Charter Communications, Inc. today reported financial and operating results for the three and twelve months ended December 31, 2023.
- Fourth quarter total residential and small and medium business (“SMB”) Internet customers decreased by 61,000. As of December 31, 2023, Charter served a total of 30.6 million residential and SMB Internet customers, with 155,000 total Internet customers added in 2023.
- Fourth quarter total residential and SMB mobile lines increased by 546,000. As of December 31, 2023, Charter served a total of 7.8 million mobile lines, with 2.5 million mobile lines added in 2023.
- Fourth quarter revenue of $13.7 billion grew by 0.3% year-over-year, driven by residential Internet revenue growth of 3.0%, residential mobile service revenue growth of 35.7% and other revenue growth of 24.4%, primarily driven by higher mobile device sales.
- Net income attributable to Charter shareholders totaled $1.1 billion in the fourth quarter. For the year ended December 31, 2023, net income attributable to Charter shareholders totaled $4.6 billion.
- Fourth quarter Adjusted EBITDA1 of $5.6 billion grew by 1.6% year-over-year.
- For the year ended December 31, 2023, revenue of $54.6 billion grew by 1.1% year-over-year. Full year 2023 Adjusted EBITDA totaled $21.9 billion, 1.3% higher than in 2022.
- For the year ended December 31, 2023, capital expenditures totaled $11.1 billion and included $4.0 billion of line extensions.
- Full year 2023 net cash flows from operating activities totaled $14.4 billion, compared to $14.9 billion in the prior year.
- Full year 2023 free cash flow1 of $3.5 billion decreased from $6.1 billion in the prior year, primarily due to higher capital expenditures, mostly driven by Charter’s network evolution and expansion initiatives.
- During the fourth quarter, Charter purchased 3.2 million shares of Charter Class A common stock and Charter Communications Holdings, LLC (“Charter Holdings”) common units for $1.3 billion. For the year ended December 31, 2023, Charter purchased 9.0 million shares of Charter Class A common stock and Charter Holdings common units for approximately $3.6 billion.
“Our rural footprint expansion is exceeding our deployment and penetration targets,” said Chris Winfrey, President and CEO of Charter. “Our network evolution and convergence efforts remain on course. And we are beginning to see the benefits of investments in our employees and digital service to improve the customer experience. We are executing on a clear strategy to ensure we offer consumers the best products and services, all while saving them money. Not only now, but in the future.”
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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. |
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Key Operating Results |
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Approximate as of |
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December 31, |
December 31, |
Y/Y Change |
||||
|
Footprint (d) |
||||||
|
Estimated Passings |
56,986 |
55,573 |
2.5 % |
|||
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Customer Relationships (e) |
||||||
|
Residential |
29,904 |
29,988 |
(0.3) % |
|||
|
SMB |
2,222 |
2,207 |
0.7 % |
|||
|
Total Customer Relationships |
32,126 |
32,195 |
(0.2) % |
|||
|
Residential |
(108) |
42 |
(150) |
|||
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SMB |
(2) |
12 |
(14) |
|||
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Total Customer Relationships Quarterly Net Additions |
(110) |
54 |
(164) |
|||
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Total Customer Relationship Penetration of Estimated Passings (f) |
56.4 % |
57.9 % |
(1.5) ppts |
|||
|
Monthly Residential Revenue per Residential Customer (g) |
$ 119.41 |
$ 119.32 |
0.1 % |
|||
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Monthly SMB Revenue per SMB Customer (h) |
$ 162.38 |
$ 165.50 |
(1.9) % |
|||
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Residential Customer Relationships Penetration |
||||||
|
One Product Penetration (i) |
46.7 % |
45.9 % |
0.8 ppts |
|||
|
Two Product Penetration (i) |
33.1 % |
32.7 % |
0.4 ppts |
|||
|
Three or More Product Penetration (i) |
20.2 % |
21.3 % |
(1.1) ppts |
|||
|
% Residential Non-Video Customer Relationships |
54.8 % |
51.7 % |
3.1 ppts |
|||
|
Internet |
||||||
|
Residential |
28,544 |
28,412 |
0.5 % |
|||
|
SMB |
2,044 |
2,021 |
1.2 % |
|||
|
Total Internet Customers |
30,588 |
30,433 |
0.5 % |
|||
|
Residential |
(62) |
92 |
(154) |
|||
|
SMB |
1 |
13 |
(12) |
|||
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Total Internet Quarterly Net Additions |
(61) |
105 |
(166) |
|||
