Charter Communications, Inc. today reported financial and operating results for the three and six months ended June 30, 2024.
- Second quarter total residential and small and medium business (“SMB”) Internet customers decreased by 149,000. As of June 30, 2024, Charter served a total of 30.4 million residential and SMB Internet customers.
- Second quarter total residential and SMB mobile lines increased by 557,000. As of June 30, 2024, Charter served a total of 8.8 million mobile lines.
- As of June 30, 2024, Charter had a total of 31.8 million residential and SMB customer relationships, excluding mobile-only relationships.
- Second quarter revenue of $13.7 billion grew by 0.2% year-over-year, driven by residential mobile service revenue growth of 36.9% and residential Internet revenue growth of 1.3%.
- Net income attributable to Charter shareholders totaled $1.2 billion in the second quarter.
- Second quarter Adjusted EBITDA1 of $5.7 billion grew by 2.6% year-over-year.
- Second quarter capital expenditures totaled $2.9 billion and included $1.1 billion of line extensions.
- Second quarter net cash flows from operating activities totaled $3.9 billion, compared to $3.3 billion in the prior year.
- Second quarter free cash flow1 of $1.3 billion increased from $668 million in the prior year, primarily due to higher Adjusted EBITDA, a more favorable change in working capital and lower cash taxes due to timing.
- During the second quarter, Charter purchased 1.5 million shares of Charter Class A common stock and Charter Communications Holdings, LLC (“Charter Holdings”) common units for $404 million.
“We are executing well on several transformational initiatives, growing EBITDA through efficiencies, and improving our service and sales capabilities,” said Chris Winfrey, President and CEO of Charter. “We remain fully focused on driving customer growth, with a unique, high quality product set that continues to evolve, creating long term value for shareholders.”
|
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, 2024 (c) |
June 30, 2023 (c) |
Y/Y Change |
||||
|
Footprint |
||||||
|
Estimated Passings (d) |
57,774 |
56,209 |
2.8 % |
|||
|
Customer Relationships (e) |
||||||
|
Residential |
29,615 |
30,009 |
(1.3) % |
|||
|
SMB |
2,222 |
2,219 |
0.2 % |
|||
|
Total Customer Relationships |
31,837 |
32,228 |
(1.2) % |
|||
|
Residential |
(182) |
13 |
(195) |
|||
|
SMB |
3 |
4 |
(1) |
|||
|
Total Customer Relationships Quarterly Net Additions |
(179) |
17 |
(196) |
|||
|
Total Customer Relationship Penetration of Estimated Passings (f) |
55.1 % |
57.3 % |
(2.2) ppts |
|||
|
Monthly Residential Revenue per Residential Customer (g) |
$ 120.77 |
$ 120.25 |
0.4 % |
|||
|
Monthly SMB Revenue per SMB Customer (h) |
$ 165.28 |
$ 164.56 |
0.4 % |
|||
|
Residential Customer Relationships Penetration |
||||||
|
One Product Penetration (i) |
47.7 % |
46.0 % |
1.7 ppts |
|||
|
Two Product Penetration (i) |
33.2 % |
33.0 % |
0.2 ppts |
|||
|
Three or More Product Penetration (i) |
19.2 % |
20.9 % |
(1.7) ppts |
|||
|
% Residential Non-Video Customer Relationships |
57.1 % |
53.1 % |
4.0 ppts |
|||
|
Internet |
||||||
|
Residential |
28,318 |
28,549 |
(0.8) % |
|||
|
SMB |
2,049 |
2,037 |
0.6 % |
|||
|
Total Internet Customers |
30,367 |
30,586 |
(0.7) % |
|||
|
Residential |
(154) |
70 |
(224) |
|||
|
SMB |
5 |
7 |
(2) |
|||
|
Total Internet Quarterly Net Additions |
(149) |
77 |
(226) |
|||
|
Video |
||||||
|
Residential |
12,718 |
14,071 |
(9.6) % |
|||
|
SMB |
591 |
635 |
(6.9) % |
|||
|
Total Video Customers |
13,309 |
14,706 |
(9.5) % |
|||
|
Residential |
(393) |
(189) |
(204) |
|||
|
SMB |
(15) |
(11) |
(4) |
|||
|
Total Video Quarterly Net Additions |
(408) |
(200) |
(208) |
|||
|
Voice |
||||||
|
Residential |
6,170 |
7,248 |
(14.9) % |
|||
|
SMB |
1,276 |
1,294 |
(1.4) % |
|||
|
Total Voice Customers |
7,446 |
8,542 |
(12.8) % |
|||
|
Residential |
(268) |
(225) |
(43) |
|||
|
SMB |
(12) |
4 |
(16) |
|||
|
Total Voice Quarterly Net Additions |
(280) |
(221) |
(59) |
|||
|
Mobile Lines (j) |
||||||
|
Residential |
8,531 |
6,410 |
33.1 % |
|||
|
SMB |
278 |
216 |
28.7 % |
|||
|
Total Mobile Lines |
8,809 |
6,626 |
32.9 % |
|||
|
Residential |
539 |
628 |
(89) |
|||
|
SMB |
18 |
20 |
(2) |
|||
|
Total Mobile Lines Quarterly Net Additions |
557 |
648 |
(91) |
|||
|
Enterprise (k) |
||||||
|
Enterprise Primary Service Units (“PSUs”) |
312 |
294 |
6.1 % |
|||
|
Enterprise Quarterly Net Additions |
4 |
6 |
(2) |
|||
|
In thousands, except per customer and penetration data. See footnotes to unaudited summary of operating statistics on page 7 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, 2024, Charter had 29.6 million residential customer relationships, excluding mobile-only relationships.
