InvestorsApril 26, 2024
Charter Announces First Quarter 2024 Results
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STAMFORD, Conn.,
- First quarter total residential and small and medium business ("SMB") Internet customers decreased by 72,000. As of
March 31, 2024 , Charter served a total of 30.5 million residential and SMB Internet customers. - First quarter total residential and SMB mobile lines increased by 486,000. As of
March 31, 2024 , Charter served a total of 8.3 million mobile lines. - As of
March 31, 2024 , Charter had a total of 32.0 million residential and SMB customer relationships, excluding mobile-only relationships. - First quarter revenue of
$13.7 billion grew by 0.2% year-over-year, driven by residential mobile service revenue growth of 37.8% and residential Internet revenue growth of 1.9%. - Net income attributable to Charter shareholders totaled
$1.1 billion in the first quarter. - First quarter Adjusted EBITDA1 of
$5.5 billion grew by 2.8% year-over-year. - First quarter capital expenditures totaled
$2.8 billion and included$1.0 billion of line extensions. - First quarter net cash flows from operating activities totaled
$3.2 billion , compared to$3.3 billion in the prior year. - First quarter free cash flow1 of
$358 million decreased from$664 million in the prior year, primarily due to higher capital expenditures, mostly driven by Charter's network evolution and expansion initiatives and a one-time settlement payment in the first quarter of 2024. - During the first quarter, Charter purchased 1.7 million shares of Charter Class A common stock and
Charter Communications Holdings, LLC ("Charter Holdings ") common units for$567 million .
"Our differentiated converged connectivity products provide us with significant competitive advantages that position Charter for sustainable customer and financial growth," said
1. | Adjusted EBITDA and free cash flow are non-GAAP measures defined in the "Use of Adjusted EBITDA and Free Cash Flow Information" section and are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the addendum of this news release. |
Key Operating Results | ||||||
Approximate as of | ||||||
Y/Y Change | ||||||
Footprint | ||||||
Estimated Passings (d) | 57,351 | 55,885 | 2.6 % | |||
Customer Relationships (e) | ||||||
Residential | 29,797 | 29,996 | (0.7) % | |||
SMB | 2,219 | 2,215 | 0.2 % | |||
Total Customer Relationships | 32,016 | 32,211 | (0.6) % | |||
Residential | (107) | 8 | (115) | |||
SMB | (3) | 8 | (11) | |||
Total Customer Relationships Quarterly Net Additions | (110) | 16 | (126) | |||
Total Customer Relationship Penetration of Estimated Passings (f) | 55.8 % | 57.6 % | (1.8) ppts | |||
Monthly Residential Revenue per Residential Customer (g) | $ 120.48 | $ 120.56 | (0.1) % | |||
Monthly SMB Revenue per SMB Customer (h) | $ 163.44 | $ 164.58 | (0.7) % | |||
Residential Customer Relationships Penetration | ||||||
One Product Penetration (i) | 47.3 % | 46.0 % | 1.3 ppts | |||
Two Product Penetration (i) | 33.0 % | 32.8 % | 0.2 ppts | |||
Three or More Product Penetration (i) | 19.7 % | 21.1 % | (1.4) ppts | |||
% Residential Non-Video Customer Relationships | 56.0 % | 52.5 % | 3.5 ppts | |||
Internet | ||||||
Residential | 28,472 | 28,479 | 0.0 % | |||
SMB | 2,044 | 2,030 | 0.7 % | |||
Total Internet Customers | 30,516 | 30,509 | 0.0 % | |||
Residential | (72) | 67 | (139) | |||
SMB | — | 9 | (9) | |||
Total Internet Quarterly Net Additions | (72) | 76 | (148) | |||
Video | ||||||
Residential | 13,111 | 14,260 | (8.1) % | |||
SMB | 606 | 646 | (6.2) % | |||
Total Video Customers | 13,717 | 14,906 | (8.0) % | |||
Residential | (392) | (237) | (155) | |||
SMB | (13) | (4) | (9) | |||
Total Video Quarterly Net Additions | (405) | (241) | (164) | |||
Voice | ||||||
Residential | 6,438 | 7,473 | (13.8) % | |||
SMB | 1,288 | 1,290 | (0.2) % | |||
Total Voice Customers | 7,726 | 8,763 | (11.8) % | |||
Residential | (274) | (224) | (50) | |||
SMB | (5) | 4 | (9) | |||
Total Voice Quarterly Net Additions | (279) | (220) | (59) | |||
Mobile Lines (j) | ||||||
Residential | 7,992 | 5,782 | 38.2 % | |||
SMB | 260 | 196 | 32.9 % | |||
Total Mobile Lines | 8,252 | 5,978 | 38.1 % | |||
Residential | 473 | 666 | (193) | |||
SMB | 13 | 20 | (7) | |||
Total Mobile Lines Quarterly Net Additions | 486 | 686 | (200) | |||
Enterprise (k) | ||||||
Enterprise Primary Service Units ("PSUs") | 308 | 288 | 6.9 % | |||
Enterprise Quarterly Net Additions | 5 | 4 | 1 |
In thousands, except per customer and penetration data. See footnotes to unaudited summary of operating statistics on page 7 of the addendum of this news release. The footnotes contain important disclosures regarding the definitions used for these operating statistics. All percentages are calculated using whole numbers. Minor differences may exist due to rounding. |
As of
First quarter residential Internet customers decreased by 72,000, compared to an increase of 67,000 during the first quarter of 2023.
