Charter Announces Third Quarter 2024 Results
STAMFORD, Conn., Nov. 1, 2024 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter"), which operates the Spectrum brand, today reported financial and operating results for the three and nine months ended September 30, 2024.
Third quarter total Internet customers decreased by 110,000. As of September 30, 2024, Charter served 30.3 million Internet customers.
Third quarter total mobile lines increased by 545,000. As of September 30, 2024, Charter served 9.4 million mobile lines.
As of September 30, 2024, Charter had a total of 31.7 million customer relationships, excluding mobile-only relationships.
Third quarter revenue of $13.8 billion grew by 1.6% year-over-year, driven by residential mobile service revenue growth of 37.6% and residential Internet revenue growth of 1.7%.
Net income attributable to Charter shareholders totaled $1.3 billion in the third quarter.
Third quarter Adjusted EBITDA1 of $5.6 billion grew by 3.6% year-over-year.
Third quarter capital expenditures totaled $2.6 billion and included $1.1 billion of line extensions.
Third quarter net cash flows from operating activities totaled $3.9 billion, in-line with the prior year period.
Third quarter free cash flow1 of $1.6 billion increased from $1.1 billion in the prior year, primarily driven by lower capital expenditures and higher Adjusted EBITDA.
During the third quarter, Charter purchased 844 thousand shares of Charter Class A common stock and Charter Communications Holdings, LLC ("Charter Holdings") common units for $262 million.
"We executed well during the third quarter, building on our operating strategy and foundational investments," said Chris Winfrey, President and CEO of Charter. "Now and in the future, we have the best, fully deployed network uniquely capable of delivering seamless connectivity and entertainment, everywhere we operate. We have pricing and packaging that saves customers money with the best products, and a service capability and investment that has yet to be fully realized as a competitive advantage."
1.
Adjusted EBITDA and free cash flow are non-GAAP measures defined in the "Use of Adjusted EBITDA and Free Cash Flow Information" section and are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the addendum of this news release.
Key Operating Results
Approximate as of
September 30, 2024 (c)
September 30, 2023 (c)
Y/Y Change
Footprint
Estimated Passings (d)
58,206
56,582
2.9 %
Customer Relationships (e)
Residential
29,465
30,012
(1.8) %
Small and Medium Business ("SMB")
2,223
2,224
— %
Total Customer Relationships
31,688
32,236
(1.7) %
Residential
(150)
3
(153)
SMB
1
5
(4)
Total Customer Relationships Quarterly Net Additions
(149)
8
(157)
Total Customer Relationship Penetration of Estimated Passings (f)
54.4 %
57.0 %
(2.6) ppts
Monthly Residential Revenue per Residential Customer (g)
$ 121.47
$ 119.28
1.8 %
Monthly SMB Revenue per SMB Customer (h)
$ 164.38
$ 162.94
0.9 %
Residential Customer Relationships Penetration
One Product Penetration (i)
47.9 %
46.5 %
1.4 ppts
Two Product Penetration (i)
33.4 %
33.0 %
0.4 ppts
Three or More Product Penetration (i)
18.7 %
20.5 %
(1.8) ppts
% Residential Non-Video Customer Relationships
57.8 %
54.2 %
3.6 ppts
Internet
Residential
28,205
28,606
(1.4) %
SMB
2,052
2,043
0.4 %
Total Internet Customers
30,257
30,649
(1.3) %
Residential
(113)
57
(170)
SMB
3
6
(3)
Total Internet Quarterly Net Additions
(110)
63
(173)
Video
Residential
12,437
13,751
(9.6) %
SMB
578
628
(8.0) %
Total Video Customers
13,015
14,379
(9.5) %
Residential
(281)
(320)
39
SMB
(13)
(7)
(6)
Total Video Quarterly Net Additions
(294)
(327)
33
Voice
Residential
5,895
6,960
(15.3) %
SMB
1,263
1,296
(2.5) %
Total Voice Customers
7,158
8,256
(13.3) %
Residential
(275)
(288)
13
SMB
(13)
2
(15)
Total Voice Quarterly Net Additions
(288)
(286)
(2)
Mobile Lines (j)
Residential
9,057
6,987
29.6 %
SMB
297
233
27.4 %
Total Mobile Lines
9,354
7,220
29.6 %
Residential
526
577
(51)
SMB
19
17
2
Total Mobile Lines Quarterly Net Additions
545
594
(49)
Enterprise (k)
Enterprise Primary Service Units ("PSUs")
315
298
5.7 %
Enterprise Quarterly Net Additions
3
4
(1)
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.
In September, Spectrum launched a new brand platform, Life Unlimited, which emphasizes the power of Spectrum's advanced network and cutting-edge connectivity products and services to create opportunities and remove barriers to help customers live their best lives. As part of its new brand platform, Spectrum launched a new and simplified pricing strategy that better utilizes its seamless connectivity and entertainment products to offer lower promotional and persistent bundled pricing to drive growth. Additionally, Spectrum announced new customer commitments focused on reliable connectivity, transparency, exceptional service and a focus on always improving.
