CHTR
$453.85
Charter Communicatio
($4.22)
(.92%)
Earnings Details
2nd Quarter June 2022
Friday, July 29, 2022 7:00:00 AM
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Summary

Charter Communicatio Beats

Charter Communicatio (CHTR) reported 2nd Quarter June 2022 earnings of $8.80 per share on revenue of $13.6 billion. The consensus earnings estimate was $6.92 per share on revenue of $13.4 billion. The Earnings Whisper number was $6.92 per share. Revenue grew 6.2% on a year-over-year basis.

Charter Communications Inc is a cable operator providing services in the United States. It offers cable video programming, Internet services, and voice services, as well as video services such as video on demand, HD television and DVR service.

Results
Reported Earnings
$8.80
Earnings Whisper
$6.92
Consensus Estimate
$6.92
Reported Revenue
$13.60 Bil
Revenue Estimate
$13.42 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Charter Announces Second Quarter 2022 Results

STAMFORD, Conn., July 29, 2022 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and six months ended June 30, 2022.

  • 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 Tom Rutledge, Chairman and CEO of Charter Communications. "Looking forward, we remain well-positioned to grow our business using that same strategy. Our fixed and mobile broadband services continue to converge, and we offer a unique connectivity package while meaningfully reducing customer bills. So there is a large opportunity for us to save customers money, which in turn raises connects, reduces churn and drives overall customer relationship growth." 

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





June 30, 2022 (a)


June 30, 2021 (a)


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 June 30, 2022, Charter had 29.9 million residential customer relationships, with year-over-year growth of 1.0%.

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 June 30, 2022, over 80% of total Internet customers subscribed to tiers that provided 300 Mbps or more of speed. Charter also offers Spectrum Internet Ultra (500 Mbps) and Spectrum Internet Gig (1 Gbps) across its entire footprint. Charter's Advanced Home WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of their connected devices, is available to nearly all Spectrum Internet customers.

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 June 30, 2022, Charter had 14.9 million residential video customers.

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 June 30, 2022, Charter had 8.2 million residential wireline voice customers.

Second quarter 2022 residential revenue per residential customer (excluding mobile) totaled $116.00, and increased by 2.8% compared to the prior year period, given promotional rate step-ups and rate adjustments that in part pass through programmer rate increases, partly offset by a higher mix of non-video customer relationships and a higher mix of lower priced video packages within Charter's video customer base.

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 October 2021, Spectrum Mobile introduced new Unlimited pricing starting at $29.99/month per Unlimited line for customers with at least two lines. Additionally, customers qualify for the new multiline pricing when combining By the Gig lines for $14/GB with Unlimited lines. All Spectrum Mobile plans offer the fastest overall speeds1, include 5G access and taxes and fees and do not require contracts. Spectrum Mobile's multiline Unlimited pricing is part of Charter's converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing.

1.

Fastest Overall Speed claim based on Global Wireless Solutions' combined cellular and WiFi speed test results in Spectrum service area where WiFi is available. Cellular speeds vary by location.

Second Quarter Financial Results

 

(in millions)


Three Months Ended June 30,


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 $13.6 billion, driven primarily by growth in residential, mobile and commercial revenues.

Residential revenue totaled $10.4 billion in the second quarter, an increase of 4.5% year-over-year.

Internet revenue grew by 6.5% year-over-year to $5.6 billion, driven by growth in Internet customers during the last year, promotional rate step-ups and reduced bundled discounts, partly offset by lower bundled revenue allocation.

Video revenue totaled $4.5 billion in the second quarter, an increase of 2.4% compared to the prior year period, driven by promotional rate step-ups, video rate adjustments that pass through programmer rate increases and higher bundled revenue allocation, mostly offset by a higher mix of lower priced video packages within Charter's video customer base and a decline in video customers during the last year.

 Voice revenue totaled $398 million in the second quarter, an increase of 1.0% compared to the second quarter of 2021, driven by voice rate adjustments, partly offset by a decline in wireline voice customers over the last twelve months.

Commercial revenue increased by 4.2% year-over-year to $1.7 billion, driven by SMB and enterprise revenue growth of 3.7% and 4.9% year-over-year, respectively. Second quarter 2022 SMB revenue growth was driven by customer relationship growth. Enterprise revenue excluding wholesale increased by 8.2% year-over-year, mostly reflecting PSU growth.

