Charter Announces Second Quarter 2019 Results
STAMFORD, Conn., July 26, 2019 /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, 2019.
Key highlights:
-- Second quarter total residential and SMB customer relationships
increased 203,000, compared to 196,000 during the second quarter of
2018. As of June 30, 2019, Charter had 28.7 million total customer
relationships, with growth of over 1.0 million year-over-year.
-- During the second quarter, Charter generated residential and SMB
Internet net additions of 258,000, video net losses of 141,000 and
wireline voice net losses of 182,000.
-- Charter added 208,000 mobile lines in the second quarter, compared to
176,000 mobile line net additions in the first quarter of 2019. Late in
the second quarter, our Bring Your Own Device (BYOD) program was
expanded to all sales channels. As of June 30, 2019, Charter served a
total of 518,000 mobile lines.
-- Second quarter revenues of $11.3 billion grew 4.5%, as compared to the
prior year period, driven by residential revenue growth of 3.7%,
commercial revenue growth of 4.7% and mobile revenue of $158 million.
-- Second quarter Adjusted EBITDA(1) of $4.2 billion grew 3.3%
year-over-year, while second quarter cable Adjusted EBITDA(1) of $4.3
billion grew 5.4% year-over-year.
-- Net income attributable to Charter shareholders totaled $314 million in
the second quarter, compared to $273 million during the same period last
year. The year-over-year increase in net income attributable to Charter
shareholders in the second quarter was primarily driven by higher
Adjusted EBITDA.
-- Second quarter capital expenditures totaled $1.6 billion compared to
$2.4 billion during the second quarter of 2018. Second quarter capital
expenditures included $93 million of mobile-related capital
expenditures.
-- Consolidated free cash flow(1) for the second quarter of 2019 totaled
$1.1 billion, compared to $804 million during the same period last year.
Cable free cash flow(1) for the second quarter totaled $1.4 billion,
compared to $920 million during the same period last year.
-- During the second quarter, Charter purchased approximately 2.7 million
shares of Charter Class A common stock and Charter Communications
Holdings, LLC ("Charter Holdings") common units for approximately $998
million.
"We are realizing the benefits of consolidating three large cable operators under one centralized operating strategy, with lower customer churn, fewer service transactions per customer and improving customer satisfaction resulting in growth of over 1 million customer relationships year-over-year," said Tom Rutledge, Chairman and CEO of Charter Communications. "In the second quarter, free cash flow grew nearly 40% year-over-year. Our core business is strong and we are positioned to be the network of choice today and in the future."
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
Approximate as of
June 30, 2019 (a) June 30, 2018 (a) Y/Y Change
Footprint (b)
---
Estimated Video Passings 51,258 50,364 1.8
%
Estimated Internet 51,093 50,149 1.9
Passings %
Estimated Voice Passings 50,538 49,532 2.0
%
Penetration Statistics
(c)
---
Video Penetration of 31.8 33.1
Estimated Video Passings % % (1.3)
ppts
Internet Penetration of
Estimated Internet % %
Passings 50.8 49.1 1.7
ppts
Voice Penetration of 21.6 22.9
Estimated Voice Passings % % (1.3)
ppts
Customer Relationships
(d)
---
Residential 26,755 25,871 3.4
%
Small and Medium Business 1,902 1,750 8.7
%
Total Customer 28,657 27,621 3.8
Relationships %
Quarterly Net Additions/
(Losses)
---
Residential 164 141 16.1
%
Small and Medium Business 39 55 (29.1)
%
Total Customer 203 196 3.4
Relationships %
Residential
---
Primary Service Units
("PSUs")
---
Video 15,802 16,206 (2.5)
%
Internet 24,244 23,070 5.1
%
Voice 9,808 10,325 (5.0)
%
Quarterly Net Additions/
(Losses)
---
Video (150) (73) (106.0)
%
Internet 221 218 1.8
%
Voice (207) (45) (360.2)
%
Single Play (e) 11,354 10,694 6.2
%
Double Play (e) 7,709 6,633 16.2
%
Triple Play (e) 7,692 8,544 (10.0)
%
Single Play Penetration 42.4 41.3
(f) % % 1.1
ppts
Double Play Penetration 28.8 25.6
(f) % % 3.2
ppts
Triple Play Penetration 28.8 33.0
(f) % % (4.2)
ppts
% Residential Non-Video 40.9 37.4
Customer Relationships % % 3.5
ppts
Monthly Residential
Revenue per Residential %
Customer (g) $112.20 $111.88 0.3
Small and Medium Business
---
PSUs
---
Video 518 476 8.8
%
Internet 1,701 1,552 9.6
%
Voice 1,097 994 10.5
%
Quarterly Net Additions/
(Losses)
---
Video 9 16 (48.6)
%
Internet 37 49 (25.8)
%
Voice 25 37 (30.7)
%
Monthly Small and Medium
Business Revenue per %
Customer (h) $170.42 $176.96 (3.7)
Enterprise PSUs (i)
---
Enterprise PSUs 258 235 9.5
%
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.
