driven by a $607 million increase in capital expenditures and a $203 million increase in cash paid for interest. While this represents a short-term decrease, the company continues to generate significant operating cash flow and manages its liquidity through cash on hand, credit facilities, and ongoing refinancing efforts. Management believes it has sufficient liquidity to fund its projected cash needs.