Second quarter advertising sales revenue of $460 million increased by 12.0% compared to the year-ago quarter, primarily driven by higher political revenue. Excluding political revenue in both periods, advertising sales revenue decreased by 0.7% year-over-year, due to lower local and national advertising revenue, particularly in the automotive category, partly offset by higher advanced advertising revenue.

Second quarter mobile revenue totaled $726 million, an increase of 39.8% year-over-year, driven by mobile line growth.

Operating Costs and Expenses

Second quarter programming costs decreased by $6 million, or 0.2% as compared to the second quarter of 2021, reflecting fewer video customers and a higher mix of lower cost packages within Charter's video customer base, mostly offset by contractual programming increases and renewals.

Regulatory, connectivity and produced content expenses decreased by $69 million, or 10.3% year-over-year, primarily driven by lower sports rights costs given a normalized game schedule in the second quarter of 2022 compared to the second quarter of 2021 when more games were played due to a delayed start of the 2020-2021 NBA season and lower video CPE sold to customers.

Costs to service customers increased by $93 million, or 5.1% year-over-year. The year-over-year increase in costs to service customers was primarily driven by low bad debt in the second quarter of 2021, which benefited from government stimulus packages and higher bad debt in the second quarter of 2022. Costs to service customers excluding bad debt increased by 1.1% year-over-year primarily due to a larger customer base and higher fuel costs, partly offset by productivity improvements.

Marketing expenses increased by $65 million, or 8.6% year-over-year, due to higher labor costs driven by previously announced wage increases to a $20 per hour starting wage and higher staffing levels as Charter completes the insourcing of its inbound sales and retention call centers with a focus on providing better service to new and existing customers.

Second quarter mobile costs totaled $797 million, an increase of 35.9% year-over-year, and were comprised of device costs, customer acquisition costs, and service and operating costs.

Other expenses increased by $13 million, or 1.3% as compared to the second quarter of 2021.

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $1.5 billion in the second quarter of 2022, compared to $1.0 billion in the second quarter of 2021. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA. 

 Net income per basic common share attributable to Charter shareholders totaled $8.96 in the second quarter of 2022 compared to $5.48 during the same period last year. The increase was primarily the result of the factors described above in addition to an 11.8% decrease in basic weighted average common shares outstanding versus the prior year period.

Adjusted EBITDA

Second quarter Adjusted EBITDA of $5.5 billion grew by 9.7% year-over-year, reflecting growth in revenue and operating expenses of 6.2% and 3.9%, respectively.

Capital Expenditures

Property, plant and equipment expenditures totaled $2.2 billion in the second quarter of 2022, compared to $1.9 billion during the second quarter of 2021, primarily driven by an increase in line extensions and customer premise equipment ("CPE"), partly offset by a decrease in scalable infrastructure. The increase in line extensions was due to Charter's rural construction initiative. The increase in CPE was primarily due to higher spend on Advanced Home WiFi equipment. The decrease in scalable infrastructure was primarily related to timing of spend. Second quarter capital expenditures included $357 million of rural construction initiative spend, most of which was included in line extensions. Second quarter capital expenditures also included $95 million of mobile costs, most of which related to information technology systems and CBRS small cell construction and were included in support capital and scalable infrastructure.

Charter currently expects full year 2022 cable capital expenditures, excluding capital expenditures associated with its rural construction initiative, to be between $7.1 billion and $7.3 billion.

Cash Flow and Free Cash Flow

During the second quarter of 2022, net cash flows from operating activities totaled $3.7 billion, compared to $4.0 billion in the prior year quarter. The year-over-year decrease in net cash flows from operating activities was primarily due to higher cash taxes, higher cash paid for interest and an unfavorable change in working capital, excluding the changes in accrued interest and taxes and accrued expenses related to capital expenditures, partly offset by higher Adjusted EBITDA.

Free cash flow in the second quarter of 2022 totaled $1.7 billion, compared to $2.1 billion during the same period last year. The year-over-year decrease in free cash flow was primarily driven by a decrease in net cash flows from operating activities and an increase in capital expenditures.

