InvestorsJanuary 31, 2019
Charter Announces Fourth Quarter 2018 Results
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Key highlights:
- During the fourth quarter, Charter completed its all-digital and DOCSIS 3.1 initiatives. As of
December 31, 2018 , virtually all of Charter's national footprint was all-digital and Charter's Spectrum Internet Gig service is now available throughout Charter's footprint. - Fourth quarter total residential and SMB customer relationships increased 248,000, compared to 209,000 during the fourth quarter of 2017. During the year ended
December 31, 2018 , total residential and SMB customer relationships grew by 3.5% to 28.1 million, and total residential and SMB Internet customers grew by 1.3 million, or 5.3% to 25.3 million, with 329,000 residential and SMB Internet customer net additions in the fourth quarter of 2018. - Fourth quarter revenues of
$11.2 billion grew 5.9%, as compared to the prior year period, driven by residential revenue growth of 3.9%, commercial revenue growth of 4.5%, and advertising revenue growth of 34.1%. - Fourth quarter Adjusted EBITDA1 of
$4.2 billion grew 4.6% year-over-year, and 7.6% when excluding fourth quarter mobile revenue and operating expenses. - For the year ended
December 31, 2018 , revenues rose to$43.6 billion , 4.9% higher than in 2017. Adjusted EBITDA totaled$16.1 billion for the year endedDecember 31, 2018 , an increase of 5.0% compared to the prior year. Excluding mobile revenue and operating expenses in 2018, Adjusted EBITDA grew by 6.5% year-over-year. - Net income attributable to Charter shareholders totaled
$296 million in the fourth quarter, compared to$9.6 billion during the same period last year. For the year endedDecember 31, 2018 , net income attributable to Charter shareholders totaled$1.2 billion , compared to$9.9 billion in 2017. The year-over-year decrease in net income in the fourth quarter and for the year endedDecember 31, 2018 was primarily driven by a GAAP tax benefit from a reduction in the deferred tax liability as a result of Federal tax reform in 2017. - Fourth quarter capital expenditures totaled
$2.4 billion and included$28 million of all-digital costs and$106 million of mobile-related capital expenditures. For the year endedDecember 31, 2018 , capital expenditures totaled$9.1 billion , or$8.9 billion excluding mobile-related capital expenditures. - During the fourth quarter, Charter purchased approximately 4.3 million shares of Charter Class A common stock and
Charter Communications Holdings, LLC ("Charter Holdings ") common units for approximately$1.4 billion . For the year endedDecember 31, 2018 , Charter purchased approximately 16.2 million shares of Charter Class A common stock andCharter Holdings common units for approximately$5.0 billion .
"We performed well in 2018, growing our Internet customer base by 1.3 million, cable revenue by 4.7%, and cable Adjusted EBITDA by 6.5% -- very strong operating and financial performance, particularly in the midst of what we believe is the largest cable integration ever," said
1. |
Adjusted EBITDA, Adjusted EBITDA - Cable, free cash flow and free cash flow - Cable are non-GAAP measures defined in the "Use of Adjusted EBITDA and Free Cash Flow Information" section and are reconciled to consolidated net income and net cash flows from operating activities, respectively, in the addendum of this news release. |
Key Operating Results |
||||||||
Approximate as of |
||||||||
December 31, |
December 31, |
Y/Y Change |
||||||
Footprint (b) |
||||||||
Estimated Video Passings |
50,824 |
49,973 |
1.7 |
% |
||||
Estimated Internet Passings |
50,652 |
49,727 |
1.9 |
% |
||||
Estimated Voice Passings |
50,086 |
48,995 |
2.2 |
% |
||||
Penetration Statistics (c) |
||||||||
Video Penetration of Estimated Video Passings |
32.7 |
% |
33.7 |
% |
(1.0) |
ppts |
||
Internet Penetration of Estimated Internet Passings |
49.9 |
% |
48.2 |
% |
1.7 |
ppts |
||
Voice Penetration of Estimated Voice Passings |
22.3 |
% |
23.2 |
% |
(0.9) |
ppts |
||
Customer Relationships (d) |
||||||||
Residential |
26,270 |
25,499 |
3.0 |
% |
||||
Small and Medium Business |
1,833 |
1,662 |
10.2 |
% |
||||
Total Customer Relationships |
28,103 |
27,161 |
3.5 |
% |
||||
Residential |
||||||||
Primary Service Units ("PSUs") |
||||||||
Video |
16,104 |
16,400 |
(1.8) |
% |
||||
Internet |
23,625 |
22,518 |
4.9 |
% |
||||
Voice |
10,135 |
10,424 |
(2.8) |
% |
||||
49,864 |
49,342 |
1.1 |
% |
|||||
Quarterly Net Additions/(Losses) |
||||||||
Video |
(36) |
2 |
NM |
|||||
Internet |
289 |
263 |
10.1 |
% |
||||
Voice |
(83) |
23 |
NM |
|||||
170 |
288 |
(40.9) |
% |
|||||