During the second quarter of 2019, Charter's residential customer relationships grew by 164,000, while second quarter 2018 residential customer relationships grew by 141,000. As of June 30, 2019, Charter had 26.8 million residential customer relationships, with year-over-year growth of 3.4%.
Charter added 221,000 residential Internet customers in the second quarter of 2019, versus second quarter 2018 residential Internet customer net additions of 218,000. As of June 30, 2019, Charter had 24.2 million residential Internet customers, with nearly 85% subscribing to tiers that provided 100 Mbps or more of speed. Currently, 100 Mbps is the slowest speed offered to new Internet customers in 99% of Charter's footprint. Additionally, Charter has doubled minimum Internet speeds to 200 Mbps in a number of markets at no additional cost to new and existing Spectrum Internet customers.
Residential video customers decreased by 150,000 in the second quarter of 2019, while second quarter 2018 video customers decreased by 73,000. As of June 30, 2019, Charter had 15.8 million residential video customers.
During the second quarter of 2019, residential wireline voice customers declined by 207,000, while second quarter 2018 voice customers declined by 45,000. As of June 30, 2019, Charter had 9.8 million residential wireline voice customers.
Second quarter 2019 residential revenue per residential customer (excluding mobile) totaled $112.20, and grew by 0.3% compared to the prior year period, as promotional rate step-ups and rate adjustments were partly offset by a higher percentage of non-video customers, a higher mix of Choice and Stream customers within our video base and lower pay-per-view and video on demand revenues.
In September of 2018, Charter completed the full market launch of its Spectrum Mobile(TM)( )service to new and existing Spectrum Internet customers across its footprint. Spectrum Mobile runs on America's most awarded LTE network and is combined with Spectrum WiFi. Spectrum Mobile customers can choose one of two simple ways to pay for data, "Unlimited" for $45 a month (per line), or "By the Gig" at $14/GB, in both cases including applicable fees and taxes. Late in the second quarter, BYOD was expanded to all sales channels. Previously, our BYOD program was only available by visiting select Spectrum Mobile stores. During the second quarter of 2019, Charter added 208,000 mobile lines, and as of June 30, 2019, Charter served a total of 518,000 mobile lines.
SMB customer relationships grew by 39,000 during the second quarter of 2019, compared to growth of 55,000 during the second quarter of 2018. As of June 30, 2019, Charter had 1.9 million SMB customer relationships, with year-over-year growth of 8.7%. Enterprise PSUs grew by 5,000 during the second quarter of 2019 compared to growth of 7,000 during the second quarter of 2018. As of June 30, 2019, Charter had 258,000 enterprise PSUs, with growth of 9.5% year-over-year.