Second quarter residential Internet customers decreased by 154,000, largely driven by the end of the FCC’s Affordable Connectivity Program (“ACP”) subsidies in the second quarter, compared to an increase of 70,000 during the second quarter of 2023. Spectrum Internet® delivers the fastest Internet speeds1 in the nation. Charter is evolving its connectivity network at a lower cost than its competitors to offer symmetrical and multi-gigabit Internet speeds across its entire footprint. Charter’s Advanced WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of connected devices with enhanced security and privacy is available to all Spectrum Internet customers.
Residential video customers decreased by 393,000 in the second quarter of 2024, compared to a decline of 189,000 in the second quarter of 2023. As of June 30, 2024, Charter had 12.7 million residential video customers.
During the second quarter of 2024, residential wireline voice customers declined by 268,000, compared to a decline of 225,000 in the second quarter of 2023. As of June 30, 2024, Charter had 6.2 million residential wireline voice customers.
During the second quarter of 2024, Charter added 539,000 residential mobile lines, compared to growth of 628,000 during the second quarter of 2023. Spectrum MobileTM is available to all new and existing Spectrum Internet customers and offers the fastest overall speeds,2 with plans that include 5G access, do not require contracts and include taxes and fees in the price. Spectrum Mobile is central to Charter’s converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing.
In April, Charter launched Anytime Upgrade, which is now included in the Spectrum Mobile Unlimited Plus data plan at no extra cost, and allows new and existing customers to upgrade their phones whenever they want, as many times as they want, eliminating the traditional wait times and condition requirements associated with phone upgrades. In May, Charter launched a phone balance buyout program, making it easier for customers to switch and save money. When a customer switches to Spectrum Mobile from another provider and purchases at least three lines with at least one ported line, Charter will pay off their existing phone balance on ported lines up to $2,500 while also enabling potential savings of hundreds of dollars annually on their mobile bills.
Second quarter 2024 monthly residential revenue per residential customer totaled $120.77, and increased by 0.4% compared to the prior year period, given promotional rate step-ups, rate adjustments and the growth of Spectrum Mobile, partly offset by a lower mix of video customer relationships, a higher mix of lower priced video packages within Charter’s video customer base and retention offers extended to customers that previously received an ACP subsidy.
SMB customer relationships increased by 3,000 in the second quarter of 2024, while second quarter 2023 SMB customer relationships grew by 4,000. Enterprise PSUs grew by 4,000 in the second quarter of 2024 versus 6,000 added in the second quarter of 2023.
Charter continues to work with federal, state and local governments to bring Spectrum Internet to unserved and underserved communities. During the second quarter of 2024, Charter activated 89,000 subsidized rural passings. Within Charter’s subsidized rural footprint, total residential and SMB customer relationships increased by 36,000 in the second quarter of 2024.
