Charter Announces Third Quarter 2020 Results

STAMFORD, Conn., Oct. 30, 2020 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and nine months ended September 30, 2020.

Charter Communications Logo. (PRNewsfoto/Charter Communications, Inc.)

Key highlights:

  • Third quarter total residential and small and medium business ("SMB") customer relationships increased by 457,000, compared to 310,000 during the third quarter of 2019. Over the last 12 months, total customer relationships grew by 6.8%.
  • Third quarter total residential and SMB Internet customers increased by 537,000, compared to 380,000 during the third quarter of 2019. Over the last 12 months, total Internet customers grew by 2.3 million, or 8.8%, to 28.6 million.
  • Charter added 363,000 mobile lines in the third quarter, compared to 276,000 during the third quarter of 2019. As of September 30, 2020, Charter served a total of 2.1 million mobile lines.
  • Third quarter revenue of $12.0 billion grew by 5.1% year-over-year, driven by residential revenue growth of 4.0%, mobile revenue growth of 91.8% and advertising revenue growth of 16.8%.
  • Third quarter Adjusted EBITDA1 of $4.6 billion grew by 13.6% year-over-year, while third quarter cable Adjusted EBITDA1 of $4.7 billion grew by 11.7% year-over-year.
  • Net income attributable to Charter shareholders totaled $814 million in the third quarter, compared to $387 million during the same period last year.
  • Third quarter capital expenditures totaled $2.0 billion and included $139 million of mobile-related capital expenditures.
  • Consolidated free cash flow1 in the third quarter of 2020 totaled $1.8 billion, compared to $1.3 billion in 2019. Cable free cash flow1 totaled $2.0 billion in the third quarter of 2020, versus $1.5 billion in 2019.
  • During the third quarter, Charter purchased approximately 6.1 million shares of Charter Class A common stock and Charter Communications Holdings, LLC ("Charter Holdings") common units for approximately $3.6 billion.

"Our long-term strategy of growing customer relationships by delivering high-quality products and service remains on track," said Tom Rutledge, Chairman and CEO of Charter Communications, Inc. "We've added two million customer relationships in the past year and remain focused on executing a proven operating and investment strategy that works for customers, employees and the communities we serve, creating shareholder value for the long term."

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





September 30,
2020 (a)


September 30,
2019 (a)


Y/Y Change

Footprint (b)







Estimated Passings


53,022



51,940



2.1

%








Customer Relationships (c)







Residential


28,912



27,037



6.9

%

SMB


2,021



1,930



4.7

%

Total Customer Relationships


30,933



28,967



6.8

%








Residential


416



282



47.9

%

SMB


41



28



46.0

%

Total Customer Relationships Net Additions


457



310



47.7

%








Total Customer Relationship Penetration of Estimated Passings (d)


58.3

%


55.8

%


2.5 ppts








Monthly Residential Revenue per Residential Customer (e)


$

109.03



$

112.00



(2.7)

%

Monthly SMB Revenue per SMB Customer (f)


$

164.77



$

169.44



(2.8)

%








Residential Customer Relationships Penetration







Single Play Penetration (g)


44.2

%


42.7

%


1.5 ppts

Double Play Penetration (g)


32.3

%


29.9

%


2.4 ppts

Triple Play Penetration (g)


23.5

%


27.3

%


(3.8) ppts








% Residential Non-Video Customer Relationships


45.7

%


41.8

%


3.9 ppts








Internet







Residential


26,807



24,595



9.0

%

SMB


1,826



1,730



5.5

%

Total Internet Customers


28,633



26,325



8.8

%








Residential


494



351



40.3

%

SMB


43



29



47.5

%

Total Internet Net Additions


537



380



41.3

%








Video







Residential


15,705



15,725



(0.1)

%

SMB


530



520



1.9

%

Total Video Customers


16,235



16,245



(0.1)

%








Residential


53



(77)



169.4

%

SMB


14



2



410.1

%

Total Video Net Additions


67



(75)