Liquidity & Financing

As of June 30, 2022, total principal amount of debt was $95.7 billion and Charter's credit facilities provided approximately $4.4 billion of additional liquidity in excess of Charter's $483 million cash position.

In May 2022, Charter Communications Operating, LLC ("Charter Operating") entered into an amendment to its credit agreement (the "Amendment") to: (i) upsize term A loans by $2.3 billion to $6.05 billion and extend the maturity to August 31, 2027 from March 31, 2023 and February 1, 2025, (ii) create and borrow a new tranche of $500 million of term A-6 loans maturing August 31, 2028, (iii) increase the size of Charter Operating's revolving credit facility and extend the maturity date to August 31, 2027 from March 31, 2023 and February 1, 2025 and (iv) make certain other amendments to the credit agreement. Charter used a portion of the proceeds from the Amendment to repay all of the term A-2 loans, term A-4 loans and borrowings under the revolving credit facility outstanding prior to the effective date of the Amendment.

After giving effect to the Amendment: (i) the aggregate principal amount of term A-5 loans outstanding is $6.05 billion with a pricing of Secured Overnight Financing Rate ("SOFR") plus 1.25%, (ii) the aggregate principal amount of term A-6 loans outstanding is $500 million with a pricing of SOFR plus 1.50% and (iii) the aggregate amount of the revolving credit facility increased to a total capacity of $5.5 billion and the interest rate benchmark changed from London Interbank Offering Rate ("LIBOR") to SOFR, with a pricing of SOFR plus 1.25%. The aggregate principal amount of term B-1 loans (maturing April 30, 2025) and term B-2 loans (maturing February 1, 2027) outstanding are $2.4 billion and $3.7 billion, respectively, with LIBOR-based pricing unchanged.

Share Repurchases

During the three months ended June 30, 2022, Charter purchased 8.3 million shares of Charter Class A common stock and Charter Holdings common units for approximately $4.3 billion. During the six months ended June 30, 2022, Charter purchased 14.3 million shares of Charter Class A common stock and Charter Holdings common units, or 7.2% of fully diluted shares outstanding (including as-exchanged Charter Holdings common units) as of December 31, 2021, for approximately $7.8 billion.

Webcast

Charter will host a webcast on Friday, July 29, 2022 at 8:30 a.m. Eastern Time (ET) related to the contents of this release.

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 and six months ended June 30, 2022, which will be posted on the "Results & SEC Filings" section of the Company's investor relations website at ir.charter.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available in the "Results & SEC Filings" section.

Use of Adjusted EBITDA and Free Cash Flow Information

The Company uses certain measures that are not defined by U.S. generally accepted accounting principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income attributable to Charter shareholders and net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the Addendum to this release.

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 SEC). For the purpose of calculating compliance with leverage covenants, the Company uses Adjusted EBITDA, as presented, excluding certain expenses paid by its operating subsidiaries to other Charter entities. The Company's debt covenants refer to these expenses as management fees, which were $348 million and $690 million for the three and six months ended June 30, 2022, respectively, and $365 million and $642 million for the three and six months ended June 30, 2021, respectively.

About Charter

Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband connectivity company and cable operator serving more than 32 million customers in 41 states through its Spectrum brand. Over an advanced communications network, the Company offers a full range of state-of-the-art residential and business services including Spectrum Internet®, TV, Mobile and Voice.

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," "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 SEC, and include, but are not limited to:

  • 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.

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(dollars in millions) 



Three Months Ended June 30,


Six Months Ended June 30,


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 June 30,


Six Months Ended June 30,


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 %


789


793


(0.5) %

  Residential revenue

10,444


9,993


4.5 %


20,633


19,822


4.1 %

Small and medium business

1,080


1,042


3.7 %


2,139


2,054


4.1 %

Enterprise

669


636


4.9 %


1,330


1,274


4.3 %

  Commercial revenue

1,749


1,678


4.2 %


3,469


3,328


4.2 %

Advertising sales

460


411


12.0 %


843


755


11.8 %

Mobile

726


519


39.8 %


1,416


1,011


40.0 %

Other

219


201


8.8 %


437


408


7.0 %

  Total Revenues

13,598


12,802


6.2 %


26,798


25,324


5.8 %













COSTS AND EXPENSES:












