Charter Announces First Quarter 2024 Results

Charter Communications, Inc. today reported financial and operating results for the three months ended March 31, 2024.

• First quarter total residential and small and medium business (“SMB”) Internet customers decreased by 72,000. As of March 31, 2024, Charter served a total of 30.5 million residential and SMB Internet customers.
• First quarter total residential and SMB mobile lines increased by 486,000. As of March 31, 2024, Charter served a total of 8.3 million mobile lines.
• As of March 31, 2024, Charter had a total of 32.0 million residential and SMB customer relationships, excluding mobile-only relationships.
• First quarter revenue of $13.7 billion grew by 0.2% year-over-year, driven by residential mobile service revenue growth of 37.8% and residential Internet revenue growth of 1.9%.
• Net income attributable to Charter shareholders totaled $1.1 billion in the first quarter.
• First quarter Adjusted EBITDA¹ of $5.5 billion grew by 2.8% year-over-year.
• First quarter capital expenditures totaled $2.8 billion and included $1.0 billion of line extensions.
• First quarter net cash flows from operating activities totaled $3.2 billion, compared to $3.3 billion in the prior year.
• First quarter free cash flow¹ of $358 million decreased from $664 million in the prior year, primarily due to higher capital expenditures, mostly driven by Charter’s network evolution and expansion initiatives and a one-time settlement payment in the first quarter of 2024.
• During the first quarter, Charter purchased 1.7 million shares of Charter Class A common stock and Charter Communications Holdings, LLC (“Charter Holdings”) common units for $567 million.

“Our differentiated converged connectivity products provide us with significant competitive advantages that position Charter for sustainable customer and financial growth,” said Chris Winfrey, President and CEO of Charter.

As of March 31, 2024, Charter had 29.8 million residential customer relationships, excluding mobile-only relationships.

First quarter residential Internet customers decreased by 72,000, compared to an increase of 67,000 during the first quarter of 2023.

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 392,000 in the first quarter of 2024, compared to a decline of 237,000 in the first quarter of 2023. As of March 31, 2024, Charter had 13.1 million residential video customers. In October 2023, 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 first quarter, Charter launched two new value-oriented Internet-delivered streaming TV packages, Spectrum TV^® Stream and Spectrum Stream Latino, for Spectrum Internet customers. Spectrum TV Stream features many of the most popular news and entertainment networks, and Spectrum Stream Latino adds another option for Hispanic audiences to take advantage of Charter’s robust programming lineup.

During the first quarter of 2024, residential wireline voice customers declined by 274,000, compared to a decline of 224,000 in the first quarter of 2023. As of March 31, 2024, Charter had 6.4 million residential wireline voice customers.

During the first quarter of 2024, Charter added 473,000 residential mobile lines, compared to growth of 666,000 during the first quarter of 2023. Spectrum Mobile^TM is available to all new and existing Spectrum Internet customers and offers the fastest overall speeds,¹ 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. 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.

First quarter 2024 monthly residential revenue per residential customer totaled $120.48, and decreased by 0.1% compared to the prior year period, given a lower mix of video customer relationships and a higher mix of lower priced video packages within Charter’s video customer base, mostly offset by promotional rate step-ups, rate adjustments and the growth of Spectrum Mobile.

SMB customer relationships decreased by 3,000 in the first quarter of 2024, while first quarter 2023 SMB customer relationships grew by 8,000. Enterprise PSUs grew by 5,000 in the first quarter of 2024 versus 4,000 added in the first quarter of 2023.

Charter continues to work with federal, state and local governments to bring Spectrum Internet to unserved and underserved communities. During the first quarter of 2024, Charter activated 73,000 subsidized rural passings. Within Charter’s subsidized rural footprint, total residential and SMB customer relationships increased by 35,000 in the first quarter of 2024.

Revenues

First quarter revenue increased by 0.2% year-over-year to $13.7 billion, driven by growth in residential mobile service, residential Internet and advertising sales revenues, partly offset by lower residential video revenue.