Single Play (e) |
10,928 |
10,341 |
5.7 |
% |
||||
Double Play (e) |
7,097 |
6,473 |
9.6 |
% |
||||
Triple Play (e) |
8,245 |
8,685 |
(5.1) |
% |
||||
Single Play Penetration (f) |
41.6 |
% |
40.6 |
% |
1.0 |
ppts |
||
Double Play Penetration (f) |
27.0 |
% |
25.4 |
% |
1.6 |
ppts |
||
Triple Play Penetration (f) |
31.4 |
% |
34.1 |
% |
(2.7) |
ppts |
||
% Residential Non-Video Customer Relationships |
38.7 |
% |
35.7 |
% |
3.0 |
ppts |
||
Monthly Residential Revenue per Residential Customer (g) |
$111.78 |
$110.74 |
0.9 |
% |
||||
Small and Medium Business |
||||||||
PSUs |
||||||||
Video |
502 |
450 |
11.5 |
% |
||||
Internet |
1,634 |
1,470 |
11.1 |
% |
||||
Voice |
1,051 |
930 |
13.1 |
% |
||||
3,187 |
2,850 |
11.8 |
% |
|||||
Quarterly Net Additions/(Losses) |
||||||||
Video |
14 |
12 |
10.1 |
% |
||||
Internet |
40 |
41 |
(2.5) |
% |
||||
Voice |
27 |
32 |
(11.6) |
% |
||||
81 |
85 |
(4.0) |
% |
|||||
Monthly Small and Medium Business Revenue per Customer (h) |
$170.62 |
$181.57 |
(6.0) |
% |
||||
Enterprise PSUs (i) |
||||||||
Enterprise PSUs |
248 |
220 |
13.0 |
% |
Footnotes
In thousands, except per customer and penetration data. See footnotes to unaudited summary of operating statistics on page 5 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. NM - Not meaningful
During the fourth quarter of 2018, Charter's residential customer relationships grew by 207,000, while fourth quarter 2017 residential customer relationships grew by 170,000. Residential PSUs increased by 170,000 in the fourth quarter of 2018, compared to fourth quarter 2017 residential PSU net additions of 288,000. The year-over-year decrease in PSU net additions was driven by a decline in voice and video net additions in the fourth quarter of 2018. As of December 31, 2018, Charter had 26.3 million residential customer relationships and 49.9 million residential PSUs.
Charter added 289,000 residential Internet customers in the fourth quarter of 2018, versus fourth quarter 2017 Internet customer net additions of 263,000. As of December 31, 2018, Charter had 23.6 million residential Internet customers, with over 80% of those residential Internet customers subscribing to tiers that provided 100 Mbps or more of speed. Currently, 100 Mbps is the slowest speed offered to new Internet customers in 99% of Charter's footprint. Additionally, Charter has doubled minimum Internet speeds to 200 Mbps in a number of markets at no additional cost to new and existing SpectrumInternet customers.
During the fourth quarter, Charter further expanded the availability of its Spectrum Internet Gig service to a number of new markets. The service, which uses DOCSIS 3.1 technology, is now available in 99% of Charter's footprint.
Residential video customers decreased by 36,000 in the fourth quarter of 2018, while fourth quarter 2017 video customers increased by 2,000. As of December 31, 2018, Charter had 16.1 million residential video customers.
During the fourth quarter of 2018, Charter completed its all-digital efforts in its Legacy TWC and Legacy Bright House footprints. As of December 31, 2018, virtually all of Charter's national footprint was all-digital. All-digital allows Charter to offer more advanced products and services, and provides residential customers with two-way digital set-top boxes, which offer better video picture quality, an interactive programming guide and video on demand on all TV outlets in the home.
During the fourth quarter of 2018, residential voice customers declined by 83,000, while fourth quarter 2017 voice customers grew by 23,000. As of December 31, 2018, Charter had 10.1 million residential voice customers.
Fourth quarter 2018 residential revenue per customer relationship (excluding mobile revenue) totaled
In September of 2018, Charter completed the full market launch of its Spectrum MobileTM service to new and existing Spectrum Internet customers across its footprint. Spectrum Mobile runs on America's largest, most reliable LTE network and is combined with a nationwide network of Spectrum WiFi hotspots. Spectrum Mobile customers can choose one of two simple ways to pay for data, "Unlimited" for
SMB customer relationships grew by 41,000 during the fourth quarter of 2018, compared to growth of 39,000 during the fourth quarter of 2017. SMB PSUs increased 81,000, compared to 85,000 during the fourth quarter of 2017. As of December 31, 2018, Charter had 1.8 million SMB customer relationships and 3.2 million SMB PSUs. Enterprise PSUs grew by 5,000 during the fourth quarter of 2018 compared to growth of 10,000 during the fourth quarter of 2017. As of December 31, 2018, Charter had 248,000 enterprise PSUs.