Second Quarter Financial Results
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
(dollars in millions, except per share data)
Three Months Ended June 30,
2019 2018 % Change
---
REVENUES:
Video $
4,391 $
4,363 0.6
%
Internet 4,103 3,770 8.8
%
Voice 489 531 (7.8)
%
Residential revenue 8,983 8,664 3.7
%
Small and medium business 963 915 5.3
%
Enterprise 652 627 4.0
%
Commercial revenue 1,615 1,542 4.7
%
Advertising sales 395 427 (7.5)
%
Mobile 158
NM
Other 196 221 (11.3)
%
Total Revenue 11,347 10,854 4.5
%
COSTS AND EXPENSES:
Cable operating costs and expenses 6,885 6,770 1.7
%
Mobile operating costs and expenses 277 33
NM
Total operating costs and expenses 7,162 6,803 5.3
%
Adjusted EBITDA $
4,185 $
4,051 3.3
%
Adjusted EBITDA margin 36.9 37.3
% %
Cable Adjusted EBITDA $
4,304 $
4,084 5.4
%
Cable Adjusted EBITDA margin 38.5 37.6
% %
Capital Expenditures $
1,597 $
2,391
% Total Revenues 14.1 22.0
% %
Net income attributable to Charter shareholders $
314 $
273
Earnings per common share attributable to Charter shareholders:
Basic $
1.41 $
1.17
Diluted $
1.39 $
1.15
Net cash flows from operating activities $
2,761 $
3,096
Free cash flow $
1,112 $
804
Cable free cash flow $
1,409 $
920
Revenue
Second quarter revenues rose 4.5% year-over-year to $11.3 billion, driven by growth in Internet, mobile, commercial and video revenues. Excluding advertising revenue, which benefited from political spend in the second quarter of 2018, and mobile revenue, revenue grew 3.5% year-over-year.
Video revenues totaled $4.4 billion in the second quarter, an increase of 0.6% compared to the prior year period. Video revenue growth was driven by annual rate adjustments and promotional rolloff, partly offset by a decline in video customers during the last year, a higher mix of Choice and Stream customers within our video base and lower pay-per-view and video on demand revenues.
Internet revenues grew 8.8%, compared to the year-ago quarter, to $4.1 billion, driven by growth in Internet customers during the last year, promotional rolloff and rate adjustments.
Voice revenues totaled $489 million in the second quarter, a decrease of 7.8% compared to the second quarter of 2018, driven by value-based pricing and a decline in wireline voice customers over the last twelve months.
Commercial revenues rose to $1.6 billion, an increase of 4.7% over the prior year period, driven by SMB revenue growth of 5.3% and enterprise revenue growth of 4.0%. Second quarter 2019 commercial revenue growth was lower than second quarter 2019 commercial customer relationship growth, given the migration of Legacy TWC and Legacy Bright House commercial customers to more attractively priced Spectrum pricing and packaging for both SMB and enterprise services.
Second quarter advertising sales revenues of $395 million declined 7.5% compared to the year-ago quarter, driven by lower political revenue. Second quarter mobile revenue totaled $158 million.
Other revenues totaled $196 million in the second quarter, a decrease of 11.3% year-over-year, driven by lower processing fees and home shopping revenues, partly offset by video customer premise equipment ("CPE") sold to customers.
Operating Costs and Expenses
Second quarter total operating costs and expenses increased by $359 million, or 5.3% year-over-year, and 1.7% when excluding second quarter mobile costs.
Second quarter programming expense increased by $24 million, or 0.9% as compared to the second quarter of 2018, reflecting contractual programming increases and renewals, partly offset by lower video customers, a higher mix of Choice and Stream customers within our video base and lower pay-per-view expenses.
Regulatory, connectivity and produced content expenses increased by $37 million, or 6.7% year-over-year, primarily driven by costs of video CPE sold to customers, higher regulatory and franchise pass-through fees and original programming costs.
Costs to service customers decreased by $17 million, or 0.9% year-over-year, despite year-over-year residential and SMB customer growth of 3.8%. The year-over-year decrease in costs to service customers was primarily the result of a decline in bad debt. In addition, we have lowered our per relationship cost to service customers with lower service calls and truck rolls per customer and lower churn.