189.3

%








Voice







Residential


9,335



9,595



(2.7)

%

SMB


1,207



1,120



7.8

%

Total Voice Customers


10,542



10,715



(1.6)

%








Residential


(63)



(213)



70.1

%

SMB


38



23



68.7

%

Total Voice Net Additions


(25)



(190)



86.8

%








Mobile Lines







Residential


2,020



793



154.6

%

SMB


40



1



NM


Total Mobile Lines


2,060



794



159.5

%








Residential


348



275



26.5

%

SMB


15



1



NM


Total Mobile Lines Net Additions


363



276



31.5

%








Enterprise (h)







Enterprise Primary Service Unites ("PSUs")


272



264



3.1

%

Enterprise Net Additions


2



6



(68.9)

%


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.  NM - Not meaningful

During the third quarter of 2020, Charter's residential customer relationships grew by 416,000, while third quarter 2019 residential customer relationships grew by 282,000. As of September 30, 2020, Charter had 28.9 million residential customer relationships, with year-over-year growth of 1.9 million, or 6.9%.

Charter added 494,000 residential Internet customers in the third quarter of 2020, versus third quarter 2019 residential Internet customer net additions of 351,000. As of September 30, 2020, Charter had 26.8 million residential Internet customers, with over 85% subscribing to tiers that provided 100 Mbps or more of speed, and over 50% subscribing to tiers that provided 200 Mbps or more of speed. Currently, 200 Mbps is the slowest speed offered to new Spectrum Internet® customers in approximately 60% of Charter's footprint, with 100 Mbps the slowest speed offered in the remaining 40% of its footprint.

Residential video customers increased by 53,000 in the third quarter of 2020, while third quarter 2019 residential video customers decreased by 77,000. As of September 30, 2020, Charter had 15.7 million residential video customers.

During the third quarter of 2020, residential wireline voice customers declined by 63,000, while third quarter 2019 residential wireline voice customers declined by 213,000. As of September 30, 2020, Charter had 9.3 million residential wireline voice customers.

Third quarter 2020 residential revenue per residential customer (excluding mobile) totaled $109.03, and declined by 2.7% compared to the prior year period, driven by $218 million of estimated credits to be provided to Charter's video customers upon finalization of expected rebates from sports programming networks which result from fewer games broadcast during COVID-19. Excluding the planned credit to video customers, residential revenue per residential customer (excluding mobile) totaled $111.56, and declined 0.4% year-over-year given a higher percentage of non-video customers and a higher mix of lower priced video packages within Charter's video customer base, lower pay-per-view and video on demand revenue and lower installation revenue partly offset by promotional rate step-ups and rate adjustments.

SMB customer relationships grew by 41,000 during the third quarter of 2020, compared to growth of 28,000 during the third quarter of 2019. As of September 30, 2020, Charter had 2.0 million SMB customer relationships, with year-over-year growth of 4.7%. Enterprise PSUs grew by 2,000 during the third quarter of 2020 compared to growth of 6,000 during the third quarter of 2019. As of September 30, 2020, Charter had 272,000 enterprise PSUs, with growth of 3.1% year-over-year.

During the third quarter of 2020, Charter added 363,000 mobile lines, and as of September 30, 2020, Charter served a total of 2.1 million mobile lines. Spectrum Mobile is available to all new and existing Spectrum Internet customers and runs on America's most awarded LTE network combined with Spectrum WiFi. Spectrum Mobile customers can choose one of two simple ways to pay for data, "Unlimited", or "By the Gig." All plans include 4G and 5G access, with no added taxes, fees or contracts.

