InvestorsJuly 29, 2022
Charter Announces Second Quarter 2022 Results
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- Second quarter total residential and small and medium business ("SMB") mobile lines increased by 344,000. As of
June 30, 2022 , Charter served a total of 4.3 million mobile lines. - Second quarter total residential and SMB Internet customers increased by 38,000 when excluding 59,000 customer disconnects related to the discontinuation of the Emergency Broadband Benefit program and additional requirements of the Affordable Connectivity Program. Including the unfavorable transition impact, second quarter total residential and SMB Internet customers decreased by 21,000. As of
June 30, 2022 , Charter served a total of 30.3 million residential and SMB Internet customers. - As of
June 30, 2022 , Charter had a total of 32.1 million residential and SMB customer relationships, which excludes mobile-only relationships. - Second quarter revenue of
$13.6 billion grew by 6.2% year-over-year, driven by residential revenue growth of 4.5%, mobile revenue growth of 39.8% and commercial revenue growth of 4.2%. - Net income attributable to Charter shareholders totaled
$1.5 billion in the second quarter, an increase of 44.2% year-over-year. - Second quarter Adjusted EBITDA1 of
$5.5 billion grew by 9.7% year-over-year. - Second quarter capital expenditures totaled
$2.2 billion and included$357 million of rural construction initiative capital expenditures and$95 million of mobile-related capital expenditures. - Second quarter net cash flows from operating activities totaled
$3.7 billion , compared to$4.0 billion in the prior year quarter. - Second quarter free cash flow1 of
$1.7 billion decreased by 19.8% year-over-year, primarily due to higher cash taxes and capital expenditures associated with Charter's rural construction initiative. - During the second quarter, Charter purchased 8.3 million shares of Charter Class A common stock and
Charter Communications Holdings, LLC ("Charter Holdings ") common units for approximately$4.3 billion .
"Our growth has always been driven by offering value-rich packages at prices customers can afford," 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. |
Approximate as of |
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|
|
Y/Y Change |
||||
Footprint (b) |
||||||
Estimated Passings |
55,008 |
54,000 |
1.9 % |
|||
Customer Relationships (c) |
||||||
Residential |
29,942 |
29,660 |
1.0 % |
|||
SMB |
2,182 |
2,104 |
3.7 % |
|||
Total Customer Relationships |
32,124 |
31,764 |
1.1 % |
|||
Residential |
(93) |
299 |
(392) |
|||
SMB |
19 |
33 |
(14) |
|||
Total Customer Relationships Quarterly Net Additions |
(74) |
332 |
(406) |
|||
Total Customer Relationship Penetration of Estimated Passings (d) |
58.4 % |
58.8 % |
(0.4) ppts |
|||
Monthly Residential Revenue per Residential Customer (e) |
$ 116.00 |
$ 112.85 |
2.8 % |
|||
Monthly SMB Revenue per SMB Customer (f) |
$ 165.66 |
$ 166.28 |
(0.4) % |
|||
Residential Customer Relationships Penetration |
||||||
Single Play Penetration (g) |
47.8 % |
45.7 % |
2.1 ppts |
|||
Double Play Penetration (g) |
33.1 % |
32.7 % |
0.4 ppts |
|||
Triple Play Penetration (g) |
19.1 % |
21.6 % |
(2.5) ppts |
|||
% Residential Non-Video Customer Relationships |
50.4 % |
48.0 % |
2.4 ppts |
|||
Internet |
||||||
Residential |
28,259 |
27,722 |
1.9 % |
|||
SMB |
1,994 |
1,912 |
4.3 % |
|||
Total Internet Customers |
30,253 |
29,634 |
2.1 % |
|||
Residential |
(42) |
365 |
(407) |
|||
SMB |
21 |
35 |
(14) |
|||
Total Internet Quarterly Net Additions |
(21) |
400 |
(421) |
|||
Video |
||||||