Marketing expenses decreased by $1 million, or 0.1% year-over-year.
Other expenses increased by $72 million, or 8.4% as compared to the second quarter of 2018 primarily driven by software costs, insurance costs, property taxes and enterprise costs.
In the second quarter of 2019, mobile costs totaled $277 million and were comprised of device costs, service and operating costs and launch costs.
Adjusted EBITDA
Second quarter Adjusted EBITDA of $4.2 billion grew by 3.3% year-over-year, reflecting revenue growth and operating expense growth of 4.5% and 5.3%, respectively. Second quarter cable Adjusted EBITDA grew by 5.4% year-over-year reflecting cable revenue growth and cable operating expense growth of 3.1% and 1.7%, respectively.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $314 million in the second quarter of 2019, compared to $273 million in the second quarter of 2018. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA and lower depreciation and amortization costs, partly offset by higher interest expense, a greater non-cash loss on financial instruments and higher income tax expense.
Net income per basic common share attributable to Charter shareholders totaled $1.41 in the second quarter of 2019 compared to $1.17 during the same period last year. The increase was primarily the result of the factors described above in addition to a 5.1% decrease in weighted average common shares outstanding versus the prior year period.
Capital Expenditures
Property, plant and equipment expenditures totaled $1.6 billion in the second quarter of 2019, compared to $2.4 billion during the second quarter of 2018, primarily driven by declines in scalable infrastructure, CPE and support spending. The decrease in scalable infrastructure spending was primarily driven by the completion of the rollout of DOCSIS 3.1 technology in 2018 and the associated bandwidth benefit in 2019. The year-over-year decrease in CPE spending was primarily driven by a decline in the pace of migration of Legacy TWC and Legacy Bright House customers to Spectrum pricing and packaging, the completion of Charter's all-digital initiative in 2018, increasing customer self-installations and a higher mix of boxless video outlets. The decrease in support capital was due to lower insourcing and integration-related spend, partly offset by higher mobile capital spending. Second quarter capital expenditures included $93 million of mobile costs, of which $71 million were included in support capital.
We currently expect capital expenditures, excluding capital expenditures related to mobile, to be approximately $7 billion in 2019, versus $8.9 billion in 2018.
Cash Flow and Free Cash Flow
During the second quarter of 2019, net cash flows from operating activities totaled $2.8 billion, compared to $3.1 billion in the prior year quarter. The year-over-year decline in net cash flows from operating activities was primarily due to a higher year-over-year negative cash contribution from working capital resulting from lower payables and a one-time impact from bill cycle standardization efforts as well as higher cash interest, partly offset by higher Adjusted EBITDA.
Consolidated free cash flow for the second quarter of 2019 totaled $1.1 billion, compared to $804 million during the same period last year. Cable free cash flow for the second quarter of 2019 totaled $1.4 billion, compared to $920 million during the same period last year. The year-over-year increases in consolidated free cash flow and cable free cash flow were driven by a decline in capital expenditures versus the prior year quarter, partly offset by a decline in net cash flows from operating activities and accrued capital expenditures.
Liquidity & Financing
As of June 30, 2019, total principal amount of debt was $72.6 billion. Charter's credit facilities provided approximately $4.1 billion of additional liquidity in excess of Charter's $696 million cash position.
In May 2019, CCO Holdings, LLC and CCO Holdings Capital Corp. issued $750 million of 5.375% senior unsecured notes due 2029 and in July 2019, an additional $750 million of the same series of notes were issued. Charter used the net proceeds for general corporate purposes, including funding buybacks of Charter Class A common stock and/or Charter Holdings common units and for repaying certain indebtedness.
In July 2019, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. issued $1.25 billion of 5.125% senior secured notes due 2049. The net proceeds will be used to repay certain indebtedness, which may include the 5.000% Senior Notes due 2020 issued by Time Warner Cable, LLC, with any remaining proceeds used for general corporate purposes, including to fund potential buybacks of Charter Class A common stock or Charter Holdings common units.
