InvestorsOctober 30, 2020
Charter Announces Third Quarter 2020 Results
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Key highlights:
- Third quarter total residential and small and medium business ("SMB") customer relationships increased by 457,000, compared to 310,000 during the third quarter of 2019. Over the last 12 months, total customer relationships grew by 6.8%.
- Third quarter total residential and SMB Internet customers increased by 537,000, compared to 380,000 during the third quarter of 2019. Over the last 12 months, total Internet customers grew by 2.3 million, or 8.8%, to 28.6 million.
- Charter added 363,000 mobile lines in the third quarter, compared to 276,000 during the third quarter of 2019. As of
September 30, 2020 , Charter served a total of 2.1 million mobile lines. - Third quarter revenue of
$12.0 billion grew by 5.1% year-over-year, driven by residential revenue growth of 4.0%, mobile revenue growth of 91.8% and advertising revenue growth of 16.8%. - Third quarter Adjusted EBITDA1 of
$4.6 billion grew by 13.6% year-over-year, while third quarter cable Adjusted EBITDA1 of$4.7 billion grew by 11.7% year-over-year. - Net income attributable to Charter shareholders totaled
$814 million in the third quarter, compared to$387 million during the same period last year. - Third quarter capital expenditures totaled
$2.0 billion and included$139 million of mobile-related capital expenditures. - Consolidated free cash flow1 in the third quarter of 2020 totaled
$1.8 billion , compared to$1.3 billion in 2019. Cable free cash flow1 totaled$2.0 billion in the third quarter of 2020, versus$1.5 billion in 2019. - During the third quarter, Charter purchased approximately 6.1 million shares of Charter Class A common stock and
Charter Communications Holdings, LLC ("Charter Holdings ") common units for approximately$3.6 billion .
"Our long-term strategy of growing customer relationships by delivering high-quality products and service remains on track," said
1. |
Adjusted EBITDA, cable Adjusted EBITDA, free cash flow and cable 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 |
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Approximate as of |
|||||||||||
|
|
Y/Y Change |
|||||||||
Footprint (b) |
|||||||||||
Estimated Passings |
53,022 |
51,940 |
2.1 |
% |
|||||||
Customer Relationships (c) |
|||||||||||
Residential |
28,912 |
27,037 |
6.9 |
% |
|||||||
SMB |
2,021 |
1,930 |
4.7 |
% |
|||||||
Total Customer Relationships |
30,933 |
28,967 |
6.8 |
% |
|||||||
Residential |
416 |
282 |
47.9 |
% |
|||||||
SMB |
41 |
28 |
46.0 |
% |
|||||||
Total Customer Relationships Net Additions |
457 |
310 |
47.7 |
% |
|||||||
Total Customer Relationship Penetration of Estimated Passings (d) |
58.3 |
% |
55.8 |
% |
2.5 ppts |
||||||
Monthly Residential Revenue per Residential Customer (e) |
$ |
109.03 |
$ |
112.00 |
(2.7) |
% |
|||||
Monthly SMB Revenue per SMB Customer (f) |
$ |
164.77 |
$ |
169.44 |
(2.8) |
% |
|||||
Residential Customer Relationships Penetration |
|||||||||||
Single Play Penetration (g) |
44.2 |
% |
42.7 |
% |
1.5 ppts |
||||||
Double Play Penetration (g) |
32.3 |
% |
29.9 |
% |
2.4 ppts |
||||||
Triple Play Penetration (g) |
23.5 |
% |
27.3 |
% |
(3.8) ppts |
||||||
% Residential Non-Video Customer Relationships |
45.7 |
% |
41.8 |
% |
3.9 ppts |
||||||
Internet |
|||||||||||
Residential |
26,807 |
24,595 |
9.0 |
% |
|||||||
SMB |
1,826 |
1,730 |
5.5 |
% |
|||||||
Total Internet Customers |
28,633 |
26,325 |
8.8 |
% |
|||||||
Residential |
494 |
351 |
40.3 |
% |
|||||||
SMB |
43 |
29 |
47.5 |
% |
|||||||
Total Internet Net Additions |
537 |
380 |
41.3 |
% |
|||||||
Video |
|||||||||||
Residential |
15,705 |
15,725 |
(0.1) |
% |
|||||||
SMB |
530 |
520 |
1.9 |
% |
|||||||
Total Video Customers |
16,235 |
16,245 |
(0.1) |
% |
|||||||
Residential |
53 |
(77) |
169.4 |
% |
|||||||
SMB |
14 |
2 |
410.1 |
% |
|||||||
Total Video Net Additions |
67 |
(75) |
189.3 |
% |
|||||||
Voice |
|||||||||||
Residential |
9,335 |
9,595 |
(2.7) |
% |
|||||||
SMB |
1,207 |
1,120 |
7.8 |
% |
|||||||
Total Voice Customers |
10,542 |
10,715 |
(1.6) |
% |
|||||||
Residential |
(63) |
(213) |
70.1 |
% |
|||||||
SMB |
38 |
23 |
68.7 |
% |
