Charter Announces First Quarter 2022 Results

STAMFORD, Conn., April 29, 2022 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three months ended March 31, 2022.

Key highlights:

• First quarter total residential and small and medium business ("SMB") customer relationships increased by 129,000. As of March 31, 2022, Charter served a total of 32.2 million residential and SMB customers.
• First quarter total residential and SMB Internet customers increased by 185,000. As of March 31, 2022, Charter served a total of 30.3 million residential and SMB Internet customers.
• First quarter total residential and SMB mobile lines increased by 373,000. As of March 31, 2022, Charter served a total of 3.9 million mobile lines.
• First quarter revenue of $13.2 billion grew by 5.4% year-over-year, driven by residential revenue growth of 3.7%, mobile revenue growth of 40.2% and commercial revenue growth of 4.3%.
• First quarter Adjusted EBITDA¹ of $5.2 billion grew by 5.4% year-over-year.
• Net income attributable to Charter shareholders totaled $1.2 billion in the first quarter.
• First quarter capital expenditures totaled $1.9 billion and included $232 million of rural construction initiative capital expenditures and $74 million of mobile-related capital expenditures.
• First quarter free cash flow¹ of $1.8 billion decreased by 3.0% year-over-year. Excluding a $220 million one-time payment in the first quarter of 2022, free cash flow grew by 8.9% year-over-year.
• During the first quarter, Charter purchased 6.0 million shares of Charter Class A common stock and Charter Communications Holdings, LLC ("Charter Holdings") common units for approximately $3.6 billion.

"We remain focused on our primary goal of driving connected customer and mobile broadband relationship growth," said Tom Rutledge, Chairman and CEO of Charter. "We continue to grow our business by offering superior converged connectivity products. And our new joint venture with Comcast will allow us to provide a next generation streaming platform that offers new and differentiated direct-to-consumer products to meet demand in a fast-changing video environment." 

Key Operating Results

During the first quarter of 2022, Charter's residential customer relationships grew by 109,000, compared to growth of 282,000 in the first quarter of 2021. As of March 31, 2022, Charter had 30.0 million residential customer relationships, with year-over-year growth of 2.3%.

Charter added 164,000 residential Internet customers during the first quarter of 2022, compared to 334,000 during the first quarter of 2021. Currently, 200 Mbps is the minimum speed offered to new Spectrum Internet^® customers across Charter's footprint. As of March 31, 2022, over 80% of total Internet customers subscribed to tiers that provided 200 Mbps or more of speed. Charter also offers Spectrum Internet Ultra (400 Mbps) and Spectrum Internet Gig (1 Gbps) across its entire footprint. Charter's Advanced Home WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of their connected devices, is available to nearly all Spectrum Internet customers.

Residential video customers decreased by 123,000 in the first quarter of 2022, compared to a decline of 156,000 in the first quarter of 2021. As of March 31, 2022, Charter had 15.1 million residential video customers.

During the first quarter of 2022, residential wireline voice customers declined by 156,000, compared to a decline of 102,000 in the first quarter of 2021. As of March 31, 2022, Charter had 8.5 million residential wireline voice customers.

First quarter 2022 residential revenue per residential customer (excluding mobile) totaled $113.28, and increased by 1.0% compared to the prior year period, given promotional rate step-ups and video rate adjustments that pass through programmer rate increases, partly offset by a higher mix of non-video customer relationships, a higher mix of lower priced video packages within Charter's video customer base and $20 million of sports network credits recorded in the current year period to be provided to qualified video customers given fewer sporting events being broadcast during COVID-19.

SMB customer relationships grew by 20,000 in the first quarters of 2022 and 2021, while enterprise PSUs grew by 2,000 in the first quarters of 2022 and 2021.

During the first quarter of 2022, Charter added 373,000 mobile lines, compared to growth of 300,000 during the first quarter of 2021. Spectrum Mobile^TM is available to all new and existing Spectrum Internet customers. Spectrum Mobile customers can choose "Unlimited" or "By the Gig" data plans. In October 2021, Spectrum Mobile introduced new Unlimited pricing starting at $29.99/month per Unlimited line for customers with at least two lines. Additionally, customers qualify for the new multiline pricing when combining By the Gig lines for $14/GB with Unlimited lines. All Spectrum Mobile plans include 5G access, with taxes and fees included and no contracts. Spectrum Mobile's new Unlimited pricing is part of Charter's converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing.

First Quarter Financial Results

Revenues

First quarter revenue increased by 5.4% year-over-year to $13.2 billion, driven primarily by growth in residential, mobile and commercial revenues.

Residential revenue totaled $10.2 billion in the first quarter, an increase of 3.7% year-over-year. The year-over-year revenue growth rate was negatively impacted by $20 million of sports network credits recorded in the current year period.