Programming

2,972


2,978


(0.2) %


5,949


5,966


(0.3) %

Regulatory, connectivity and produced content

599


668


(10.3) %


1,155


1,268


(8.9) %

Costs to service customers

1,920


1,827


5.1 %


3,819


3,631


5.2 %

Marketing

806


741


8.6 %


1,632


1,492


9.4 %

Mobile

797


586


35.9 %


1,557


1,158


34.4 %

Other expense (a)

995


982


1.3 %


1,964


1,844


6.5 %

  Total operating costs and expenses (a)

8,089


7,782


3.9 %


16,076


15,359


4.7 %













Adjusted EBITDA

$        5,509


$        5,020


9.7 %


$      10,722


$        9,965


7.6 %



(a)

Other expense excludes stock compensation expense.  Total operating costs and expenses excludes stock compensation expense, depreciation and amortization and other operating (income) expenses, net.



All percentages are calculated using whole numbers. Minor differences may exist due to rounding. 

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in millions, except per share data)



Three Months Ended June 30,


Six Months Ended June 30,


2022


2021


2022


2021

REVENUES

$           13,598


$           12,802


$           26,798


$           25,324









COSTS AND EXPENSES:








Operating costs and expenses (exclusive of items shown separately below)

8,193


7,882


16,327


15,593

Depreciation and amortization

2,240


2,354


4,534


4,795

Other operating (income) expenses, net

(62)


(9)


(61)


293


10,371


10,227


20,800


20,681

  Income from operations

3,227


2,575


5,998


4,643









OTHER INCOME (EXPENSES):








Interest expense, net

(1,109)


(1,004)


(2,169)


(1,987)

Other income (expense), net

79


(132)


102


(80)


(1,030)


(1,136)


(2,067)


(2,067)

Income before income taxes

2,197


1,439


3,931


2,576

Income tax expense

(489)


(281)


(834)


(497)

Consolidated net income

1,708


1,158


3,097


2,079

Less: Net income attributable to noncontrolling interests

(237)


(138)


(423)


(252)

Net income attributable to Charter shareholders

$             1,471


$             1,020


$             2,674


$             1,827









EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:








Basic

$               8.96


$               5.48


$             15.98


$               9.69

Diluted

$               8.80


$               5.29


$             15.66


$               9.37

Weighted average common shares outstanding, basic

164,049,619


185,916,505


167,350,535


188,645,356

Weighted average common shares outstanding, diluted

167,090,925


199,077,390


170,741,462


202,458,265

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions) 



June 30,


December 31,


2022


2021

ASSETS

(unaudited)



CURRENT ASSETS:




Cash and cash equivalents

$                    483


$                    601

Accounts receivable, net

2,779


2,579

Prepaid expenses and other current assets

476


386

Total current assets

3,738


3,566





INVESTMENT IN CABLE PROPERTIES:




Property, plant and equipment, net

34,472


34,310

Customer relationships, net

3,373


4,060

Franchises

67,354


67,346

Goodwill

29,563


29,562

Total investment in cable properties, net

134,762


135,278





OTHER NONCURRENT ASSETS

4,758


3,647





Total assets

$              143,258


$              142,491





LIABILITIES AND SHAREHOLDERS' EQUITY




CURRENT LIABILITIES:




Accounts payable and accrued liabilities

$                 9,862


$                 9,461

Current portion of long-term debt

1,533


2,997

Total current liabilities

11,395


12,458





LONG-TERM DEBT

94,468


88,564

DEFERRED INCOME TAXES

19,123


19,096

OTHER LONG-TERM LIABILITIES

4,759


4,217





SHAREHOLDERS' EQUITY:




Controlling interest

9,879


14,050

Noncontrolling interests

3,634


4,106

Total shareholders' equity

13,513


18,156





Total liabilities and shareholders' equity

$              143,258


$              142,491

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions) 



Three Months Ended June 30,


Six Months Ended June 30,


2022


2021


2022


2021

CASH FLOWS FROM OPERATING ACTIVITIES:








Consolidated net income

$             1,708


$             1,158


$             3,097


$             2,079

Adjustments to reconcile consolidated net income to net cash flows from operating activities:








  Depreciation and amortization

2,240


2,354


4,534


4,795

  Stock compensation expense

104


100


251


234

  Noncash interest income, net

(4)


(8)


(7)


(15)

  Deferred income taxes

77


215


115


371

  Other, net

(132)


129


(153)


124

Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:








  Accounts receivable

(249)


(188)


(200)


(44)

  Prepaid expenses and other assets

52


69


(133)


(113)

  Accounts payable, accrued liabilities and other

(62)


170


(123)


319

Net cash flows from operating activities

3,734


3,999


7,381


7,750









CASH FLOWS FROM INVESTING ACTIVITIES:








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)

Other, net

(220)


(85)


(160)


(145)

Net cash flows from investing activities

(2,295)


(2,016)


(4,082)


(3,972)









CASH FLOWS FROM FINANCING ACTIVITIES:








Borrowings of long-term debt

9,918


5,669


16,631


10,958

Repayments of long-term debt

(8,993)


(2,595)


(11,947)


(5,759)

Payments for debt issuance costs

(20)


(36)


(57)


(58)

Purchase of treasury stock

(3,687)


(3,516)


(7,020)


(7,168)

Proceeds from exercise of stock options

4


17


5


26

Purchase of noncontrolling interest

(578)


(583)


(994)


(1,090)

Distributions to noncontrolling interest

(5)


(32)


(7)


(71)

Other, net

(26)


32


(28)


94

Net cash flows from financing activities

(3,387)


(1,044)


(3,417)


(3,068)









NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(1,948)


939


(118)


710

CASH AND CASH EQUIVALENTS, beginning of period

2,431


772


601


1,001

CASH AND CASH EQUIVALENTS, end of period

$                483


$             1,711


$                483


$             1,711









CASH PAID FOR INTEREST

$             1,168


$                979


$             2,150


$             1,996

CASH PAID FOR TAXES

$                441


$                  49


$                470


$                  69

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 

UNAUDITED SUMMARY OF OPERATING STATISTICS

(in thousands, except per customer and penetration data)




Approximate as of



June 30, 2022 (a)


March 31, 2022 (a)


December 31, 2021 (a)


June 30, 2021 (a)

Footprint (b)









Estimated Passings


55,008


54,739


54,521


54,000










Customer Relationships (c)









Residential


29,942


30,035


29,926


29,660

SMB


2,182


2,163


2,143


2,104

  Total Customer Relationships


32,124


32,198


32,069


31,764










Residential


(93)


109


103


299

SMB


19


20


17


33

  Total Customer Relationships Quarterly Net Additions


(74)


129


120


332










Total Customer Relationship Penetration of Estimated Passings (d)


58.4 %


58.8 %


58.8 %


58.8 %










Monthly Residential Revenue per Residential Customer (e)


$      116.00


$      113.28


$        114.14


$      112.85

Monthly SMB Revenue per SMB Customer (f)


$      165.66


$      163.96


$        164.59


$      166.28










Residential Customer Relationships Penetration









Single Play Penetration (g)


47.8 %


47.2 %


46.7 %


45.7 %

Double Play Penetration (g)


33.1 %


33.0 %


33.0 %


32.7 %

Triple Play Penetration (g)


19.1 %


19.8 %


20.4 %


21.6 %










% Residential Non-Video Customer Relationships


50.4 %


49.7 %


49.2 %


48.0 %










Internet









Residential


28,259


28,301


28,137


27,722

SMB


1,994


1,973


1,952


1,912

  Total Internet Customers


30,253


30,274


30,089


29,634










Residential


(42)


164


172


365

SMB


21


21


18


35

  Total Internet Quarterly Net Additions


(21)


185


190


400










Video









Residential


14,853


15,093


15,216


15,420

SMB


642


628


617


592

  Total Video Customers


15,495


15,721


15,833


16,012










Residential


(240)


(123)


(71)


(63)

SMB


14


11


13


13

  Total Video Quarterly Net Additions


(226)


(112)


(58)


(50)










Voice









Residential


8,200


8,465


8,621


9,014

SMB


1,287


1,288


1,282


1,259

  Total Voice Customers


9,487


9,753


9,903


10,273










Residential


(265)


(156)


(163)


(99)

SMB


(1)


6


9


21

  Total Voice Quarterly Net Additions


(266)