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Video |
||||||
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Residential |
13,503 |
14,497 |
(6.9) % |
|||
|
SMB |
619 |
650 |
(4.8) % |
|||
|
Total Video Customers |
14,122 |
15,147 |
(6.8) % |
|||
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Residential |
(248) |
(145) |
(103) |
|||
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SMB |
(9) |
1 |
(10) |
|||
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Total Video Quarterly Net Additions |
(257) |
(144) |
(113) |
|||
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Voice |
||||||
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Residential |
6,712 |
7,697 |
(12.8) % |
|||
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SMB |
1,293 |
1,286 |
0.5 % |
|||
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Total Voice Customers |
8,005 |
8,983 |
(10.9) % |
|||
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Residential |
(248) |
(232) |
(16) |
|||
|
SMB |
(3) |
(1) |
(2) |
|||
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Total Voice Quarterly Net Additions |
(251) |
(233) |
(18) |
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Mobile Lines (j) |
||||||
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Residential |
7,519 |
5,116 |
47.0 % |
|||
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SMB |
247 |
176 |
40.4 % |
|||
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Total Mobile Lines |
7,766 |
5,292 |
46.8 % |
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Residential |
532 |
600 |
(68) |
|||
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SMB |
14 |
15 |
(1) |
|||
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Total Mobile Lines Quarterly Net Additions |
546 |
615 |
(69) |
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Enterprise (k) |
||||||
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Enterprise Primary Service Units (“PSUs”) |
303 |
284 |
6.5 % |
|||
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Enterprise Quarterly Net Additions |
5 |
2 |
3 |
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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 December 31, 2023, Charter had 29.9 million residential customer relationships, excluding mobile-only relationships.
Fourth quarter residential Internet customers decreased by 62,000, compared to an increase of 92,000 during the fourth quarter of 2022.
Spectrum Internet® delivers the fastest Internet1 and WiFi download speeds in Charter’s footprint. Charter is on plan to evolve its network at a lower cost than its competitors to offer symmetrical and multi-gigabit 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 their connected devices with enhanced security and privacy is available to all Spectrum Internet customers.
Residential video customers decreased by 248,000 in the fourth quarter of 2023, compared to a decline of 145,000 in the fourth quarter of 2022, partly driven by video disconnects related to the temporary loss of Disney programming in early September. As of December 31, 2023, Charter had 13.5 million residential video customers. In October, Charter began deploying Xumo Stream Boxes to video customers. The Xumo Stream Box combines a live TV experience with access to hundreds of the most popular direct-to-consumer TV applications, and features unified search and discovery along with a curated content offering based on the customer’s interests and subscriptions.
During the fourth quarter of 2023, residential wireline voice customers declined by 248,000, compared to a decline of 232,000 in the fourth quarter of 2022. As of December 31, 2023, Charter had 6.7 million residential wireline voice customers.
During the fourth quarter of 2023, Charter added 532,000 residential mobile lines, compared to growth of 600,000 during the fourth quarter of 2022. Spectrum Mobile™ 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. Charter’s converged offer, Spectrum One, and Spectrum Mobile are central to Charter’s converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing.
Fourth quarter 2023 monthly residential revenue per residential customer totaled $119.41, and increased by 0.1% compared to the prior year period, given promotional rate step-ups, rate adjustments and the accelerated growth of Spectrum Mobile, partly offset by a lower mix of video customer relationships and a higher mix of lower priced video packages within Charter’s video customer base.
SMB customer relationships decreased by 2,000 in the fourth quarter of 2023, while fourth quarter 2022 SMB customer relationships grew by 12,000. Enterprise PSUs grew by 5,000 in the fourth quarter of 2023 versus 2,000 added in the fourth quarter of 2022.
