Charter Announces Fourth Quarter and Full Year 2020 Results

STAMFORD, Conn., Jan. 29, 2021 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and twelve months ended December 31, 2020.

Key highlights:

• As of December 31, 2020, Charter served a total of 31.1 million residential and small and medium business ("SMB") customers, with 1.9 million customers added in 2020 versus 1.1 million added in 2019. Charter added 197,000 total customer relationships in the fourth quarter, compared to 268,000 during the fourth quarter of 2019.
• As of December 31, 2020, Charter served a total of 28.9 million residential and SMB Internet customers, with 2.2 million Internet customers added in 2020 versus 1.4 million added in 2019. Charter added 246,000 total Internet customers in the fourth quarter compared to 339,000 during the fourth quarter of 2019.
• As of December 31, 2020, Charter served a total of 2.4 million mobile lines, with 1.3 million mobile lines added in 2020 versus 948,000 added in 2019. Charter added 315,000 mobile lines in the fourth quarter, compared to 288,000 during the fourth quarter of 2019.
• Fourth quarter revenue of $12.6 billion grew by 7.3% year-over-year, driven by residential revenue growth of 5.0%, mobile revenue growth of 80.9% and advertising revenue growth of 43.9%.
• Fourth quarter Adjusted EBITDA¹ of $5.0 billion grew by 10.2% year-over-year.
• For the year ended December 31, 2020, revenue of $48.1 billion increased by 5.1% year-over-year. Full year 2020 Adjusted EBITDA totaled $18.5 billion, 9.9% higher than in 2019.
• Net income attributable to Charter shareholders totaled $1.2 billion in the fourth quarter, compared to $714 million during the same period last year. For the year ended December 31, 2020, net income attributable to Charter shareholders totaled $3.2 billion, compared to $1.7 billion in 2019.
• Fourth quarter capital expenditures totaled $2.1 billion and included $157 million of mobile-related capital expenditures. For the year ended December 31, 2020, capital expenditures totaled $7.4 billion and included $508 million of mobile-related capital expenditures.
• Full year 2020 free cash flow¹ totaled $7.1 billion, compared to $4.6 billion in 2019.
• During the fourth quarter, Charter purchased approximately 7.4 million shares of Charter Class A common stock and Charter Communications Holdings, LLC ("Charter Holdings") common units for approximately $4.8 billion. For the year ended December 31, 2020, Charter purchased 21.1 million shares of Charter Class A common stock and Charter Holdings common units for approximately $12.1 billion.

"Our 2020 performance demonstrates that our customer-friendly operating strategy works well for Charter communities, employees and shareholders, even in challenging economic and operating environments," said Tom Rutledge, Chairman and CEO of Charter. "We added nearly two million customer relationships in 2020—800,000 more than we added in 2019—and demand for our connectivity products remains strong. As we look forward, we remain focused on the continued execution of our operating strategy, driving customer, revenue and free cash flow growth, enhancing value for our shareholders."

 

 

In 2020, Charter added 1.8 million residential customer relationships versus 1.0 million added in 2019. During the fourth quarter of 2020, Charter's residential customer relationships grew by 167,000, while fourth quarter 2019 residential customer relationships increased by 240,000.

Charter added 2.1 million residential Internet customers in 2020, versus 1.3 million added in 2019. During the fourth quarter of 2020, Charter added 216,000 residential Internet customers versus fourth quarter 2019 net additions of 313,000, which is a function of lower sales activity caused by adding 1.9 million residential Internet customers in the prior three quarters as well as lower market churn, resulting in fewer selling opportunities in the fourth quarter. As of December 31, 2020, over 85% of residential Internet customers subscribed to tiers that provided 100 Mbps or more of speed, and over 50% subscribed to tiers that provided 200 Mbps or more of speed. During the fourth quarter, Charter doubled its starting download speed to 200 Mbps in 17 markets. Currently, 200 Mbps is the slowest speed offered to new Spectrum Internet^® customers in nearly 75% of Charter's footprint, with 100 Mbps the slowest speed offered in the remainder of its footprint. Charter also offers Spectrum Internet Gig (940 Mbps) across its entire footprint. Additionally, Charter's Advanced In-Home WiFi service, which provides customers the ability to optimize their home networks while providing greater control of their connected devices, has now been launched across more than 65% of Charter's footprint for new Internet connects.