Share Repurchases
During the three months ended June 30, 2019, Charter purchased approximately 2.7 million shares of Charter Class A common stock and Charter Holdings common units for approximately $998 million.
Conference Call
Charter will host a conference call on Friday, July 26, 2019 at 8:30 a.m. Eastern Time (ET) related to the contents of this release.
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 9656479.
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 August 9, 2019. The conference ID code for the replay is 9656479.
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, 2019, which will be posted on the "Financial Information" section of our 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 "Financial Information" 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, consolidated net income 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, (gain) loss on financial instruments, other (income) expense, net and other operating (income) expenses, 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 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 $299 million and $599 million for the three and six months ended June 30, 2019, respectively, and $265 million and $538 million for the three and six months ended June 30, 2018, respectively.
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 provide the handset or tablet to customers pursuant to equipment installment plans.
About Charter
Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband communications company and the second largest cable operator in the United States. Charter provides a full range of advanced residential broadband services, including Spectrum TV(®) programming, Spectrum Internet(®), Spectrum Voice(®), and Spectrum Mobile(TM). Under the Spectrum Business(®) brand, Charter provides scalable, and cost-effective broadband communications solutions to small and medium-sized business organizations, including Internet access, business telephone, and TV services. Through the Spectrum Enterprise brand, Charter is a national provider of scalable, fiber-based technology solutions serving many of America's largest businesses and communications service providers. Charter's advertising sales and production services are sold under the Spectrum Reach(®) brand. Charter's news and sports networks are operated under the Spectrum Networks brand. More information about Charter can be found at newsroom.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" 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 video, Internet, 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, video
provided over the Internet by (i) market participants that have not
historically competed in the multichannel video business, (ii)
traditional multichannel video distributors, and (iii) content providers
that have historically licensed cable networks to multichannel video
distributors, and providers of advertising over the Internet;
-- our ability to efficiently and effectively integrate acquired
operations;
-- 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. and Bright House Networks,
LLC Transactions;
-- general business conditions, economic uncertainty or downturn,
unemployment levels and the level of activity in the housing sector;
-- 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 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.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
(dollars in millions, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2019 2018 % Change 2019 2018 % Change
---
REVENUES:
Video $
4,391 $
4,363 0.6 $
8,775 $
8,655 1.4
% %
Internet 4,103 3,770 8.8 8,127 7,477 8.7
% %
Voice 489 531 (7.8) 993 1,087 (8.6)
% %
Residential revenue 8,983 8,664 3.7 17,895 17,219 3.9
% %
Small and medium business 963 915 5.3 1,908 1,815 5.1
% %
Enterprise 652 627 4.0 1,295 1,249 3.7
% %
Commercial revenue 1,615 1,542 4.7 3,203 3,064 4.5
% %
Advertising sales 395 427 (7.5) 740 783 (5.5)