Residential |
14,853 |
15,420 |
(3.7) % |
|||
SMB |
642 |
592 |
8.4 % |
|||
Total Video Customers |
15,495 |
16,012 |
(3.2) % |
|||
Residential |
(240) |
(63) |
(177) |
|||
SMB |
14 |
13 |
1 |
|||
Total Video Quarterly Net Additions |
(226) |
(50) |
(176) |
|||
Voice |
||||||
Residential |
8,200 |
9,014 |
(9.0) % |
|||
SMB |
1,287 |
1,259 |
2.2 % |
|||
Total Voice Customers |
9,487 |
10,273 |
(7.6) % |
|||
Residential |
(265) |
(99) |
(166) |
|||
SMB |
(1) |
21 |
(22) |
|||
Total Voice Quarterly Net Additions |
(266) |
(78) |
(188) |
|||
Mobile Lines (h) |
||||||
Residential |
4,134 |
2,855 |
44.8 % |
|||
SMB |
147 |
85 |
73.2 % |
|||
Total Mobile Lines |
4,281 |
2,940 |
45.6 % |
|||
Residential |
329 |
250 |
79 |
|||
SMB |
15 |
15 |
— |
|||
Total Mobile Lines Quarterly Net Additions |
344 |
265 |
79 |
|||
Enterprise (i) |
||||||
Enterprise Primary Service Units ("PSUs") |
277 |
265 |
4.7 % |
|||
Enterprise Quarterly Net Additions |
3 |
4 |
(1) |
|||
Footnotes - In thousands, except per customer and penetration data. See footnotes to unaudited summary of operating statistics on page 6 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
Second quarter residential Internet customers increased by 17,000 when excluding 59,000 customer disconnects related to the discontinuation of the Emergency Broadband Benefit program and additional requirements of the Affordable Connectivity Program. Including the unfavorable transition impact, second quarter residential Internet customers decreased by 42,000, compared to an increase of 365,000 customers during the second quarter of 2021. Currently, 300 Mbps is the minimum speed offered to new Spectrum Internet® customers across Charter's footprint. As of
Residential video customers decreased by 240,000 in the second quarter of 2022, compared to a decline of 63,000 in the second quarter of 2021, partly driven by downgrades following an April pass through of higher programming expense. As of
During the second quarter of 2022, residential wireline voice customers declined by 265,000, compared to a decline of 99,000 in the second quarter of 2021. As of
Second quarter 2022 residential revenue per residential customer (excluding mobile) totaled
SMB customer relationships grew by 19,000 in the second quarter of 2022, while second quarter 2021 SMB customer relationships grew by 33,000. Enterprise PSUs grew by 3,000 in the second quarter of 2022 versus 4,000 added in the second quarter of 2021.
During the second quarter of 2022, Charter added 344,000 mobile lines, compared to growth of 265,000 during the second quarter of 2021. Spectrum MobileTM is available to all new and existing Spectrum Internet customers. Spectrum Mobile customers can choose "Unlimited" or "By the Gig" data plans. In
1. |
Fastest Overall Speed claim based on |
(in millions) |
|||||
Three Months Ended |
|||||
2022 |
2021 |
% Change |
|||
Revenues: |
|||||
Internet |
$ 5,562 |
$ 5,221 |
6.5 % |
||
Video |
4,484 |
4,378 |
2.4 % |
||
Voice |
398 |
394 |
1.0 % |
||
Residential revenue |
10,444 |
9,993 |
4.5 % |
||
Small and medium business |
1,080 |
1,042 |
3.7 % |
||
Enterprise |
669 |
636 |
4.9 % |
||
Commercial revenue |
1,749 |
1,678 |
4.2 % |
||
Advertising sales |
460 |
411 |
12.0 % |
||
Mobile |
726 |
519 |
39.8 % |
||
Other |
219 |
201 |
8.8 % |
||
Total Revenues |
$ 13,598 |
$ 12,802 |
6.2 % |
||
Net income attributable to Charter shareholders |
$ 1,471 |
$ 1,020 |
44.2 % |
||
Net income attributable to Charter shareholders margin |
10.8 % |
8.0 % |
|||
Adjusted EBITDA1 |
$ 5,509 |
$ 5,020 |
9.7 % |
||
Adjusted EBITDA margin |
40.5 % |
39.2 % |
|||
Capital Expenditures |