(150)


(154)


(78)










Mobile Lines (h)









Residential


4,134


3,805


3,448


2,855

SMB


147


132


116


85

  Total Mobile Lines


4,281


3,937


3,564


2,940










Residential


329


357


363


250

SMB


15


16


17


15

  Total Mobile Lines Quarterly Net Additions


344


373


380


265










Enterprise (i)









Enterprise Primary Service Units ("PSUs")


277


274


272


265

Enterprise Quarterly Net Additions


3


2


3


4



(a)

We calculate the aging of customer accounts based on the monthly billing cycle for each account.  On that basis, at June 30, 2022, March 31, 2022, December 31, 2021 and June 30, 2021, customers included approximately 154,500, 132,500, 128,300 and 162,700 customers, respectively, whose accounts were over 60 days past due, approximately 45,800, 29,000, 26,800 and 23,200 customers, respectively, whose accounts were over 90 days past due and approximately 97,200, 74,500, 43,200 and 30,400 customers, respectively, whose accounts were over 120 days past due.  Bad debt expense associated with these past due accounts has been reflected in our consolidated statements of operations.  The increase in past due accounts is predominately due to pre-existing and incremental unsubsidized amounts of customers' bills for those customers participating in government assistance programs.  These customers are downgraded to a fully subsidized Internet only service.  Included in the June 30, 2021 aging statistics are approximately 73,500 residential customers that would have been disconnected under our normal collection policies, but were not due to certain state mandates in place.  



(b)

Passings represent our estimate of the number of units, such as single family homes, apartment and condominium units and SMB and enterprise sites passed by our cable distribution network in the areas where we offer the service indicated.  These estimates are based upon the information available at this time and are updated for all periods presented when new information becomes available.



(c)

Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video and voice services, without regard to which service(s) such customers receive.  Customers who reside in residential multiple dwelling units ("MDUs") and that are billed under bulk contracts are counted based on the number of billed units within each bulk MDU.  Total customer relationships exclude enterprise and mobile-only customer relationships.



(d)

Penetration represents residential and SMB customers as a percentage of estimated passings.  Penetration excludes mobile-only customers.



(e)

Monthly residential revenue per residential customer is calculated as total residential quarterly revenue divided by three divided by average residential customer relationships during the respective quarter and excludes mobile revenue and customers.



(f)

Monthly SMB revenue per SMB customer is calculated as total SMB quarterly revenue divided by three divided by average SMB customer relationships during the respective quarter and excludes mobile revenue and customers.



(g)

Single play, double play and triple play penetration represents the number of residential single play, double play and triple play cable customers, respectively, as a percentage of residential customer relationships, excluding mobile.



(h)

Mobile lines include phones and tablets which require one of our standard rate plans (e.g., "Unlimited" or "By the Gig").  Mobile lines exclude wearables and other devices that do not require standard phone rate plans.



(i)

Enterprise PSUs represents the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

 UNAUDITED CAPITAL EXPENDITURES

(dollars in millions) 



Three Months Ended June 30,


Six Months Ended June 30,


2022


2021


2022


2021

Customer premise equipment (a)

$                560


$                494


$              1,029


$                 983

Scalable infrastructure (b)

389


437


760


848

Line extensions (c)

694


400


1,236


799

Upgrade/rebuild (d)

181


161


327


306

Support capital (e)

369


389


698


766

   Total capital expenditures

$             2,193


$             1,881


$              4,050


$              3,702









Capital expenditures included in total related to:








Commercial services

$                376


$                397


$                 741


$                 730

Mobile

$                  95


$                124


$                 169


$                 236

Rural construction initiative (f)

$                357


$                  —


$                 589


$                   —



(a)

Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units, including customer installation costs and customer premise equipment (e.g., digital receivers and cable modems).

(b)

Scalable infrastructure includes costs, not related to customer premise equipment, to secure growth of new customers and revenue generating units, or provide service enhancements (e.g., headend equipment).

(c)

Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(d)

Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.

(e)

Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

(f)

The rural construction initiative subcategory includes expenditures associated with our Rural Construction Initiative (for which separate reporting was initiated in 2022), excluding customer premise equipment and installation.

 

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SOURCE Charter Communications, Inc.