Third 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 September 30,


2020


2019


% Change

REVENUES:






Internet

$

4,722



$

4,195



12.5

%

Video

4,221



4,359



(3.2)

%

Voice

449



477



(5.8)

%

Residential revenue

9,392



9,031



4.0

%

Small and medium business

988



974



1.5

%

Enterprise

617



644



(4.3)

%

Commercial revenue

1,605



1,618



(0.8)

%

Advertising sales

460



394



16.8

%

Mobile

368



192



91.8

%

Other

214



215



(0.7)

%

Total Revenue

12,039



11,450



5.1

%







COSTS AND EXPENSES:






Cable operating costs and expenses

6,944



7,027



(1.2)

%

Mobile operating costs and expenses

456



337



35.2

%

Total operating costs and expenses

7,400



7,364



0.5

%







Adjusted EBITDA

$

4,639



$

4,086



13.6

%







Adjusted EBITDA margin

38.5

%


35.7

%









Cable Adjusted EBITDA

$

4,727



$

4,231



11.7

%

Cable Adjusted EBITDA margin

40.5

%


37.6

%









Capital Expenditures

$

2,014



$

1,651




% Total Revenue

16.7

%


14.4

%









Cable Capital Expenditures

$

1,875



$

1,551




% Total Cable Revenue

16.1

%


13.8

%









Net income attributable to Charter shareholders

$

814



$

387




Earnings per common share attributable to Charter shareholders:






Basic

$

4.01



$

1.77




Diluted

$

3.90



$

1.74










Net cash flows from operating activities

$

3,664



$

2,943




Free cash flow

$

1,754



$

1,271




Cable free cash flow

$

2,019



$

1,527




Revenues

Third quarter revenue increased by 5.1% year-over-year to $12.0 billion, driven by growth in Internet, mobile and advertising.

Residential revenue totaled $9.4 billion in the third quarter, an increase of 4.0% year-over-year, despite $218 million of estimated credits to be provided to Charter's video customers upon finalization of expected rebates from sports programming networks which result from fewer games broadcast during COVID-19.

Internet revenue grew by 12.5% compared to the year-ago quarter, to $4.7 billion, driven by growth in Internet customers during the last year, promotional rate step-ups and rate adjustments.

Video revenue totaled $4.2 billion in the third quarter, a decrease of 3.2% compared to the prior year period, driven by the estimated customer credits related to sports programming, a higher mix of lower priced video packages within Charter's video customer base, a decline in video customers during the last year, lower pay-per-view and video on demand revenue and lower installation revenue partly offset by rate adjustments and promotional rate step-ups.

Voice revenue totaled $449 million in the third quarter, a decrease of 5.8% compared to the third quarter of 2019, driven by a decline in wireline voice customers over the last 12 months and value-based pricing.

Commercial revenue declined to $1.6 billion, a decrease of 0.8% over the prior year period, driven by Charter's sale of Navisite in the third quarter of 2019, lower cell tower backhaul and other wholesale revenue – both in Enterprise, and an $11 million impact from COVID-19 related seasonal plans in SMB. SMB revenue growth absent the COVID-19 seasonal plan impact was 2.6% year-over-year, reflecting customer relationship growth. Enterprise retail revenue excluding Navisite in 2019 and wholesale revenue, was 5.8%, reflecting PSU growth.

Third quarter advertising sales revenue of $460 million increased by 16.8% compared to the year-ago quarter, driven by higher political revenue and the timing of the return of multiple sports events and leagues, partly offset by lower local and national sales which are recovering from previous lows during the COVID-19 pandemic. Excluding political revenue in both periods, advertising sales revenue declined by 11.2% year-over-year.

Third quarter mobile revenue totaled $368 million, an increase of 91.8% year-over-year.

Other revenue totaled $214 million in the third quarter, a decrease of 0.7% year-over-year, driven by lower processing fees, partly offset by higher video customer premise equipment ("CPE") sold to customers.

Operating Costs and Expenses

Third quarter total operating costs and expenses increased by $36 million, or 0.5% year-over-year. Excluding mobile costs in both periods, operating costs and expenses decreased by 1.2% compared to the year-ago quarter.

Third quarter programming costs decreased by $63 million, or 2.3% as compared to the third quarter of 2019, reflecting $163 million of estimated sports network rebates which result from fewer games broadcast during COVID-19, a higher mix of lower cost video packages within Charter's video customer base and fewer video customers, partly offset by contractual programming increases and renewals.