% %
Mobile 158
NM 298
NM
Other 196 221 (11.3) 417 445 (6.3)
%
%
Total Revenue 11,347 10,854 4.5 22,553 21,511 4.8
% %
COSTS AND EXPENSES:
Programming 2,827 2,803 0.9 5,692 5,555 2.5
% %
Regulatory, connectivity and produced content 597 560 6.7 1,158 1,093 5.9
% %
Costs to service customers 1,767 1,784 (0.9) 3,589 3,638 (1.3)
% %
Marketing 768 769 (0.1) 1,503 1,520 (1.1)
% %
Mobile 277 33
NM 537 41
NM
Other expense 926 854 8.4 1,834 1,720 6.6
% %
Total operating costs and expenses (exclusive of items 7,162 6,803 5.3 14,313 13,567 5.5
shown separately below) % %
Adjusted EBITDA 4,185 4,051 3.3 8,240 7,944 3.7
% %
Adjusted EBITDA margin 36.9 37.3 36.5 36.9
%
%
%
%
Depreciation and amortization 2,500 2,592 5,050 5,302
Stock compensation expense 82 70 167 142
Other operating expenses, net 62 29 57 98
Income from operations 1,541 1,360 2,966 2,402
OTHER INCOME (EXPENSES):
Interest expense, net (945) (878) (1,870) (1,729)
Loss on financial instruments, net (119) (75) (82) (12)
Other pension benefits, net 9 20 18 40
Other expense, net (16) (47) (126) (70)
(1,071) (980) (2,060) (1,771)
Income before income taxes 470 380 906 631
Income tax expense (84) (41) (203) (69)
Consolidated net income 386 339 703 562
Less: Net income attributable to noncontrolling
interests (72) (66) (136) (121)
Net income attributable to Charter shareholders $
314 $
273 $
567 $
441
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic $
1.41 $
1.17 $
2.54 $
1.87
Diluted $
1.39 $
1.15 $
2.50 $
1.84
Weighted average common shares outstanding, basic 222,392,274 234,241,769 223,505,016 235,992,306
Weighted average common shares outstanding, diluted 225,942,172 237,073,566 226,889,745 239,246,727
Adjusted EBITDA is a non-GAAP
term. See page 6 of this
addendum for the reconciliation
of Adjusted EBITDA to net income
attributable to Charter
shareholders as defined by GAAP.
All percentages are calculated
using whole numbers. Minor
differences may exist due to
rounding.
NM - Not meaningful
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
June 30, December 31,
2019 2018
---
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $
696 $
551
Accounts receivable, net 2,070 1,733
Prepaid expenses and other
current assets 574 446
Total current assets 3,340 2,730
RESTRICTED CASH 150 214
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment,
net 34,475 35,126
Customer relationships, net 8,461 9,565
Franchises 67,319 67,319
Goodwill 29,554 29,554
Total investment in cable
properties, net 139,809 141,564
OPERATING LEASE RIGHT-OF-USE
ASSETS 1,166
OTHER NONCURRENT ASSETS 1,620 1,622
Total assets $
146,085 $
146,130
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $
8,145 $
8,805
Operating lease liabilities 208
Current portion of long-term
debt 1,522 3,290
Total current liabilities 9,875 12,095
LONG-TERM DEBT 71,784 69,537
DEFERRED INCOME TAXES 17,522 17,389
LONG-TERM OPERATING LEASE
LIABILITIES 1,052
OTHER LONG-TERM LIABILITIES 2,758 2,837
SHAREHOLDERS' EQUITY:
Controlling interest 35,286 36,285
Noncontrolling interests 7,808 7,987
Total shareholders' equity 43,094 44,272
Total liabilities and
shareholders' equity $
146,085 $
146,130
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income $
386 $
339 $
703 $
562
Adjustments to reconcile consolidated
net income to net cash flows from
operating activities:
Depreciation and
amortization 2,500 2,592 5,050 5,302
Stock compensation
expense 82 70 167 142
Accelerated vesting of
equity awards - 5
Noncash interest income,
net (17) (88) (72) (177)
Other pension benefits,
net (9) (20) (18) (40)
Loss on financial
instruments, net 119 75 82 12
Deferred income taxes 56 29 137 57
Other, net 53 38 151 76
Changes in operating assets and
liabilities:
Accounts receivable (492) (210) (337) 16
Prepaid expenses and
other assets 124 40 (176) (91)
Accounts payable, accrued
liabilities and other (41) 231 (240) (69)
Net cash flows from
operating activities 2,761 3,096 5,447 5,795