$ 2,193 |
$ 1,881 |
16.6 % |
||
% Total Revenues |
16.1 % |
14.7 % |
|||
Net cash flows from operating activities |
$ 3,734 |
$ 3,999 |
(6.6) % |
||
Free cash flow1 |
$ 1,659 |
$ 2,068 |
(19.8) % |
1. |
See page 1 of the addendum for a GAAP reconciliation of Adjusted EBITDA and free cash flow. |
Revenues
Second quarter revenue increased by 6.2% year-over-year to
Residential revenue totaled
Internet revenue grew by 6.5% year-over-year to
Video revenue totaled
Voice revenue totaled
Commercial revenue increased by 4.2% year-over-year to
Second quarter advertising sales revenue of
Second quarter mobile revenue totaled
Operating Costs and Expenses
Second quarter programming costs decreased by
Regulatory, connectivity and produced content expenses decreased by
Costs to service customers increased by
Marketing expenses increased by
Second quarter mobile costs totaled
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
Second quarter Adjusted EBITDA of
Capital Expenditures
Property, plant and equipment expenditures totaled
Charter currently expects full year 2022 cable capital expenditures, excluding capital expenditures associated with its rural construction initiative, to be between
Cash Flow and Free Cash Flow
During the second quarter of 2022, net cash flows from operating activities totaled
Free cash flow in the second quarter of 2022 totaled
Liquidity & Financing
As of
In
After giving effect to the Amendment: (i) the aggregate principal amount of term A-5 loans outstanding is
Share Repurchases
During the three months ended
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.
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 and six months ended
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
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, sports and high-quality original programming to its customers through Spectrum Networks and Spectrum Originals. More information about Charter can be found at corporate.charter.com.
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, including the impacts of the Novel Coronavirus ("COVID-19") pandemic to sales opportunities from residential move activity, our customers, our vendors and local, state and federal governmental responses to the pandemic;
- 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;
- 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 |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Net income attributable to Charter shareholders |
$ 1,471 |
$ 1,020 |
$ 2,674 |
$ 1,827 |
|||
Plus: Net income attributable to noncontrolling interest |
237 |
138 |
423 |
252 |
|||
Interest expense, net |
1,109 |
1,004 |
2,169 |
1,987 |
|||
Income tax expense |
489 |
281 |
834 |
497 |
|||
Depreciation and amortization |
2,240 |
2,354 |
4,534 |
4,795 |
|||
Stock compensation expense |
104 |
100 |
251 |
234 |
|||
Other (income) expenses, net |
(141) |
123 |
(163) |
373 |
|||
Adjusted EBITDA |
$ 5,509 |
$ 5,020 |
$ 10,722 |
$ 9,965 |
|||
Net cash flows from operating activities |
$ 3,734 |
$ 3,999 |
$ 7,381 |
$ 7,750 |
|||
Less: Purchases of property, plant and equipment |
(2,193) |
(1,881) |
(4,050) |
(3,702) |
|||
Change in accrued expenses related to capital expenditures |
118 |
(50) |
128 |
(125) |
|||
Free cash flow |
$ 1,659 |
$ 2,068 |
$ 3,459 |
$ 3,923 |
|||
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 |
Six Months Ended |
||||||||||
2022 |
2021 |
% Change |
2022 |
2021 |
% Change |
||||||
REVENUES: |
|||||||||||
Internet |
$ 5,562 |
$ 5,221 |
6.5 % |
$ 11,014 |
$ 10,307 |
6.9 % |
|||||
Video |
4,484 |
4,378 |
2.4 % |
8,830 |
8,722 |
1.2 % |
|||||
Voice |
398 |
394 |
1.0 % |