Regulatory, connectivity and produced content expenses were essentially unchanged year-over-year, as lower regulatory and franchise fees were offset by higher video CPE sold to customers and higher sports rights costs. The impact of an expected reduction in sports rights content costs were immaterial in the quarter as this benefit will be amortized over the life of the contract, consistent with the deferral of second quarter expense for canceled games. Together with the expected rebates shown in programming expense, Charter intends to provide a credit on its video customers' invoices for all of the rebates provided by sports programming networks when details are finalized with the networks.

Costs to service customers increased by $8 million, or 0.4% year-over-year, despite year-over-year residential and SMB customer growth of 6.8%. The year-over-year increase in costs to service customers was primarily driven by previously announced accelerated wage benefits for hourly field operations and call center employees, higher COVID-19 related benefits and the timing of medical costs, partly offset by lower bad debt and productivity improvements.

Marketing expenses decreased by $5 million, or 0.7% year-over-year.

Other expenses decreased by $23 million, or 2.5% as compared to the third quarter of 2019 primarily driven by lower enterprise costs from the sale of Navisite, lower employee travel expense and insurance costs, partly offset by higher information technology and advertising sales expense.

Third quarter mobile costs totaled $456 million, an increase of 35.2% year-over-year, and were comprised of device costs, customer acquisition costs, and service and operating costs.

Adjusted EBITDA

Third quarter Adjusted EBITDA of $4.6 billion grew by 13.6% year-over-year, reflecting growth in revenue and operating expenses of 5.1% and 0.5%, respectively. Third quarter cable Adjusted EBITDA grew by 11.7% year-over-year reflecting growth in cable revenue of 3.7% and a decline in cable operating expenses of 1.2%.

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $814 million in the third quarter of 2020, compared to $387 million in the third quarter of 2019. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA, partly offset by a pension remeasurement loss.

Net income per basic common share attributable to Charter shareholders totaled $4.01 in the third quarter of 2020 compared to $1.77 during the same period last year. The increase was primarily the result of the factors described above in addition to a 7.2% decrease in weighted average common shares outstanding versus the prior year period.

Capital Expenditures

Property, plant and equipment expenditures totaled $2.0 billion in the third quarter of 2020, compared to $1.7 billion during the third quarter of 2019, primarily driven by increases in support capital, scalable infrastructure, line extensions and Internet CPE. The year-over-year increase in support capital was primarily due to facility improvements, the timing of back office systems investments and mobile store build-outs. The increase in scalable infrastructure spending was primarily due to core network enhancements and node splits given growing customers and traffic. The increase in line extensions was driven by continued network expansion, including to rural areas. The increase in Internet CPE spending was due to higher Internet customer growth. Third quarter capital expenditures included $139 million of mobile costs, most of which are included in support capital.

Charter currently expects 2020 cable capital expenditures to be consistent and possibly lower as a percentage of cable revenue versus 2019, despite the significant acceleration in customer growth and network utilization during COVID-19.

Cash Flow and Free Cash Flow

During the third quarter of 2020, net cash flows from operating activities totaled $3.7 billion, compared to $2.9 billion in the prior year quarter. The year-over-year increase in net cash flows from operating activities was primarily due to higher Adjusted EBITDA and a favorable change in working capital.

Consolidated free cash flow in the third quarter of 2020 totaled $1.8 billion, compared to $1.3 billion during the same period last year. Cable free cash flow in the third quarter of 2020 totaled $2.0 billion, compared to $1.5 billion during the same period last year. The year-over-year increases in consolidated free cash flow and cable free cash flow were driven by an increase in net cash flows from operating activities.

Liquidity & Financing

As of September 30, 2020, total principal amount of debt was $79.1 billion and Charter's credit facilities provided approximately $4.7 billion of additional liquidity in excess of Charter's $1.3 billion cash position.