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property,
plant and equipment (1,597) (2,391) (3,262) (4,574)
Change in accrued
expenses related to
capital expenditures (52) 99 (428) (466)
Real estate investments
through variable
interest entities (25) (64)
Other, net 8 (77) 8 (67)
Net cash flows from
investing activities (1,666) (2,369) (3,746) (5,107)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term
debt 3,830 2,699 10,714 5,628
Repayments of long-term
debt (4,551) (1,315) (10,123) (3,500)
Payments for debt
issuance costs (7) (17) (32) (17)
Purchase of treasury
stock (861) (1,664) (1,801) (2,281)
Proceeds from exercise of
stock options 37 7 81 43
Purchase of
noncontrolling interest (161) (201) (254) (328)
Distributions to
noncontrolling interest (39) (37) (78) (76)
Other, net (123) (2) (127) (5)
Net cash flows from
financing activities (1,875) (530) (1,620) (536)
NET INCREASE (DECREASE)
IN CASH, CASH
EQUIVALENTS AND
RESTRICTED CASH (780) 197 81 152
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH,
beginning of period 1,626 576 765 621
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, end
of period $
846 $
773 $
846 $
773
CASH PAID FOR INTEREST $
1,051 $
882 $
2,017 $
1,889
CASH PAID FOR TAXES $
39 $
21 $
43 $
22
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
(in thousands, except per customer and penetration data)
Approximate as of
June 30, March 31, December 31, June 30,
2019 (a) 2019 (a) 2018 (a) 2018 (a)
---
Footprint (b)
---
Estimated Video Passings 51,258 51,023 50,824 50,364
Estimated Internet Passings 51,093 50,857 50,652 50,149
Estimated Voice Passings 50,538 50,292 50,086 49,532
Penetration Statistics (c)
---
Video Penetration of 31.8 32.3 32.7 33.1
Estimated Video Passings % % % %
Internet Penetration of 50.8 50.5 49.9 49.1
Estimated Internet Passings % % % %
Voice Penetration of 21.6 22.0 22.3 22.9
Estimated Voice Passings % % % %
Customer Relationships (d)
---
Residential 26,755 26,591 26,270 25,871
Small and Medium Business 1,902 1,863 1,833 1,750
Total Customer Relationships 28,657 28,454 28,103 27,621
Quarterly Net Additions/(Losses)
---
Residential 164 321 207 141
Small and Medium Business 39 30 41 55
Total Customer Relationships 203 351 248 196
Residential
---
Primary Service Units ("PSUs")
---
Video 15,802 15,952 16,104 16,206
Internet 24,244 24,023 23,625 23,070
Voice 9,808 10,015 10,135 10,325
Quarterly Net Additions/(Losses)
---
Video (150) (152) (36) (73)
Internet 221 398 289 218
Voice (207) (120) (83) (45)
Single Play (e) 11,354 11,189 10,928 10,694
Double Play (e) 7,709 7,412 7,097 6,633
Triple Play (e) 7,692 7,990 8,245 8,544
Single Play Penetration (f) 42.4 42.1 41.6 41.3
% % % %
Double Play Penetration (f) 28.8 27.9 27.0 25.6
% % % %
Triple Play Penetration (f) 28.8 30.0 31.4 33.0
% % % %
% Residential Non-Video 40.9 40.0 38.7 37.4
Customer Relationships % % % %
Monthly Residential Revenue
per Residential Customer (g) $
112.20 $
112.47 $
111.78 $
111.88
Small and Medium Business
---
PSUs
---
Video 518 509 502 476
Internet 1,701 1,664 1,634 1,552
Voice 1,097 1,072 1,051 994
Quarterly Net Additions/(Losses)
---
Video 9 7 14 16
Internet 37 30 40 49
Voice 25 21 27 37
Monthly Small and Medium
Business Revenue per
Customer (h) $
170.42 $
170.64 $
170.62 $
176.96
Enterprise PSUs (i)
---
Enterprise PSUs 258 253 248 235
(a) Customer statistics do not include
mobile. We calculate the aging of
customer accounts based on the
monthly billing cycle for each
account. On that basis, at June
30, 2019, March 31, 2019, December
31, 2018 and June 30, 2018, actual
customers include approximately
152,900, 171,100, 217,600 and
227,500 customers, respectively,
whose accounts were over 60 days
past due, approximately 13,800,
19,500, 24,000 and 19,300
customers, respectively, whose
accounts were over 90 days past due
and approximately 15,800, 20,800,
19,200 and 13,200 customers,
respectively, whose accounts were
over 120 days past due.