|
1. |
Based on Broadband Download Speed nationally in Opensignal USA: Fixed Broadband Experience Report – National View, May 2024. Based on Opensignal independent analysis of mean download speed. © 2024 Opensignal Limited. |
|
2. |
Based on Charter’s analysis of Ookla® Speedtest Intelligence® data for overall mobile WiFi and Cellular performance for 1Q24 in Charter’s footprint. |
|
Second Quarter Financial Results (in millions) |
|||||
|
Three Months Ended June 30, |
|||||
|
2024 |
2023 |
% Change |
|||
|
Revenues: |
|||||
|
Internet |
$ 5,806 |
$ 5,733 |
1.3 % |
||
|
Video |
3,867 |
4,188 |
(7.7) % |
||
|
Voice |
350 |
365 |
(4.2) % |
||
|
Mobile service |
737 |
539 |
36.9 % |
||
|
Residential revenue |
10,760 |
10,825 |
(0.6) % |
||
|
Small and medium business |
1,101 |
1,094 |
0.6 % |
||
|
Enterprise |
721 |
690 |
4.5 % |
||
|
Commercial revenue |
1,822 |
1,784 |
2.1 % |
||
|
Advertising sales |
397 |
384 |
3.3 % |
||
|
Other |
706 |
666 |
6.0 % |
||
|
Total Revenues |
$ 13,685 |
$ 13,659 |
0.2 % |
||
|
Net income attributable to Charter shareholders |
$ 1,231 |
$ 1,223 |
0.5 % |
||
|
Net income attributable to Charter shareholders margin |
9.0 % |
9.0 % |
|||
|
Adjusted EBITDA1 |
$ 5,665 |
$ 5,522 |
2.6 % |
||
|
Adjusted EBITDA margin |
41.4 % |
40.4 % |
|||
|
Capital Expenditures |
$ 2,853 |
$ 2,834 |
0.7 % |
||
|
Net cash flows from operating activities |
$ 3,853 |
$ 3,311 |
16.4 % |
||
|
Free cash flow1 |
$ 1,296 |
$ 668 |
94.0 % |
||
|
All percentages are calculated using whole numbers. Minor differences may exist due to rounding. |
|
|
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. |
Revenues
Second quarter revenue increased by 0.2% year-over-year to $13.7 billion, driven by growth in residential mobile service, residential Internet, enterprise and other revenues, partly offset by lower residential video revenue.
Residential revenue totaled $10.8 billion in the second quarter, a decrease of 0.6% year-over-year.
Internet revenue grew by 1.3% year-over-year to $5.8 billion, driven by promotional rate step-ups and rate adjustments, partly offset by lower bundled revenue allocation and retention offers extended to customers that previously received an ACP subsidy.
Video revenue totaled $3.9 billion in the second quarter, a decrease of 7.7% compared to the prior year period, driven by a decline in video customers during the last year and a higher mix of lower priced video packages within Charter’s video customer base, partly offset by promotional rate step-ups and video rate adjustments that pass through programmer rate increases.
Voice revenue decreased by 4.2% year-over-year to $350 million, driven by a decline in wireline voice customers over the last twelve months, partly offset by voice rate adjustments.
Second quarter mobile service revenue totaled $737 million, an increase of 36.9% year-over-year, driven by mobile line growth and higher bundled revenue allocation.
Commercial revenue increased by 2.1% year-over-year to $1.8 billion, driven by enterprise and SMB revenue growth of 4.5% and 0.6% year-over-year, respectively. The year-over-year increase in second quarter 2024 SMB revenue was driven by higher monthly SMB revenue per SMB customer, primarily due to rate adjustments, and customer relationship growth. Enterprise revenue excluding wholesale increased by 5.9% year-over-year, mostly reflecting PSU growth.
Second quarter advertising sales revenue of $397 million increased by 3.3% compared to the year-ago quarter, primarily driven by higher political revenue. Excluding political revenue in both periods, advertising sales revenue decreased by 2.2% year-over-year due to a more challenged advertising market, partly offset by higher advanced advertising revenue.
Other revenue totaled $706 million in the second quarter, an increase of 6.0% compared to the second quarter of 2023, primarily driven by higher mobile device sales.
Operating Costs and Expenses
Second quarter programming costs decreased by $268 million, or 9.8% as compared to the second quarter of 2023, reflecting fewer video customers and a higher mix of lower cost packages within Charter’s video customer base, partly offset by contractual programming rate increases and renewals.
Other costs of revenue increased by $171 million, or 12.6% year-over-year, primarily driven by higher mobile service direct costs and mobile device sales.
Costs to service customers decreased by $88 million, or 4.2% year-over-year, primarily due to lower labor costs and lower bad debt expense.
Sales and marketing expenses increased by $17 million, or 1.9% year-over-year, primarily due to higher marketing costs.
Other expenses increased by $51 million, or 4.7% as compared to the second quarter of 2023, mostly driven by an insurance expense benefit in the year-ago quarter.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $1.2 billion in the second quarter of 2024, compared to $1.2 billion in the second quarter of 2023, with higher Adjusted EBITDA mostly offset by higher other operating expense primarily due to restructuring and severance costs and net amounts of litigation settlements.