Fourth Quarter Financial Results |
||||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||||
Three Months Ended December 31, |
||||||||||
2018 |
2017 |
% Change |
||||||||
REVENUES: |
||||||||||
Video |
$ |
4,361 |
$ |
4,220 |
3.4 |
% |
||||
Internet |
3,895 |
3,637 |
7.1 |
% |
||||||
Voice |
515 |
587 |
(12.3) |
% |
||||||
Residential revenue |
8,771 |
8,444 |
3.9 |
% |
||||||
Small and medium business |
928 |
895 |
3.6 |
% |
||||||
Enterprise |
647 |
612 |
5.7 |
% |
||||||
Commercial revenue |
1,575 |
1,507 |
4.5 |
% |
||||||
Advertising sales |
562 |
419 |
34.1 |
% |
||||||
Mobile |
89 |
— |
NM |
|||||||
Other |
234 |
232 |
1.2 |
% |
||||||
Total Revenue |
11,231 |
10,602 |
5.9 |
% |
||||||
COSTS AND EXPENSES: |
||||||||||
Operating costs and expenses - Cable |
6,856 |
6,621 |
3.6 |
% |
||||||
Operating costs and expenses - Mobile |
211 |
— |
NM |
|||||||
Total operating costs and expenses |
7,067 |
6,621 |
6.7 |
% |
||||||
Adjusted EBITDA |
$ |
4,164 |
$ |
3,981 |
4.6 |
% |
||||
Adjusted EBITDA margin |
37.1 |
% |
37.5 |
% |
||||||
Adjusted EBITDA - Cable |
$ |
4,286 |
$ |
3,981 |
7.6 |
% |
||||
Adjusted EBITDA margin - Cable |
38.5 |
% |
37.5 |
% |
||||||
Capital Expenditures |
$ |
2,433 |
$ |
2,585 |
||||||
% Total Revenues |
21.7 |
% |
24.4 |
% |
||||||
Net income attributable to Charter shareholders |
$ |
296 |
$ |
9,553 |
||||||
Earnings per common share attributable to Charter shareholders: |
||||||||||
Basic |
$ |
1.31 |
$ |
39.66 |
||||||
Diluted |
$ |
1.29 |
$ |
34.56 |
||||||
Net cash flows from operating activities |
$ |
3,168 |
$ |
3,258 |
||||||
Free cash flow |
$ |
885 |
$ |
1,217 |
||||||
Free cash flow - Cable |
$ |
1,189 |
$ |
1,217 |
Revenue
Fourth quarter revenues rose 5.9% year-over-year to
Video revenues totaled
Internet revenues grew 7.1%, compared to the year-ago quarter, to
Voice revenues totaled
Commercial revenues rose to
Fourth quarter advertising sales revenues of
Operating Costs and Expenses
Fourth quarter total operating costs and expenses increased by
Fourth quarter programming expense increased by
Regulatory, connectivity and produced content expenses increased by
Costs to service customers decreased by
Marketing expenses decreased by
Other expenses increased by
In the fourth quarter of 2018, mobile costs were comprised of launch costs, device costs and service and operating costs totaling
Adjusted EBITDA
Fourth quarter Adjusted EBITDA of
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled
Net income per basic common share attributable to Charter shareholders totaled
Capital Expenditures
Property, plant and equipment expenditures totaled
Cash Flow and Free Cash Flow
During the fourth quarter of 2018, net cash flows from operating activities totaled
Consolidated free cash flow for the fourth quarter of 2018 totaled
Liquidity & Financing
As of December 31, 2018, total principal amount of debt was
In
In
Share Repurchases
During the three months ended December 31, 2018, Charter purchased approximately 4.3 million shares of Charter Class A common stock and
Year to Date Financial Results |
||||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||||
Year Ended December 31, |
||||||||||
2018 |
2017 |
% Change |
||||||||
REVENUES: |
||||||||||
Video |
$ |
17,348 |
$ |
16,621 |
4.4 |
% |
||||
Internet |
15,181 |
14,101 |
7.7 |
% |
||||||
Voice |
2,114 |
2,542 |
(16.8) |
% |
||||||
Residential revenue |
34,643 |
33,264 |
4.1 |
% |
||||||
Small and medium business |
3,665 |
3,547 |
3.3 |
% |
||||||
Enterprise |
2,528 |
2,373 |
6.5 |
% |
||||||
Commercial revenue |
6,193 |
5,920 |
4.6 |
% |
||||||
Advertising sales |
1,785 |
1,510 |
18.2 |
% |
||||||
Mobile |
106 |
— |
NM |
|||||||
Other |
907 |
887 |
2.3 |
% |
||||||
Total Revenue |
43,634 |
41,581 |
4.9 |
% |
||||||
COSTS AND EXPENSES: |
||||||||||
Operating costs and expenses - Cable |
27,229 |
26,280 |
3.6 |
% |
||||||
Operating costs and expenses - Mobile |
346 |
— |
NM |
|||||||
Total operating costs and expenses |
27,575 |
26,280 |
4.9 |
% |
||||||
Adjusted EBITDA |
$ |
16,059 |
$ |
15,301 |
5.0 |
% |
||||
Adjusted EBITDA margin |
36.8 |
% |
36.8 |
% |
||||||
Adjusted EBITDA - Cable |
$ |
16,299 |
$ |
15,301 |
6.5 |
% |
||||
Adjusted EBITDA margin - Cable |
37.4 |
% |
36.8 |
% |
||||||