10-QPeriod: Q2 FY2023

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q2 Ended Jun 30, 2023

Filed July 28, 2023For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) reported its second-quarter 2023 financial results, showing modest revenue growth of 0.5% to $13.7 billion. While total revenue saw a slight increase, driven by growth in Internet and Mobile services, this was partially offset by declines in Video and Advertising revenues. Net income attributable to Charter shareholders decreased by 16.8% to $1.22 billion, or $8.05 per diluted share, compared to the prior year's $1.47 billion, or $8.80 per diluted share. This decline is attributed to increased interest expenses and higher operating costs, particularly in "other costs of revenue" and "costs to service customers." Despite these pressures, the company's Adjusted EBITDA remained relatively stable, growing by 0.2% to $5.52 billion, indicating operational efficiency in core services. Investors should note the continued significant capital expenditures, especially in network upgrades and rural construction, which impacted Free Cash Flow, decreasing to $668 million from $1.66 billion in the prior year. The company maintains a substantial debt load of nearly $98 billion but also possesses approximately $3.2 billion in available credit. Charter's strategic focus on bundling services like Spectrum One and expanding its mobile offerings continues, alongside its ongoing network modernization efforts aimed at multi-gigabit speeds.

Financial Highlights

46 data points
Beta

Revenue

$13.66B

Net Income

$1.22B

9.0% Net Margin

EPS (Diluted)

$8.05

Total Assets

$145.62B

Cash & Equivalents

$478.00M

Free Cash Flow

$477.00M

Financial Statements
Beta
Revenue$13.66B
Operating Expenses$10.42B
Operating Income$3.24B
Net Income$1.22B
EPS (Basic)$8.15
EPS (Diluted)$8.05
Shares Outstanding (Basic)150.09M
Shares Outstanding (Diluted)151.98M

Key Highlights

  • 1Total revenue increased by 0.5% year-over-year to $13.7 billion for the second quarter of 2023.
  • 2Net income attributable to Charter shareholders decreased by 16.8% to $1.22 billion, or $8.05 per diluted share.
  • 3Adjusted EBITDA saw a slight increase of 0.2% to $5.52 billion, demonstrating resilient core operations.
  • 4Significant capital expenditures of $2.8 billion for the quarter, largely driven by network upgrades and rural construction initiatives, impacting Free Cash Flow.
  • 5Free Cash Flow declined significantly to $668 million for the quarter, down from $1.66 billion in the prior year, due to increased capex and interest expenses.
  • 6Mobile lines experienced strong growth, adding 648,000 lines in the quarter, driven by the Spectrum One offering.
  • 7Video revenues continued to decline, down 6.6% year-over-year, reflecting ongoing cord-cutting trends.

Frequently Asked Questions

The decline in net income attributable to Charter shareholders was primarily due to an increase in net interest expense by $189 million and higher operating costs and expenses, particularly in 'other costs of revenue' and 'costs to service customers', which increased by $182 million and $72 million respectively for the quarter compared to the prior year. Additionally, revenue from video services declined.

Charter's capital expenditures were substantial at $2.8 billion for the quarter, with a significant portion allocated to its subsidized rural construction initiative and network evolution. This increased investment in infrastructure, while aimed at future growth and service enhancement, led to a significant decrease in Free Cash Flow to $668 million from $1.66 billion in the prior year's quarter. The company plans to continue these investments, expecting full-year 2023 capital expenditures to be between $6.5 billion and $6.8 billion, excluding line extensions.

Internet revenues continue to grow, up 3.1% year-over-year for the quarter, supported by customer growth and rate/product mix changes. Conversely, Video revenues declined by 6.6% due to a decrease in residential video customers, a trend consistent with industry-wide cord-cutting. Mobile services showed strong growth, with an increase of 29.8% in revenue driven by a significant rise in mobile lines, largely attributed to the Spectrum One offering.

Charter carries a substantial debt load, with the principal amount of debt at $97.97 billion as of June 30, 2023. However, the company maintains significant liquidity, with approximately $478 million in cash and cash equivalents and $3.2 billion available under its credit facilities. Management believes it has sufficient liquidity to fund its projected cash needs.