Internet revenue grew by 7.2% year-over-year to $5.5 billion, driven by growth in Internet customers during the last year, promotional rate step-ups and reduced bundled discounts, partly offset by lower bundled revenue allocation.

Video revenue totaled $4.3 billion in the first quarter, an increase of 0.1% compared to the prior year period, driven by promotional rate step-ups, video rate adjustments that pass through programmer rate increases and higher bundled revenue allocation, mostly offset by a higher mix of lower priced video packages within Charter's video customer base, a decline in video customers during the last year and the aforementioned $20 million of sports network credits recorded in the current year period.

 Voice revenue totaled $391 million in the first quarter, a decrease of 2.1% compared to the first quarter of 2021, driven by a decline in wireline voice customers over the last twelve months, partly offset by voice rate adjustments.

Commercial revenue increased by 4.3% year-over-year to $1.7 billion, driven by SMB and enterprise revenue growth of 4.6% and 3.7% year-over-year, respectively. First quarter 2022 SMB revenue growth was primarily driven by customer relationship growth. Enterprise revenue excluding wholesale increased by 6.5% year-over-year, reflecting PSU growth.

First quarter advertising sales revenue of $383 million increased by 11.5% compared to the year-ago quarter, driven by higher political revenue and advanced advertising revenue. Excluding political revenue in both periods, advertising sales revenue increased by 5.1% year-over-year.

First quarter mobile revenue totaled $690 million, an increase of 40.2% year-over-year, primarily driven by mobile line growth.

Operating Costs and Expenses

First quarter total operating costs and expenses increased by $410 million, or 5.4% year-over-year.

First quarter programming costs decreased by $11 million, or 0.4% as compared to the first quarter of 2021, reflecting fewer video customers and a higher mix of lower cost packages within Charter's video customer base, $20 million of sports network rebates in the first quarter of 2022 that resulted from fewer sporting events being broadcast during COVID-19 and $34 million of other favorable adjustments, mostly offset by contractual programming increases and renewals.

Regulatory, connectivity and produced content expenses decreased by $44 million, or 7.4% year-over-year, primarily driven by lower sports rights costs given a normalized game schedule in the first quarter of 2022 compared to the first quarter of 2021 when more games were played due to a delayed start of the 2020-2021 NBA season, lower video CPE sold to customers and lower regulatory and franchise fees.

Costs to service customers increased by $95 million, or 5.3% year-over-year. The year-over-year increase in costs to service customers was primarily driven by unusually low bad debt in the first quarter of 2021, which benefited from government stimulus packages. Costs to service customers excluding bad debt increased by 1.8% year-over-year primarily due to a larger customer base, previously announced wage increases to a $20 per hour starting wage for hourly field operations and call center employees and higher health benefit and fuel costs.

Marketing expenses increased by $75 million, or 10.1% year-over-year, due to higher labor costs  driven by previously announced wage increases to a $20 per hour starting wage and temporarily greater staffing levels as Charter completes the insourcing of its inbound sales and retention call centers with a focus on providing better service to new and existing customers.

First quarter mobile costs totaled $760 million, an increase of 32.8% year-over-year, and were comprised of device costs, customer acquisition costs, and service and operating costs.

Other expenses increased by $107 million, or 12.5% as compared to the first quarter of 2021, primarily due to a favorable non-recurring adjustment in the prior year period and higher labor costs.

Adjusted EBITDA

First quarter Adjusted EBITDA of $5.2 billion grew by 5.4% year-over-year, reflecting growth in revenue and operating expenses of 5.4% and 5.4%, respectively. 

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $1.2 billion in the first quarter of 2022, compared to $807 million in the first quarter of 2021. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA and non-recurring litigation settlement charges recorded in the first quarter of 2021. 

 Net income per basic common share attributable to Charter shareholders totaled $7.05 in the first quarter of 2022 compared to $4.22 during the same period last year. The increase was primarily the result of the factors described above in addition to a 10.8% decrease in basic weighted average common shares outstanding versus the prior year period.

Capital Expenditures

Property, plant and equipment expenditures totaled $1.9 billion in the first quarter of 2022, compared to $1.8 billion during the first quarter of 2021, primarily driven by an increase in line extensions, partly offset by decreases in support capital and scalable infrastructure. The increase in line extensions was due to Charter's rural construction initiative. The decrease in support capital was driven by lower mobile capital expenditures and the timing of vehicle spend. The decrease in scalable infrastructure spending was primarily due to timing. First quarter capital expenditures included $232 million of rural construction initiative spend, most of which was included in line extensions. First quarter capital expenditures also included $74 million of mobile costs, most of which related to information technology systems and were included in support capital.