Net income per basic common share attributable to Charter shareholders totaled $8.58 in the second quarter of 2024 compared to $8.15 during the same period last year. The increase was primarily the result of the factors described above in addition to a 4.5% decrease in basic weighted average common shares outstanding versus the prior year period.
Adjusted EBITDA
Second quarter Adjusted EBITDA of $5.7 billion grew by 2.6% year-over-year, reflecting growth in revenue of 0.2% and a decrease in operating expenses of 1.4%.
Capital Expenditures
Capital expenditures totaled $2.9 billion in the second quarter of 2024, an increase of $19 million compared to the second quarter of 2023. Line extensions capital expenditures totaled $1.1 billion in the second quarter of 2024, driven by Charter’s subsidized rural construction initiative and continued network expansion across residential and commercial greenfield and market fill-in opportunities. Second quarter capital expenditures excluding line extensions totaled $1.7 billion, a decrease of $18 million compared to the second quarter of 2023.
Charter now expects full year 2024 capital expenditures to total approximately $12.0 billion, a decrease from Charter’s previously expected range of between $12.2 billion and $12.4 billion. The decrease reflects lower Internet and video customer net additions, including the impact of the end of the ACP, which drives lower CPE and capitalized installation costs. Charter continues to expect line extensions capital expenditures of approximately $4.5 billion and network evolution spend of approximately $1.6 billion, compared to $4.0 billion and $0.9 billion, respectively, in 2023. The actual amount of capital expenditures in 2024 will depend on a number of factors including, but not limited to, the pace of Charter’s network evolution and expansion initiatives, supply chain timing and growth rates in Charter’s residential and commercial businesses.
Cash Flow and Free Cash Flow
During the second quarter of 2024, net cash flows from operating activities totaled $3.9 billion, compared to $3.3 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, lower cash taxes due to timing and a more favorable change in working capital.
Free cash flow in the second quarter of 2024 totaled $1.3 billion, an increase of $628 million compared to the second quarter of 2023. The year-over-year increase in free cash flow was primarily driven by an increase in net cash flows from operating activities and a more favorable change in accrued expenses related to capital expenditures.
Liquidity & Financing
As of June 30, 2024, total principal amount of debt was $96.5 billion and Charter’s credit facilities provided approximately $4.1 billion of additional liquidity in excess of Charter’s $602 million cash position.
In May 2024, Charter Communications Operating, LLC (“Charter Operating”) and Charter Communications Operating Capital Corp. jointly issued $1.5 billion of 6.100% senior secured notes due June 2029 at a price of 99.944% of the aggregate principal amount and $1.5 billion of 6.550% senior secured notes due June 2034 at a price of 99.755% of the aggregate principal amount. The net proceeds were used to fund a concurrent tender offer to repurchase $2.7 billion in aggregate principal amount of Charter Operating’s 4.908% senior secured notes due July 2025, to prepay Charter Operating’s outstanding Term B-1 Loan and to pay related fees and expenses.
In June 2024, a bankruptcy remote special purpose vehicle and consolidated subsidiary of the Company, CCO EIP Financing, LLC, (the “SPV Borrower”) entered into a senior secured revolving credit facility to finance the purchase of equipment installment plan receivables (“EIP Receivables”) with a number of financial institutions (the “EIP Financing Facility”). Borrowings under the EIP Financing Facility are secured by the EIP Receivables transferred to the SPV Borrower, future collections on such EIP Receivables, and related assets consisting primarily of restricted cash.
The revolving credit facility under the EIP Financing Facility bears interest on the outstanding borrowings based on lenders’ cost of funds plus an applicable margin and was 6.46% as of June 30, 2024. The EIP Financing Facility has a final maturity date of June 20, 2028, comprised of a one-year revolving loan period, subject to annual renewal, and if not renewed, cash flows on EIP Receivables are applied to amortize the loan which may occur over a period of up to three years. SPV Borrower may borrow up to $1.25 billion under the EIP Financing Facility. As of June 30, 2024, the carrying value of the EIP Financing Facility was $873 million and is included in the Company’s consolidated balance sheets.
Share Repurchases
During the three months ended June 30, 2024, Charter purchased 1.5 million shares of Charter Class A common stock and Charter Holdings common units for $404 million.
Webcast
Charter will host a webcast on Friday, July 26, 2024 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, 2024, 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.
About Charter
Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband connectivity company and cable operator with services available to more than 57 million homes and businesses 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 and sports programming to its customers through Spectrum Networks. More information about Charter can be found at corporate.charter.com.