Charter is on plan to evolve its network at a lower cost than its competitors to offer symmetrical and multi-gigabit speeds across its entire footprint. Charter's Advanced WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of their connected devices with enhanced security and privacy is available to all Spectrum Internet customers.
Residential video customers decreased by 392,000 in the first quarter of 2024, compared to a decline of 237,000 in the first quarter of 2023. As of
During the first quarter of 2024, residential wireline voice customers declined by 274,000, compared to a decline of 224,000 in the first quarter of 2023. As of
During the first quarter of 2024, Charter added 473,000 residential mobile lines, compared to growth of 666,000 during the first quarter of 2023. Spectrum MobileTM is available to all new and existing Spectrum Internet customers and offers the fastest overall speeds,1 with plans that include 5G access, do not require contracts and include taxes and fees in the price. Charter's converged offer, Spectrum One, and Spectrum Mobile are central to Charter's converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing. In April, Charter launched Anytime Upgrade, which is now included in the Spectrum Mobile Unlimited Plus data plan at no extra cost, and allows new and existing customers to upgrade their phones whenever they want, as many times as they want, eliminating the traditional wait times and condition requirements associated with phone upgrades.
First quarter 2024 monthly residential revenue per residential customer totaled
SMB customer relationships decreased by 3,000 in the first quarter of 2024, while first quarter 2023 SMB customer relationships grew by 8,000. Enterprise PSUs grew by 5,000 in the first quarter of 2024 versus 4,000 added in the first quarter of 2023.
Charter continues to work with federal, state and local governments to bring Spectrum Internet to unserved and underserved communities. During the first quarter of 2024, Charter activated 73,000 subsidized rural passings. Within Charter's subsidized rural footprint, total residential and SMB customer relationships increased by 35,000 in the first quarter of 2024.