Charter added 19,000 residential video customers in 2020, compared to a decline of 484,000 in 2019. Residential video customers decreased by 66,000 in the fourth quarter of 2020, while fourth quarter 2019 residential video customers decreased by 105,000.

In 2020, Charter's residential wireline voice customers declined by 228,000 versus a decline of 692,000 in 2019. During the fourth quarter of 2020, residential wireline voice customers declined by 120,000, while fourth quarter 2019 residential wireline voice customers declined by 152,000.

Fourth quarter 2020 residential revenue per residential customer (excluding mobile) totaled $111.85, and declined by 1.7% compared to the prior year period, given a higher percentage of non-video customers, a higher mix of lower priced video packages within Charter's video customer base and lower installation revenue, partly offset by promotional rate step-ups and rate adjustments.

Charter added 93,000 SMB customer relationships in 2020, compared to 125,000 added in 2019. SMB customer relationships grew by 30,000 in the fourth quarter of 2020, while fourth quarter 2019 SMB customer relationships grew by 28,000. Enterprise PSUs grew by 7,000 in 2020 versus 19,000 added in 2019. During the fourth quarter of 2020, enterprise PSUs grew by 2,000, compared to growth of 3,000 in the fourth quarter of 2019.

In 2020, Charter added 1.3 million mobile lines versus 948,000 added in 2019. During the fourth quarter of 2020, Charter added 315,000 mobile lines, compared to 288,000 in the fourth quarter of 2019. Spectrum Mobile^TM is available to all new and existing Spectrum Internet customers and runs on America's most awarded LTE network combined with Spectrum WiFi. Spectrum Mobile customers can choose one of two simple ways to pay for data, "Unlimited" or "By the Gig." All plans include 4G and 5G access, with no added taxes, fees or contracts.

Fourth Quarter Financial Results

Revenues

Fourth quarter revenue increased by 7.3% year-over-year to $12.6 billion, driven by growth in Internet, mobile and advertising. Excluding advertising revenue, which benefited from political spend in the fourth quarter of 2020, revenue grew by 5.9% year-over-year.

Internet revenue grew by 11.9% year-over-year to $4.9 billion, driven by growth in Internet customers during the last year, promotional rate step-ups and rate adjustments.

Video revenue totaled $4.4 billion in the fourth quarter, a decrease of 1.2% compared to the prior year period, driven by a higher mix of lower priced video packages within Charter's video customer base and lower installation revenue, partly offset by promotional rate step-ups and rate adjustments.

Voice revenue totaled $449 million in the fourth quarter, a decrease of 0.2% compared to the fourth quarter of 2019, driven by a decline in wireline voice customers over the last twelve months.

Residential revenue totaled $9.7 billion in the fourth quarter, an increase of 5.0% year-over-year.

Commercial revenue increased by 1.0% year-over-year to $1.6 billion, driven by SMB and enterprise revenue growth of 1.1% and 0.9% year-over-year, respectively. SMB revenue growth was partly reduced by COVID-19 related seasonal plans. Enterprise revenue growth was impacted by lower cell tower backhaul and other wholesale revenue. Enterprise retail revenue excluding wholesale revenue increased by 5.4% year-over-year, reflecting PSU growth.

Fourth quarter advertising sales revenue of $625 million increased by 43.9% compared to the year-ago quarter, driven by higher political revenue and advanced advertising, partly offset by lower local sales. Excluding political revenue in both periods, advertising sales revenue declined by 4.6% year-over-year driven by COVID-19 effects.

Fourth quarter mobile revenue totaled $428 million, an increase of 80.9% year-over-year.

Other revenue totaled $222 million in the fourth quarter, an increase of 1.5% year-over-year.

Operating Costs and Expenses

Fourth quarter total operating costs and expenses increased by $398 million, or 5.5% year-over-year.