(b) Passings represent our estimate of
the number of units, such as single
family homes, apartment and
condominium units and small and
medium business 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) Penetration represents residential
and small and medium business
customers as a percentage of
estimated passings for the service
indicated.
(d) Customer relationships include the
number of customers that receive
one or more levels of service,
encompassing video, Internet 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
customer relationships.
(e) Single play, double play and triple
play customers represent customers
that subscribe to one, two or three
of Charter service offerings,
respectively.
(f) Single play, double play and triple
play penetration represents the
number of residential single play,
double play and triple play
customers, respectively, as a
percentage of residential customer
relationships.
(g) Monthly residential revenue per
residential customer is calculated
as total residential video,
Internet and voice quarterly
revenue divided by three divided by
average residential customer
relationships during the respective
quarter.
(h) Monthly small and medium business
revenue per customer is calculated
as total small and medium business
quarterly revenue divided by three
divided by average small and medium
business customer relationships
during the respective quarter.
(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 RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(dollars in millions)
Three Months Ended June 30, Six Months Ended June 30,
---
2019 2018 2019 2018
---
Net income attributable to Charter
shareholders $
314 $
273 $
567 $
441
Plus: Net income attributable to
noncontrolling interest 72 66 136 121
Interest expense, net 945 878 1,870 1,729
Income tax expense 84 41 203 69
Depreciation and amortization 2,500 2,592 5,050 5,302
Stock compensation expense 82 70 167 142
Loss on financial instruments, net 119 75 82 12
Other pension benefits, net (9) (20) (18) (40)
Other, net 78 76 183 168
Adjusted EBITDA (a) 4,185 4,051 8,240 7,944
Less: Mobile revenue (158) (298)
Plus: Mobile costs and Expenses 277 33 537 41
Cable Adjusted EBITDA (a) $
4,304 $
4,084 $
8,479 $
7,985
Net cash flows from operating
activities $
2,761 $
3,096 $
5,447 $
5,795
Less: Purchases of property,
plant and equipment (1,597) (2,391) (3,262) (4,574)
Change in accrued expenses related
to capital expenditures (52) 99 (428) (466)
Free cash flow 1,112 804 1,757 755
Plus: Mobile net cash outflows
from operating activities 204 63 407 71
Purchases of mobile property,
plant and equipment 93 53 181 70
Cable free cash flow $
1,409 $
920 $
2,345 $
896
(a) See page 1 of this addendum for
detail of the components
included within Adjusted
EBITDA.
The above schedule is presented in order to
reconcile Adjusted EBITDA, cable Adjusted
EBITDA, free cash flow and cable free cash
flow, non-GAAP measures, to the most
directly comparable GAAP measures in
accordance with Section 401(b) of the
Sarbanes-Oxley Act.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CAPITAL EXPENDITURES
(dollars in millions)
Three Months Ended June 30, Six Months Ended June 30,
---
2019 2018 2019 2018
---
Customer premise
equipment (a) $
492 $
828 $
1,057 $
1,762
Scalable infrastructure
(b) 223 587 520 1,073
Line extensions (c) 363 353 684 644
Upgrade/rebuild (d) 155 190 286 332
Support capital (e) 364 433 715 763
Total capital
expenditures 1,597 2,391 3,262 4,574
Less: Mobile capital
expenditures (93) (53) (181) (70)
Cable capital
expenditures $
1,504 $
2,338 $
3,081 $
4,504
Capital expenditures included in total
related to:
Commercial services $
324 $
309 $
629 $
592
All-digital transition
$ $
88
$ $
274
(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., set-
top boxes 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).
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SOURCE Charter Communications, Inc.