1 | Fastest Overall Speed claim based on |
First Quarter Financial Results | |||||
Three Months Ended | |||||
2024 | 2023 | % Change | |||
Revenues: | |||||
Internet | $ 5,826 | $ 5,718 | 1.9 % | ||
Video | 3,908 | 4,254 | (8.1) % | ||
Voice | 374 | 373 | 0.3 % | ||
Mobile service | 685 | 497 | 37.8 % | ||
Residential revenue | 10,793 | 10,842 | (0.4) % | ||
Small and medium business | 1,088 | 1,091 | (0.3) % | ||
Enterprise | 708 | 682 | 3.8 % | ||
Commercial revenue | 1,796 | 1,773 | 1.3 % | ||
Advertising sales | 391 | 355 | 10.0 % | ||
Other | 699 | 683 | 2.4 % | ||
Total Revenues | $ 13,679 | $ 13,653 | 0.2 % | ||
Net income attributable to Charter shareholders | $ 1,106 | $ 1,021 | 8.4 % | ||
Net income attributable to Charter shareholders margin | 8.1 % | 7.5 % | |||
Adjusted EBITDA1 | $ 5,497 | $ 5,350 | 2.8 % | ||
Adjusted EBITDA margin | 40.2 % | 39.2 % | |||
Capital Expenditures | $ 2,791 | $ 2,464 | 13.3 % | ||
Net cash flows from operating activities | $ 3,212 | $ 3,323 | (3.3) % | ||
Free cash flow1 | $ 358 | $ 664 | (46.1) % |
All percentages are calculated using whole numbers. Minor differences may exist due to rounding. | |
1 | Adjusted EBITDA and free cash flow are non-GAAP measures defined in the "Use of Adjusted EBITDA and Free Cash Flow Information" section and are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the addendum of this news release. |
Revenues
First quarter revenue increased by 0.2% year-over-year to
Residential revenue totaled
Internet revenue grew by 1.9% year-over-year to
Video revenue totaled
Voice revenue grew by 0.3% year-over-year to
First quarter mobile service revenue totaled
Commercial revenue increased by 1.3% year-over-year to
First quarter advertising sales revenue of
Other revenue totaled
Operating Costs and Expenses
First quarter programming costs decreased by
Other costs of revenue increased by
Costs to service customers was virtually unchanged year-over-year, with additional activity to support the growth of Spectrum Mobile and higher bad debt expense, offset by productivity improvements.
Sales and marketing expenses decreased by
Other expenses increased by
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled
Net income per basic common share attributable to Charter shareholders totaled
Adjusted EBITDA
First quarter Adjusted EBITDA of
Capital Expenditures
Capital expenditures totaled
Charter currently expects full year 2024 capital expenditures to total between
Cash Flow and Free Cash Flow
During the first quarter of 2024, net cash flows from operating activities totaled
Free cash flow in the first quarter of 2024 totaled
Liquidity & Financing
As of
Share Repurchases
During the three months ended
Webcast
Charter will host a webcast on
The webcast can be accessed live via the Company's investor relations website at ir.charter.com. Participants should go to the webcast link no later than 10 minutes prior to the start time to register. The webcast will be archived at ir.charter.com two hours after completion of the webcast.
Additional Information Available on Website
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three months ended
Use of Adjusted EBITDA and Free Cash Flow Information
The Company uses certain measures that are not defined by
Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, net interest expense, income taxes, depreciation and amortization, stock compensation expense, other income (expenses), net and other operating (income) expenses, net, such as special charges and (gain) loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's capital structure or investment activities. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. These costs are evaluated through other financial measures.
Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.
Management and Charter's board of directors use Adjusted EBITDA and free cash flow to assess Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the
About Charter
For small and medium-sized companies, Spectrum Business® delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise® provides highly customized, fiber-based solutions. Spectrum Reach® delivers tailored advertising and production for the modern media landscape. The Company also distributes award-winning news coverage and sports programming to its customers through Spectrum Networks. More information about Charter can be found at corporate.charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations as reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the SEC. Many of the forward-looking statements contained in this communication may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity," "tentative," "positioning," "designed," "create," "predict," "project," "initiatives," "seek," "would," "could," "continue," "ongoing," "upside," "increases," "grow," "focused on" and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this communication are set forth in our annual report on Form 10-K, and in other reports or documents that we file from time to time with the
- our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our service areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
- the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line ("DSL") providers, fiber to the home providers and providers of video content over broadband Internet connections;
- general business conditions, unemployment levels and the level of activity in the housing sector and economic uncertainty or downturn;
- our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents and distribution requirements);
- our ability to develop and deploy new products and technologies including consumer services and service platforms;
- any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
- the effects of governmental regulation on our business including subsidies to consumers, subsidies and incentives for competitors, costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us;
- the ability to hire and retain key personnel;
- our ability to procure necessary services and equipment from our vendors in a timely manner and at reasonable costs including in connection with our network evolution and rural construction initiatives;
- the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
- our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this communication.