In July 2020, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. issued $3.0 billion of 4.250% senior unsecured notes due 2031. The proceeds were used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including all of CCO Holdings' 5.875% senior notes due 2024, as well as funding buybacks of Charter Class A common stock and/or Charter Holdings common units.

In October 2020, CCO Holdings and CCO Holdings Capital Corp. jointly issued an additional $1.5 billion of its 4.500% senior unsecured notes due 2032 at a price of 103.750%. The net proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including repayment of all of CCO Holdings' 5.375% senior notes due May 1, 2025, as well as funding potential buybacks of Charter Class A common stock and Charter Holdings common units.

Share Repurchases

During the three months ended September 30, 2020, Charter purchased approximately 6.1 million shares of Charter Class A common stock and Charter Holdings common units for approximately $3.6 billion.

Conference Call

Charter will host a conference call on Friday, October 30, 2020 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 8066249.

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 November 13, 2020. The conference ID code for the replay is 8066249.

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, 2020, which will be posted on the "Results & SEC Filings" 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 "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, loss on extinguishment of debt, (gain) loss on financial instruments, net, other pension (benefits) costs, net, other (income) expense, 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 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 $308 million and $927 million for the three and nine months ended September 30, 2020, respectively, and $317 million and $916 million for the three and nine months ended September 30, 2019, 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 sell the handset or tablet to customers pursuant to equipment installment plans. 

About Charter

Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband connectivity company and cable operator serving more than 30 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," "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:

  • the impact of the COVID-19 pandemic on the economy, our customers, our vendors, local, state and federal governmental responses to the pandemic and our businesses generally;
  • 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;
  • 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 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, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector;
  • 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 September 30,


Nine Months Ended September 30,


2020


2019


% Change


2020


2019


% Change

REVENUES:












Internet

$

4,722



$

4,195



12.5

%


$

13,659



$

12,322



10.8

%

Video

4,221



4,359



(3.2)

%


13,014



13,134



(0.9)

%

Voice

449



477



(5.8)

%


1,357



1,470



(7.7)

%

Residential revenue

9,392



9,031



4.0

%


28,030



26,926



4.1

%

Small and medium business

988



974



1.5

%


2,967



2,882



2.9

%

Enterprise

617



644



(4.3)

%


1,845



1,939



(4.9)

%

Commercial revenue

1,605



1,618



(0.8)

%


4,812



4,821



(0.2)

%

Advertising sales

460



394



16.8

%


1,074



1,134



(5.3)

%

Mobile

368



192



91.8

%


936



490



91.3

%

Other

214



215



(0.7)

%


621



632



(1.8)

%

Total Revenue

12,039



11,450



5.1

%


35,473



34,003



4.3

%

COSTS AND EXPENSES:












Programming

2,727



2,790



(2.3)

%


8,492



8,482



0.1

%

Regulatory, connectivity and produced content

612



612



(0.1)

%


1,651



1,770



(6.7)

%

Costs to service customers

1,902



1,894



0.4

%


5,598



5,483



2.1

%

Marketing

788



793



(0.7)

%


2,273



2,296



(1.0)

%

Mobile

456



337



35.2

%


1,243



874



42.2

%

Other expense

915



938



(2.5)

%


2,692



2,772



(2.9)

%

Total operating costs and expenses (exclusive of items shown separately below)

7,400



7,364



0.5

%


21,949



21,677



1.3

%

Adjusted EBITDA

4,639



4,086



13.6

%


13,524



12,326



9.7

%

Adjusted EBITDA margin

38.5

%


35.7

%




38.1

%


36.2

%



Depreciation and amortization

2,370



2,415





7,295



7,465




Stock compensation expense

83



71





263



238




Other operating expenses, net

14



14





23



71




Income from operations

2,172



1,586





5,943



4,552




OTHER INCOME (EXPENSES):












Interest expense, net

(946)



(963)





(2,883)



(2,833)




Loss on extinguishment of debt

(58)







(121)






Gain (loss) on financial instruments, net

69



(34)





(185)



(116)