|||||||
Total Voice Net Additions |
(25) |
(190) |
86.8 |
% |
|||||||
Mobile Lines |
|||||||||||
Residential |
2,020 |
793 |
154.6 |
% |
|||||||
SMB |
40 |
1 |
NM |
||||||||
Total Mobile Lines |
2,060 |
794 |
159.5 |
% |
|||||||
Residential |
348 |
275 |
26.5 |
% |
|||||||
SMB |
15 |
1 |
NM |
||||||||
Total Mobile Lines Net Additions |
363 |
276 |
31.5 |
% |
|||||||
Enterprise (h) |
|||||||||||
Enterprise Primary Service Unites ("PSUs") |
272 |
264 |
3.1 |
% |
|||||||
Enterprise Net Additions |
2 |
6 |
(68.9) |
% |
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 third quarter of 2020, Charter's residential customer relationships grew by 416,000, while third quarter 2019 residential customer relationships grew by 282,000. As of
Charter added 494,000 residential Internet customers in the third quarter of 2020, versus third quarter 2019 residential Internet customer net additions of 351,000. As of
Residential video customers increased by 53,000 in the third quarter of 2020, while third quarter 2019 residential video customers decreased by 77,000. As of
During the third quarter of 2020, residential wireline voice customers declined by 63,000, while third quarter 2019 residential wireline voice customers declined by 213,000. As of
Third quarter 2020 residential revenue per residential customer (excluding mobile) totaled
SMB customer relationships grew by 41,000 during the third quarter of 2020, compared to growth of 28,000 during the third quarter of 2019. As of
During the third quarter of 2020, Charter added 363,000 mobile lines, and as of
Third Quarter Financial Results
|
||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA |
||||||||||
(dollars in millions, except per share data) |
||||||||||
Three Months Ended |
||||||||||
2020 |
2019 |
% Change |
||||||||
REVENUES: |
||||||||||
Internet |
$ |
4,722 |
$ |
4,195 |
12.5 |
% |
||||
Video |
4,221 |
4,359 |
(3.2) |
% |
||||||
Voice |
449 |
477 |
(5.8) |
% |
||||||
Residential revenue |
9,392 |
9,031 |
4.0 |
% |
||||||
Small and medium business |
988 |
974 |
1.5 |
% |
||||||
Enterprise |
617 |
644 |
(4.3) |
% |
||||||
Commercial revenue |
1,605 |
1,618 |
(0.8) |
% |
||||||
Advertising sales |
460 |
394 |
16.8 |
% |
||||||
Mobile |
368 |
192 |
91.8 |
% |
||||||
Other |
214 |
215 |
(0.7) |
% |
||||||
Total Revenue |
12,039 |
11,450 |
5.1 |
% |
||||||
COSTS AND EXPENSES: |
||||||||||
Cable operating costs and expenses |
6,944 |
7,027 |
(1.2) |
% |
||||||
Mobile operating costs and expenses |
456 |
337 |
35.2 |
% |
||||||
Total operating costs and expenses |
7,400 |
7,364 |
0.5 |
% |
||||||
Adjusted EBITDA |
$ |
4,639 |
$ |
4,086 |
13.6 |
% |
||||
Adjusted EBITDA margin |
38.5 |
% |
35.7 |
% |
||||||
Cable Adjusted EBITDA |
$ |
4,727 |
$ |
4,231 |
11.7 |
% |
||||
Cable Adjusted EBITDA margin |
40.5 |
% |
37.6 |
% |
||||||
Capital Expenditures |
$ |
2,014 |
$ |
1,651 |
||||||
% Total Revenue |
16.7 |
% |
14.4 |
% |
||||||
Cable Capital Expenditures |
$ |
1,875 |
$ |
1,551 |
||||||
% Total Cable Revenue |
16.1 |
% |
13.8 |
% |
||||||
Net income attributable to Charter shareholders |
$ |
814 |
$ |
387 |
||||||
Earnings per common share attributable to Charter shareholders: |
||||||||||
Basic |
$ |
4.01 |
$ |
1.77 |
||||||
Diluted |
$ |
3.90 |
$ |
1.74 |
||||||
Net cash flows from operating activities |
$ |
3,664 |
$ |
2,943 |
||||||
Free cash flow |
$ |
1,754 |
$ |
1,271 |
||||||
Cable free cash flow |
$ |
2,019 |
$ |
1,527 |
Revenues
Third quarter revenue increased by 5.1% year-over-year to
Residential revenue totaled
Internet revenue grew by 12.5% compared to the year-ago quarter, to
Video revenue totaled
Voice revenue totaled
Commercial revenue declined to
Third quarter advertising sales revenue of
Third quarter mobile revenue totaled
Other revenue totaled
Operating Costs and Expenses
Third quarter total operating costs and expenses increased by
Third quarter programming costs decreased by