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES (dollars in millions) | |||
Three Months Ended | |||
2024 | 2023 | ||
Net income attributable to Charter shareholders | $ 1,106 | $ 1,021 | |
Plus: Net income attributable to noncontrolling interest | 174 | 162 | |
Interest expense, net | 1,316 | 1,265 | |
Income tax expense | 446 | 374 | |
Depreciation and amortization | 2,190 | 2,206 | |
Stock compensation expense | 214 | 208 | |
Other, net | 51 | 114 | |
Adjusted EBITDA (a) | $ 5,497 | $ 5,350 | |
Net cash flows from operating activities | $ 3,212 | $ 3,323 | |
Less: Purchases of property, plant and equipment | (2,791) | (2,464) | |
Change in accrued expenses related to capital expenditures | (63) | (195) | |
Free cash flow (a) | $ 358 | $ 664 |
The above schedule is presented in order to reconcile Adjusted EBITDA and free cash flow, non-GAAP measures, to the most directly comparable GAAP measures in accordance with Section 401(b) of the Sarbanes-Oxley Act. |
UNAUDITED ALTERNATIVE PRESENTATION OF ADJUSTED EBITDA (dollars in millions) | |||||
Three Months Ended | |||||
2024 | 2023 | % Change | |||
REVENUES: | |||||
Internet | $ 5,826 | $ 5,718 | 1.9 % | ||
Video | 3,908 | 4,254 | (8.1) % | ||
Voice | 374 | 373 | 0.3 % | ||
Mobile service | 685 | 497 | 37.8 % | ||
Residential revenue | 10,793 | 10,842 | (0.4) % | ||
Small and medium business | 1,088 | 1,091 | (0.3) % | ||
Enterprise | 708 | 682 | 3.8 % | ||
Commercial revenue | 1,796 | 1,773 | 1.3 % | ||
Advertising sales | 391 | 355 | 10.0 % | ||
Other | 699 | 683 | 2.4 % | ||
Total Revenues | 13,679 | 13,653 | 0.2 % | ||
COSTS AND EXPENSES: | |||||
Programming | 2,570 | 2,799 | (8.2) % | ||
Other costs of revenue | 1,458 | 1,328 | 9.8 % | ||
Costs to service customers | 2,094 | 2,095 | — % | ||
Sales and marketing | 920 | 946 | (2.7) % | ||
Other expense (b) | 1,140 | 1,135 | 0.5 % | ||
Total operating costs and expenses (b) | 8,182 | 8,303 | (1.5) % | ||
Adjusted EBITDA (a) | $ 5,497 | $ 5,350 | 2.8 % |
All percentages are calculated using whole numbers. Minor differences may exist due to rounding. |
See footnotes on page 7. |
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in millions, except per share data) | |||
Three Months Ended | |||
2024 | 2023 | ||
REVENUES | $ 13,679 | $ 13,653 | |
COSTS AND EXPENSES: | |||
Operating costs and expenses (exclusive of items shown separately below) | 8,396 | 8,511 | |
Depreciation and amortization | 2,190 | 2,206 | |
Other operating (income) expense, net | (38) | 10 | |
10,548 | 10,727 | ||
Income from operations | 3,131 | 2,926 | |
OTHER INCOME (EXPENSE): | |||
Interest expense, net | (1,316) | (1,265) | |
Other expense, net | (89) | (104) | |
(1,405) | (1,369) | ||
Income before income taxes | 1,726 | 1,557 | |
Income tax expense | (446) | (374) | |
Consolidated net income | 1,280 | 1,183 | |
Less: Net income attributable to noncontrolling interests | (174) | (162) | |
Net income attributable to Charter shareholders | $ 1,106 | $ 1,021 | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS: | |||
Basic | $ 7.66 | $ 6.74 | |
Diluted | $ 7.55 | $ 6.65 | |
Weighted average common shares outstanding, basic | 144,510,317 | 151,438,371 | |
Weighted average common shares outstanding, diluted | 146,643,199 | 153,538,359 |
CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in millions) | |||
2024 | 2023 | ||
ASSETS | (unaudited) | ||
CURRENT ASSETS: | |||
Cash and cash equivalents | $ 661 | $ 709 | |
Accounts receivable, net | 3,004 | 2,965 | |
Prepaid expenses and other current assets | 731 | 458 | |
Total current assets | 4,396 | 4,132 | |
INVESTMENT IN CABLE PROPERTIES: | |||
Property, plant and equipment, net | 40,349 | 39,520 | |
Customer relationships, net | 1,509 | 1,745 | |
Franchises | 67,396 | 67,396 | |
29,668 |