Third quarter total Internet customers decreased by 110,000, driven by the end of the FCC's Affordable Connectivity Program ("ACP") in the second quarter, compared to an increase of 63,000 during the third quarter of 2023. Spectrum Internet® delivers the fastest Internet speeds1 in the nation. Spectrum is evolving its connectivity network to offer symmetrical and multi-gigabit Internet speeds across its entire footprint and has launched symmetrical Internet service in eight markets. Unlike competitors, Spectrum upgrades its network for all households and can do so at a much lower cost. Spectrum Advanced WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of connected devices with enhanced security and privacy is available to all Spectrum Internet customers.
Total video customers decreased by 294,000 in the third quarter of 2024, compared to a decline of 327,000 in the third quarter of 2023. As of September 30, 2024, Charter had 13.0 million total video customers. Spectrum TV Select video customers will soon receive up to $80 per month of programmers' streaming application retail value at no extra cost, including the ad-supported versions of Max, Disney+, Peacock, Paramount+, ESPN+, AMC+, Discovery+, BET+, ViX, and Tennis Channel Plus. This programmer streaming application inclusion is part of Charter's broader video evolution strategy to provide flexible packages with enhanced value, whether through full packages with seamless entertainment, smaller video packages, or a suite of a-la-carte programmer application options for broadband-only customers.
During the third quarter of 2024, total wireline voice customers declined by 288,000, compared to a decline of 286,000 in the third quarter of 2023. As of September 30, 2024, Charter had 7.2 million total wireline voice customers.
During the third quarter of 2024, Charter added 545,000 total mobile lines, compared to growth of 594,000 during the third quarter of 2023. 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. Spectrum Mobile is central to Charter's converged network strategy to provide consumers a differentiated connectivity experience with highly competitive, simple data plans and pricing.
Charter continues to work with federal, state and local governments to bring Spectrum Internet to unserved and underserved communities. During the third quarter of 2024, Charter activated 114,000 subsidized rural passings. Within Charter's subsidized rural footprint, total customer relationships increased by 41,000 in the third quarter of 2024.
1.
Based on Broadband Download Speed nationally in Opensignal USA: Fixed Broadband Experience Report, National View, May 2024. Based on Opensignal independent analysis of mean download speed. © 2024 Opensignal Limited.
2.
Based on Charter's analysis of Ookla® Speedtest Intelligence® data for overall mobile WiFi and Cellular performance for 1Q24 in Charter's footprint.
Third Quarter Financial Results
(in millions)
Three Months Ended September 30,
2024
2023
% Change
Revenues:
Internet
$ 5,872
$ 5,776
1.7 %
Video
3,735
4,004
(6.7) %
Voice
360
379
(5.0) %
Mobile service
801
581
37.6 %
Residential revenue
10,768
10,740
0.3 %
Small and medium business
1,096
1,085
1.0 %
Enterprise
723
698
3.7 %
Commercial revenue
1,819
1,783
2.0 %
Advertising sales
452
384
18.1 %
Other
756
677
11.6 %
Total Revenues
$ 13,795
$ 13,584
1.6 %
Net income attributable to Charter shareholders
$ 1,280
$ 1,255
2.0 %
Net income attributable to Charter shareholders margin
9.3 %
9.2 %
Adjusted EBITDA1
$ 5,647
$ 5,449
3.6 %
Adjusted EBITDA margin
40.9 %
40.1 %
Capital Expenditures
$ 2,563
$ 2,961
(13.5) %
Net cash flows from operating activities
$ 3,905
$ 3,944
(1.0) %
Free cash flow1
$ 1,619
$ 1,097
47.6 %
All percentages are calculated using whole numbers. Minor differences may exist due to rounding.
1.
Adjusted EBITDA and free cash flow are non-GAAP measures defined in the "Use of Adjusted EBITDA and Free Cash Flow Information" section and are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the addendum of this news release.
Revenues
Third quarter revenue increased by 1.6% year-over-year to $13.8 billion, driven by growth in residential mobile service, residential Internet, advertising and other revenues, partly offset by lower residential video revenue. Year-over-year revenue growth was favorably impacted by $68 million of total customer credits in the prior year period related to the temporary loss of Disney programming in September 2023.
Residential revenue totaled $10.8 billion in the third quarter, an increase of 0.3% year-over-year. Year-over-year revenue growth was favorably impacted by $63 million of residential customer credits in the prior year period related to the temporary loss of Disney programming in September 2023.
Third quarter 2024 monthly residential revenue per residential customer totaled $121.47, and increased by 1.8% compared to the prior year period. The growth was driven by promotional rate step-ups, rate adjustments, the growth of Spectrum Mobile and $63 million of residential customer credits in the prior year period related to the temporary loss of Disney programming in September 2023, 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.
Internet revenue grew by 1.7% year-over-year to $5.9 billion, driven by promotional rate step-ups and rate adjustments, partly offset by lower bundled revenue allocation and a decline in Internet customers during the last year.
Video revenue totaled $3.7 billion in the third quarter, a decrease of 6.7% compared to the prior year period, driven by a decline in video customers during the last year and a higher mix of lower priced video packages within Charter's video customer base, partly offset by promotional rate step-ups, video rate adjustments that pass through programmer rate increases and the aforementioned $63 million of residential customer credits recorded in September 2023.