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

Cash Flow and Free Cash Flow

During the first quarter of 2022, net cash flows from operating activities totaled $3.6 billion, compared to $3.8 billion in the prior year quarter. The year-over-year decrease in net cash flows from operating activities was primarily due to the $220 million payment of a previously recorded litigation settlement charge and an unfavorable change in working capital, excluding the change in accrued interest and accrued expenses related to capital expenditures, partly offset by higher Adjusted EBITDA.

Free cash flow in the first quarter of 2022 totaled $1.8 billion, compared to $1.9 billion during the same period last year. The year-over-year decrease in free cash flow was primarily driven by a decrease in net cash flows from operating activities.

Liquidity & Financing

As of March 31, 2022, total principal amount of debt was $94.9 billion and Charter's credit facilities provided approximately $4.7 billion of additional liquidity in excess of Charter's $2.4 billion cash position.

In January 2022, CCO Holdings, LLC and CCO Holdings Capital Corp. jointly issued $1.2 billion of 4.750% senior unsecured notes due 2032 at par. Net proceeds were used for general corporate purposes, including to fund buybacks of Charter Class A common stock and Charter Holdings common units, to repay certain indebtedness and to pay related fees and expenses.

In March 2022, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. jointly issued $1.0 billion aggregate principal amount of 4.400% senior secured notes due April 2033 at a price of 99.634% of the aggregate principal amount, $1.5 billion aggregate principal amount of 5.250% senior secured notes due April 2053 at a price of 99.300% of the aggregate principal amount and $1.0 billion aggregate principal amount of 5.500% senior secured notes due April 2063 at a price of 99.255% of the aggregate principal amount. The net proceeds were used for general corporate purposes, including to fund buybacks of Charter Class A common stock and Charter Holdings common units, to repay certain indebtedness and to pay related fees and expenses.

Share Repurchases

During the three months ended March 31, 2022, Charter purchased 6.0 million shares of Charter Class A common stock and Charter Holdings common units for approximately $3.6 billion.

Webcast

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

The webcast can be accessed live via the Company's investor relations website at ir.charter.com. Participants should go to the webcast link no later than 10 minutes prior to the start time to register. The webcast will be archived at ir.charter.com two hours after completion of the webcast.

Additional Information Available on Website

The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2022, which will be posted on the "Results & SEC Filings" section of the Company's investor relations website at ir.charter.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available in the "Results & SEC Filings" section.

Use of Adjusted EBITDA and Free Cash Flow Information

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

Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, net interest expense, income taxes, depreciation and amortization, stock compensation expense, other income (expenses), net and other operating (income) expenses, net, such as special charges and (gain) loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's capital structure or investment activities. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. These costs are evaluated through other financial measures.     

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.   

Management and Charter's board of directors use Adjusted EBITDA and free cash flow to assess Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the SEC). For the purpose of calculating compliance with leverage covenants, the Company uses Adjusted EBITDA, as presented, excluding certain expenses paid by its operating subsidiaries to other Charter entities. The Company's debt covenants refer to these expenses as management fees, which were $342 million and $277 million for the three months ended March 31, 2022 and 2021, respectively.

About Charter

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

For small and medium-sized companies, Spectrum Business^® delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise provides highly customized, fiber-based solutions. Spectrum Reach^® delivers tailored advertising and production for the modern media landscape. The Company also distributes award-winning news coverage, sports and high-quality original programming to its customers through Spectrum Networks and Spectrum Originals. More information about Charter can be found at corporate.charter.com.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies and prospects, both business and financial.  Although we believe that our plans, intentions and expectations as reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations.  Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the SEC.  Many of the forward-looking statements contained in this communication may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity," "tentative," "positioning," "designed," "create," "predict," "project," "initiatives," "seek," "would," "could," "continue," "ongoing," "upside," "increases," "grow," "focused on" and "potential," among others.  Important factors that could cause actual results to differ materially from the forward-looking statements we make in this communication are set forth in our annual report on Form 10-K, and in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

• our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our service areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
• the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line ("DSL") providers, fiber to the home providers and providers of video content over broadband Internet connections;
• general business conditions, unemployment levels and the level of activity in the housing sector and economic uncertainty or downturn, including the impacts of the Novel Coronavirus ("COVID-19") pandemic to sales opportunities from residential move activity, our customers, our vendors and local, state and federal governmental responses to the pandemic;
• our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents and distribution requirements);
• our ability to develop and deploy new products and technologies including consumer services and service platforms;
• any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
• the effects of governmental regulation on our business including subsidies to consumers, subsidies and incentives for competitors, costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us;
• the ability to hire and retain key personnel;
• our ability to procure necessary services and equipment from our vendors in a timely manner and at reasonable costs;
• the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
• our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement.  We are under no duty or obligation to update any of the forward-looking statements after the date of this communication.

 

 

 

 

 

 

 

 

 

 

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SOURCE Charter Communications, Inc.