Regulatory, connectivity and produced content expenses were essentially unchanged year-over-year, as lower regulatory and franchise fees were offset by higher video CPE sold to customers and higher sports rights costs. The impact of an expected reduction in sports rights content costs were immaterial in the quarter as this benefit will be amortized over the life of the contract, consistent with the deferral of second quarter expense for canceled games. Together with the expected rebates shown in programming expense, Charter intends to provide a credit on its video customers' invoices for all of the rebates provided by sports programming networks when details are finalized with the networks.
Costs to service customers increased by
Marketing expenses decreased by
Other expenses decreased by
Third quarter mobile costs totaled
Adjusted EBITDA
Third 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
Charter currently expects 2020 cable capital expenditures to be consistent and possibly lower as a percentage of cable revenue versus 2019, despite the significant acceleration in customer growth and network utilization during COVID-19.
Cash Flow and Free Cash Flow
During the third quarter of 2020, net cash flows from operating activities totaled
Consolidated free cash flow in the third quarter of 2020 totaled
Liquidity & Financing
As of
In
In
Share Repurchases
During the three months ended
Conference Call
Charter will host a conference call on
The conference call will be webcast live via the Company's investor relations website at ir.charter.com. The call will be archived under the "Financial Information" section two hours after completion of the call. Participants should go to the webcast link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-919-0894 no later than 10 minutes prior to the call. International participants should dial 706-679-9379. The conference ID code for the call is 8066249.
A replay of the call will be available at 855-859-2056 or 404-537-3406 beginning two hours after the completion of the call through the end of business on
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 and nine 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, loss on extinguishment of debt, (gain) loss on financial instruments, net, other pension (benefits) costs, net, other (income) expense, 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 the
Cable Adjusted EBITDA is defined as Adjusted EBITDA less mobile revenues plus mobile operating costs and expenses. Cable free cash flow is defined as free cash flow plus mobile net cash outflows from operating activities and mobile capital expenditures. Management and Charter's board of directors use cable Adjusted EBITDA and cable free cash flow to provide management and investors a more meaningful year-over-year perspective on the financial and operational performance and trends of our core cable business without the impact of the revenue, costs and capital expenditures in the initial funding period to grow a new product line as well as the negative working capital impacts from the timing of device-related cash flows when we sell the handset or tablet to customers pursuant to equipment installment plans.
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, 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.
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," "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
- the impact of the COVID-19 pandemic on the economy, our customers, our vendors, local, state and federal governmental responses to the pandemic and our businesses generally;
- 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;
- 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);
- our ability to develop and deploy new products and technologies including mobile products and any other 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 costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us as a result of the
Time Warner Cable Inc. andBright House Networks , LLC Transactions; - general business conditions, economic uncertainty or downturn, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector;
- the ability to retain and hire key personnel;
- 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.
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UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA |
|||||||||||||||||||||
(dollars in millions, except per share data) |
|||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
||||||||||||||||
REVENUES: |