Charter continues to work with federal, state and local governments to bring Spectrum Internet to unserved and underserved communities. During the fourth quarter of 2023, Charter activated 105,000 subsidized rural passings. Within Charter’s subsidized rural footprint, total residential and SMB customer relationships increased by 34,000 in the fourth quarter of 2023.
|
1. |
Based on Ookla’s Speedtest Global Index median fixed download speeds for Q4 2023, which indicates that Spectrum Internet continues to deliver faster speeds than its competitors. |
|
2. |
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. |
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Fourth Quarter Financial Results |
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(in millions) |
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Three Months Ended December 31, |
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2023 |
2022 |
% Change |
|||
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Revenues: |
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|
Internet |
$ 5,805 |
$ 5,637 |
3.0 % |
||
|
Video |
3,905 |
4,251 |
(8.1) % |
||
|
Voice |
393 |
379 |
3.8 % |
||
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Mobile service |
626 |
461 |
35.7 % |
||
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Residential revenue |
10,729 |
10,728 |
— % |
||
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Small and medium business |
1,083 |
1,093 |
(0.9) % |
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Enterprise |
700 |
674 |
3.8 % |
||
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Commercial revenue |
1,783 |
1,767 |
0.9 % |
||
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Advertising sales |
428 |
558 |
(23.4) % |
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Other |
771 |
621 |
24.4 % |
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Total Revenues |
$ 13,711 |
$ 13,674 |
0.3 % |
||
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Net income attributable to Charter shareholders |
$ 1,058 |
$ 1,196 |
(11.5) % |
||
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Net income attributable to Charter shareholders margin |
7.7 % |
8.7 % |
|||
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Adjusted EBITDA (a) |
$ 5,573 |
$ 5,482 |
1.6 % |
||
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Adjusted EBITDA margin |
40.6 % |
40.1 % |
|||
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Capital Expenditures |
$ 2,856 |
$ 2,920 |
(2.2) % |
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Net cash flows from operating activities |
$ 3,855 |
$ 3,787 |
1.8 % |
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Free cash flow (a) |
$ 1,061 |
$ 1,136 |
(6.6) % |
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See page 1 of the addendum of this news release for a GAAP reconciliation of Adjusted EBITDA and free cash flow and page 7 of the addendum of this news release for footnotes. The footnotes contain important disclosures regarding the definitions used for these financial results. All percentages are calculated using whole numbers. Minor differences may exist due to rounding. |
Revenues
Fourth quarter revenue increased by 0.3% year-over-year to $13.7 billion, driven by growth in residential Internet, mobile service and other revenues, primarily driven by higher mobile device sales, partly offset by lower residential video and advertising sales revenues.
Residential revenue totaled $10.7 billion in the fourth quarter, and was virtually unchanged year-over-year.
Internet revenue grew by 3.0% year-over-year to $5.8 billion, driven by growth in Internet customers during the last year, promotional rate step-ups and rate adjustments, partly offset by lower bundled revenue allocation.
Video revenue totaled $3.9 billion in the fourth quarter, a decrease of 8.1% compared to the prior year period, driven 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, partly offset by promotional rate step-ups and video rate adjustments that pass through programmer rate increases.
Voice revenue grew by 3.8% year-over-year to $393 million, driven by voice rate adjustments, partly offset by a decline in wireline voice customers over the last twelve months.
Fourth quarter mobile service revenue totaled $626 million, an increase of 35.7% year-over-year, driven by mobile line growth and higher bundled revenue allocation.
Commercial revenue increased by 0.9% year-over-year to $1.8 billion, driven by enterprise revenue growth of 3.8% year-over-year, partly offset by a SMB revenue decrease of 0.9%. The year-over-year decrease in fourth quarter 2023 SMB revenue was driven by lower monthly SMB revenue per SMB customer primarily due to a higher mix of lower priced video packages and a lower number of voice lines per SMB customer relationship, partly offset by customer relationship growth. Enterprise revenue excluding wholesale increased by 6.1% year-over-year, mostly reflecting PSU growth.
Fourth quarter advertising sales revenue of $428 million decreased by 23.4% compared to the year-ago quarter, primarily driven by lower political revenue. Excluding political revenue in both periods, advertising sales revenue decreased by 0.7% year-over-year, due to a more challenged advertising market, partly offset by higher advanced advertising revenue.