Fourth quarter programming costs increased by $101 million, or 3.6% as compared to the fourth quarter of 2019, reflecting contractual programming increases and renewals, partly offset by a higher mix of lower cost video packages within Charter's video customer base.

Regulatory, connectivity and produced content expenses decreased by $64 million, or 10.7% year-over-year, primarily driven by the deferral of sports rights costs to 2021 due to a delayed start of the NBA season.

Costs to service customers increased by $80 million, or 4.4% year-over-year, despite year-over-year residential and SMB customer growth of 6.5%. The year-over-year increase in costs to service customers was primarily driven by previously announced accelerated wage benefits for hourly field operations and call center employees and higher COVID-19 related benefits, partly offset by lower bad debt and productivity improvements.

Marketing expenses increased by $10 million, or 1.4% year-over-year.

Other expenses increased by $121 million, or 13.3% as compared to the fourth quarter of 2019 primarily driven by a one-time corporate cost and higher advertising sales expense.

Fourth quarter mobile costs totaled $522 million, an increase of 40.5% year-over-year, and were comprised of device costs, customer acquisition costs, and service and operating costs.

Adjusted EBITDA

Fourth quarter Adjusted EBITDA of $5.0 billion grew by 10.2% year-over-year, reflecting growth in revenue and operating expenses of 7.3% and 5.5%, respectively. 

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $1.2 billion in the fourth quarter of 2020, compared to $714 million in the fourth quarter of 2019. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA, a pension remeasurement gain in the current year period versus a loss in the prior year period and a non-cash gain on financial instruments, partly offset by higher tax expense.

Net income per basic common share attributable to Charter shareholders totaled $6.33 in the fourth quarter of 2020 compared to $3.36 during the same period last year. The increase was primarily the result of the factors described above in addition to a 7.4% decrease in weighted average common shares outstanding versus the prior year period.

Capital Expenditures

Property, plant and equipment expenditures totaled $2.1 billion in the fourth quarter of 2020, compared to $2.3 billion during the fourth quarter of 2019, primarily driven by declines in scalable infrastructure and support spending. The year-over-year decrease in scalable infrastructure spending was primarily due to timing of core network enhancements, partly offset by higher node splits given growing customer relationships and traffic. The decrease in support capital was driven by lower spend on back office systems, partly offset by facility improvements. Fourth quarter capital expenditures included $157 million of mobile costs, most of which are included in support capital.

Cash Flow and Free Cash Flow

During the fourth quarter of 2020, net cash flows from operating activities totaled $4.1 billion, compared to $3.4 billion in the prior year quarter. The year-over-year increase in net cash flows from operating activities was primarily due to higher Adjusted EBITDA and a favorable change in trade working capital.

Free cash flow in the fourth quarter of 2020 totaled $2.1 billion, compared to $1.6 billion during the same period last year. The year-over-year increase in free cash flow was driven by an increase in net cash flows from operating activities.

Liquidity & Financing

As of December 31, 2020, total principal amount of debt was $82.1 billion and Charter's credit facilities provided approximately $4.7 billion of additional liquidity in excess of Charter's $1.0 billion cash position.

In October 2020, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. jointly issued an additional $1.5 billion of its 4.500% senior unsecured notes due 2032 at a price of 103.750%. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of $750 million of CCO Holdings' 5.375% senior notes due May 1, 2025, as well as funding potential buybacks of Charter Class A common stock and Charter Holdings common units.

In December 2020, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. jointly issued $1.0 billion aggregate principal amount of 2.300% senior secured notes due 2032 at a price of 99.786%, an additional $650 million aggregate principal amount of 3.700% senior secured notes due 2051 at a price of 100.791% and $1.35 billion aggregate principal amount of 3.850% senior secured notes due 2061 at a price of 99.882%. The net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness, including $700 million of Time Warner Cable, LLC 4.125% notes due February 2021.

Share Repurchases

During the three months ended December 31, 2020, Charter purchased approximately 7.4 million shares of Charter Class A common stock and Charter Holdings common units for approximately $4.8 billion.

Full Year Financial Results