Residential revenue totaled $10.8 billion in the first quarter, a decrease of 0.4% year-over-year.

Internet revenue grew by 1.9% year-over-year to $5.8 billion, driven by promotional rate step-ups and rate adjustments, partly offset by lower bundled revenue allocation.

Video revenue totaled $3.9 billion in the first quarter, a decrease of 8.1% 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 grew by 0.3% year-over-year to $374 million, driven by voice rate adjustments, mostly offset by a decline in wireline voice customers over the last twelve months.

First quarter mobile service revenue totaled $685 million, an increase of 37.8% year-over-year, driven by mobile line growth and higher bundled revenue allocation.

Commercial revenue increased by 1.3% 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 0.3%. The year-over-year decrease in first quarter 2024 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 5.5% year-over-year, mostly reflecting PSU growth.

First quarter advertising sales revenue of $391 million increased by 10.0% compared to the year-ago quarter, primarily driven by higher political revenue. Excluding political revenue in both periods, advertising sales revenue increased by 0.3% year-over-year due to higher advanced advertising revenue, mostly offset by a more challenged advertising market.

Other revenue totaled $699 million in the first quarter, an increase of 2.4% compared to the first quarter of 2023, primarily driven by higher mobile device sales.

Operating Costs and Expenses

First quarter programming costs decreased by $229 million, or 8.2% as compared to the first 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, renewals and adjustments. First quarter 2024 programming costs include $28 million of favorable adjustments compared to $50 million of favorable adjustments in the prior year period.

Other costs of revenue increased by $130 million, or 9.8% year-over-year, primarily driven by higher mobile service direct costs and mobile device sales.

Costs to service customers was virtually unchanged year-over-year, with additional activity to support the growth of Spectrum Mobile and higher bad debt expense, offset by productivity improvements.

Sales and marketing expenses decreased by $26 million, or 2.7% year-over-year, primarily due to lower labor costs.

Other expenses increased by $5 million, or 0.5% as compared to the first quarter of 2023.

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $1.1 billion in the first quarter of 2024, compared to $1.0 billion in the first quarter of 2023. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA and a gain on sale of assets, partly offset by higher income tax and interest expenses.

Net income per basic common share attributable to Charter shareholders totaled $7.66 in the first quarter of 2024 compared to $6.74 during the same period last year. The increase was primarily the result of the factors described above in addition to a 4.6% decrease in basic weighted average common shares outstanding versus the prior year period.

Adjusted EBITDA

First quarter Adjusted EBITDA of $5.5 billion grew by 2.8% year-over-year, reflecting growth in revenue of 0.2% and a decrease in operating expenses of 1.5%.

Capital Expenditures

Capital expenditures totaled $2.8 billion in the first quarter of 2024, an increase of $327 million compared to the first quarter of 2023. Line extensions capital expenditures totaled $1.0 billion in the first 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. First quarter capital expenditures excluding line extensions totaled $1.8 billion, compared to $1.6 billion in the first quarter of 2023, driven by higher spend on upgrade/rebuild (primarily network evolution) and CPE (primarily Xumo Stream Boxes).

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

During the first quarter of 2024, net cash flows from operating activities totaled $3.2 billion, compared to $3.3 billion in the prior year quarter. The year-over-year decrease in net cash flows from operating activities was primarily due to a one-time settlement payment in the first quarter of 2024, partly offset by higher Adjusted EBITDA.

Free cash flow in the first quarter of 2024 totaled $358 million, a decrease of $306 million compared to the first quarter of 2023. 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, partly offset by a less unfavorable change in accrued expenses related to capital expenditures.

Liquidity & Financing

As of March 31, 2024, total principal amount of debt was $97.8 billion and Charter’s credit facilities provided approximately $2.9 billion of additional liquidity in excess of Charter’s $661 million cash position.

Share Repurchases

During the three months ended March 31, 2024, Charter purchased 1.7 million shares of Charter Class A common stock and Charter Holdings common units for $567 million.

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.