Other revenue totaled $771 million in the fourth quarter, an increase of 24.4% compared to the fourth quarter of 2022, primarily driven by higher mobile device sales.
Operating Costs and Expenses
Fourth quarter programming costs decreased by $296 million, or 10.6% as compared to the fourth quarter of 2022, 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 $198 million, or 15.0% year-over-year, primarily driven by higher mobile device sales and other mobile direct costs, partly offset by lower advertising sales expense.
Costs to service customers increased by $44 million, or 2.1% year-over-year. The year-over-year increase in costs to service customers was primarily driven by additional activity to support the growth of Spectrum Mobile, partly offset by productivity improvements.
Sales and marketing expenses decreased by $16 million, or 1.6% year-over-year, primarily due to lower labor costs.
Other expenses increased by $16 million, or 1.5% as compared to the fourth quarter of 2022.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $1.1 billion in the fourth quarter of 2023, compared to $1.2 billion in the fourth quarter of 2022. The year-over-year decrease in net income attributable to Charter shareholders was primarily driven by a pension remeasurement loss and higher interest expense, partly offset by a gain on sale of assets and higher Adjusted EBITDA.
Net income per basic common share attributable to Charter shareholders totaled $7.23 in the fourth quarter of 2023 compared to $7.79 during the same period last year. The decrease was primarily the result of the factors described above, partly offset by a 4.7% decrease in basic weighted average common shares outstanding versus the prior year period.
Adjusted EBITDA
Fourth quarter Adjusted EBITDA of $5.6 billion grew by 1.6% year-over-year, reflecting growth in revenue of 0.3% and a decrease in operating expenses of 0.7%.
Capital Expenditures
Capital expenditures totaled $2.9 billion in the fourth quarter of 2023, a decrease of $64 million compared to the fourth quarter of 2022. Line extensions capital expenditures totaled $978 million in the fourth quarter of 2023, driven by Charter’s subsidized rural construction initiative and continued network expansion across residential and commercial greenfield and market fill-in opportunities. Fourth quarter capital expenditures excluding line extensions totaled $1.9 billion, compared to $2.0 billion in the fourth quarter of 2022, driven by lower spend on scalable infrastructure and CPE, partly offset by higher spend on upgrade/rebuild (primarily network evolution).
Cash Flow and Free Cash Flow
During the fourth quarter of 2023, net cash flows from operating activities totaled $3.9 billion, compared to $3.8 billion in the prior year quarter. The year-over-year increase in net cash flows from operating activities was primarily due to lower cash taxes and higher Adjusted EBITDA, partly offset by higher cash paid for interest and a less favorable change in working capital.
Free cash flow in the fourth quarter of 2023 totaled $1.1 billion, a decrease of $75 million compared to the fourth quarter of 2022. The year-over-year decrease in free cash flow was primarily driven by a less favorable change in accrued expenses related to capital expenditures, partly offset by an increase in net cash flows from operating activities and a decrease in capital expenditures.
Liquidity & Financing
As of December 31, 2023, total principal amount of debt was $97.6 billion and Charter’s credit facilities provided approximately $5.2 billion of additional liquidity in excess of Charter’s $709 million cash position.
In January and February 2024, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. redeemed all of their outstanding senior secured floating rate notes due 2024 and paid in full all of their outstanding 4.500% senior secured notes due 2024 at maturity.
Share Repurchases
During the three months ended December 31, 2023, Charter purchased 3.2 million shares of Charter Class A common stock and Charter Holdings common units for $1.3 billion.