Voice revenue decreased by 5.0% year-over-year to $360 million, driven by a decline in wireline voice customers over the last twelve months, partly offset by voice rate adjustments.
Third quarter mobile service revenue totaled $801 million, an increase of 37.6% year-over-year, driven by mobile line growth and higher bundled revenue allocation.
Commercial revenue increased by 2.0% year-over-year to $1.8 billion, driven by enterprise and SMB revenue growth of 3.7% and 1.0% year-over-year, respectively. The year-over-year increase in third quarter 2024 SMB revenue was driven by higher monthly SMB revenue per SMB customer, primarily due to rate adjustments. Enterprise revenue excluding wholesale increased by 5.9% year-over-year, mostly reflecting PSU growth.
Third quarter advertising sales revenue of $452 million increased by 18.1% compared to the year-ago quarter, primarily driven by higher political revenue. Excluding political revenue in both periods, advertising sales revenue decreased by 6.3% year-over-year due to a more challenged advertising market, partly offset by higher advanced advertising revenue.
Other revenue totaled $756 million in the third quarter, an increase of 11.6% compared to the third quarter of 2023, primarily driven by higher mobile device sales.
Operating Costs and Expenses
Third quarter programming costs decreased by $259 million, or 10.0% as compared to the third quarter of 2023, reflecting fewer video customers and a higher mix of lower cost packages within Charter's video customer base, partly offset by contractual programming rate increases and renewals and a $61 million benefit in the prior year period related to the temporary loss of Disney programming in September 2023.
Other costs of revenue increased by $219 million, or 15.8% year-over-year, primarily driven by higher mobile device sales and mobile service direct costs.
Costs to service customers decreased by $12 million, or 0.5% year-over-year, primarily due to lower labor costs.
Sales and marketing expenses increased by $40 million, or 4.4% year-over-year, given Spectrum's continued focus on driving growth and the launch of its new brand platform, Life Unlimited.
Other expenses increased by $25 million, or 2.3% as compared to the third quarter of 2023.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $1.3 billion in the third quarter of 2024, compared to $1.3 billion in the third quarter of 2023, with higher Adjusted EBITDA mostly offset by higher other expenses, net primarily due to non-cash changes in the value of financial instruments.
Net income per basic common share attributable to Charter shareholders totaled $8.99 in the third quarter of 2024 compared to $8.42 during the same period last year. The increase was primarily the result of the factors described above in addition to a 4.5% decrease in basic weighted average common shares outstanding versus the prior year period.
Adjusted EBITDA
Third quarter Adjusted EBITDA of $5.6 billion grew by 3.6% year-over-year, reflecting growth in revenue and operating expenses of 1.6% and 0.2%, respectively.
Capital Expenditures
Capital expenditures totaled $2.6 billion in the third quarter of 2024, a decrease of $398 million compared to the third quarter of 2023, driven by lower spend on CPE and upgrade/rebuild (primarily network evolution). Line extensions capital expenditures totaled $1.1 billion in the third 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.
Charter now expects full year 2024 capital expenditures to total approximately $11.5 billion, a decrease from Charter's previous expectation of approximately $12.0 billion. The decrease primarily reflects lower expected network evolution and line extension spend in 2024, partly offset by higher expected rebuild spend related to plant restoration following recent hurricanes. Charter now expects full year 2024 network evolution spend of approximately $1.1 billion versus prior expectations of approximately $1.6 billion, due to the timing of software certification and integration. Charter now expects full year 2024 line extensions spend of approximately $4.3 billion versus $4.5 billion previously, reflecting a temporary shift in labor resources for plant restoration efforts following hurricanes Helene and Milton. 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 third quarter of 2024, net cash flows from operating activities totaled $3.9 billion, in-line with the prior year quarter, with higher Adjusted EBITDA offset by higher cash taxes.
Free cash flow in the third quarter of 2024 totaled $1.6 billion, an increase of $522 million compared to the third quarter of 2023. The year-over-year increase in free cash flow was primarily driven by lower capital expenditures and a more favorable change in accrued expenses related to capital expenditures.
Liquidity & Financing
As of September 30, 2024, total principal amount of debt was $95.1 billion and Charter's credit facilities provided approximately $5.5 billion of additional liquidity in excess of Charter's $721 million cash position.
Share Repurchases
During the three months ended September 30, 2024, Charter purchased 844 thousand shares of Charter Class A common stock and Charter Holdings common units for $262 million.
Webcast
Charter will host a webcast on Friday, November 1, 2024 at 8:30 a.m. Eastern Time (ET) related to the contents of this release.
The webcast can be accessed live via the Company's investor relations website at ir.charter.com. Participants should go to the webcast link no later than 10 minutes prior to the start time to register. The webcast will be archived at ir.charter.com two hours after completion of the webcast.
Additional Information Available on Website
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024, which will be posted on the "Results & SEC Filings" section of the Company's investor relations website at ir.charter.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available in the "Results & SEC Filings" section.
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 ...