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Full Year Financial Results |
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(in millions) |
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Year Ended December 31, |
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|
2023 |
2022 |
% Change |
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Revenues: |
|||||
|
Internet |
$ 23,032 |
$ 22,222 |
3.6 % |
||
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Video |
16,351 |
17,460 |
(6.4) % |
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|
Voice |
1,510 |
1,559 |
(3.1) % |
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Mobile service |
2,243 |
1,698 |
32.1 % |
||
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Residential revenue |
43,136 |
42,939 |
0.5 % |
||
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Small and medium business |
4,353 |
4,350 |
0.1 % |
||
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Enterprise |
2,770 |
2,677 |
3.5 % |
||
|
Commercial revenue |
7,123 |
7,027 |
1.4 % |
||
|
Advertising sales |
1,551 |
1,882 |
(17.6) % |
||
|
Other |
2,797 |
2,174 |
28.7 % |
||
|
Total Revenues |
$ 54,607 |
$ 54,022 |
1.1 % |
||
|
Net income attributable to Charter shareholders |
$ 4,557 |
$ 5,055 |
(9.9) % |
||
|
Net income attributable to Charter shareholders margin |
8.3 % |
9.4 % |
|||
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Adjusted EBITDA (a) |
$ 21,894 |
$ 21,616 |
1.3 % |
||
|
Adjusted EBITDA margin |
40.1 % |
40.0 % |
|||
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Capital Expenditures |
$ 11,115 |
$ 9,376 |
18.6 % |
||
|
% Total Revenues |
20.4 % |
17.4 % |
|||
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Net cash flows from operating activities |
$ 14,433 |
$ 14,925 |
(3.3) % |
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|
Free cash flow (a) |
$ 3,490 |
$ 6,102 |
(42.8) % |
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Revenues
For the year ended December 31, 2023, revenues increased to $54.6 billion, 1.1% higher than in 2022, driven by growth in residential Internet, mobile device sales and mobile service revenues, partly offset by lower residential video and advertising sales revenues.
Operating Costs and Expenses
Operating costs and expenses totaled $32.7 billion in 2023, an increase of $307 million, or 0.9% compared to the prior year ended December 31, 2022, primarily driven by increases in mobile direct costs and costs to service customers, partly offset by a decrease in programming costs.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $4.6 billion for the year ended December 31, 2023, compared to $5.1 billion in 2022. The year-over-year decrease in net income attributable to Charter shareholders was primarily driven by higher interest expense, net and a pension remeasurement loss in 2023 versus a gain in 2022, partly offset by higher Adjusted EBITDA and a gain on sale of assets in 2023.
Net income per basic common share attributable to Charter shareholders totaled $30.54 for the year ended December 31, 2023, compared to $31.30 during the same period last year. The decrease was primarily the result of the factors described above, partly offset by a 7.6% decrease in weighted average common shares outstanding versus the prior year period.
Adjusted EBITDA
Adjusted EBITDA totaled $21.9 billion for the year ended December 31, 2023, an increase of 1.3% compared to 2022, reflecting growth in revenue and operating expenses of 1.1% and 0.9%, respectively.
Capital Expenditures
Capital expenditures totaled $11.1 billion for the year ended December 31, 2023, compared to $9.4 billion in 2022. The increase was driven by higher spend on line extensions, which totaled $4.0 billion in 2023, driven by Charter’s rural construction initiative and continued network expansion across residential and commercial greenfield and market fill-in opportunities, and higher spend on upgrade/rebuild, driven by network evolution. For the full year 2023, capital expenditures excluding line extensions totaled $7.1 billion.
Charter currently expects full year 2024 capital expenditures to total between $12.2 billion and $12.4 billion, including 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
For the year ended December 31, 2023, net cash flows from operating activities totaled $14.4 billion, compared to $14.9 billion in 2022. The year-over-year decrease in net cash flows from operating activities was primarily due to a more unfavorable change in working capital and higher cash paid for interest, partly offset by an increase in Adjusted EBITDA in the current year period and the payment of litigation settlements in the prior year period.
Free cash flow for the year ended December 31, 2023 was $3.5 billion, compared to $6.1 billion during the same period last year. The year-over-year decrease in free cash flow was primarily driven by an increase in capital expenditures and a decrease in net cash flows from operating activities.
Share Repurchases
During the year ended December 31, 2023, Charter purchased 9.0 million shares of Charter Class A common stock and Charter Holdings common units, or 5.2% of fully diluted shares outstanding (including as-exchanged Charter Holdings common units) as of December 31, 2022, for approximately $3.6 billion.
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 and sports programming to its customers through Spectrum Networks. More information about Charter can be found at corporate.charter.com.