Other pension benefits (costs), net

(115)



9





(94)



27




Other expense, net

(13)



(5)





(13)



(131)





(1,063)



(993)





(3,296)



(3,053)




Income before income taxes

1,109



593





2,647



1,499




Income tax expense

(177)



(126)





(372)



(329)




Consolidated net income

932



467





2,275



1,170




Less: Net income attributable to noncontrolling interests

(118)



(80)





(299)



(216)




Net income attributable to Charter shareholders

$

814



$

387





$

1,976



$

954
















EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:












Basic

$

4.01



$

1.77





$

9.62



$

4.30




Diluted

$

3.90



$

1.74





$

9.35



$

4.23




Weighted average common shares outstanding, basic

202,826,502



218,499,213





205,468,736



221,818,079




Weighted average common shares outstanding, diluted

208,722,129



222,355,867





211,399,781



225,337,984





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. 

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)



September 30,


December 31,


2020


2019

ASSETS

(unaudited)



CURRENT ASSETS:




Cash and cash equivalents

$

1,283



$

3,483


Accounts receivable, net

2,068



2,227


Prepaid expenses and other current assets

709



761


Total current assets

4,060



6,471






RESTRICTED CASH

3



66






INVESTMENT IN CABLE PROPERTIES:




Property, plant and equipment, net

34,196



34,591


Customer relationships, net

6,050



7,453


Franchises

67,322



67,322


Goodwill

29,554



29,554


Total investment in cable properties, net

137,122



138,920






OTHER NONCURRENT ASSETS

3,008



2,731






Total assets

$

144,193



$

148,188






LIABILITIES AND SHAREHOLDERS' EQUITY




CURRENT LIABILITIES:




Accounts payable and accrued liabilities

$

8,541



$

8,885


Current portion of long-term debt

1,715



3,500


Total current liabilities

10,256



12,385






LONG-TERM DEBT

77,947



75,578


DEFERRED INCOME TAXES

17,929



17,711


OTHER LONG-TERM LIABILITIES

4,349



3,703






SHAREHOLDERS' EQUITY:




Controlling interest

26,906



31,445


Noncontrolling interests

6,806



7,366


Total shareholders' equity

33,712



38,811






Total liabilities and shareholders' equity

$

144,193



$

148,188


 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

CASH FLOWS FROM OPERATING ACTIVITIES:








Consolidated net income

$

932



$

467



$

2,275



$

1,170


Adjustments to reconcile consolidated net income to net cash flows from operating activities:








Depreciation and amortization

2,370



2,415



7,295



7,465


Stock compensation expense

83



71



263



238


Noncash interest income, net

(10)



(17)



(31)



(89)


Other pension (benefits) costs, net

115



(9)



94



(27)


Loss on extinguishment of debt

58





121




(Gain) loss on financial instruments, net

(69)



34



185



116


Deferred income taxes

151



96



252



233


Other, net

(4)



(3)



(21)



148


Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:








Accounts receivable

(74)



(227)



159



(564)


Prepaid expenses and other assets

(76)



(49)



(240)



(225)


Accounts payable, accrued liabilities and other

188



165



61



(75)


Net cash flows from operating activities

3,664



2,943



10,413



8,390










CASH FLOWS FROM INVESTING ACTIVITIES:








Purchases of property, plant and equipment

(2,014)



(1,651)



(5,352)



(4,913)


Change in accrued expenses related to capital expenditures

104



(21)



(70)



(449)


Real estate investments through variable interest entities

(41)



(61)



(122)



(125)


Other, net

(35)



2



(43)



10


Net cash flows from investing activities

(1,986)



(1,731)



(5,587)



(5,477)










CASH FLOWS FROM FINANCING ACTIVITIES:








Borrowings of long-term debt

3,030



2,443



10,352



13,157


Repayments of long-term debt

(1,819)



(763)



(9,711)



(10,886)


Payments for debt issuance costs

(29)



(16)



(91)



(48)


Issuance of equity





23




Purchase of treasury stock

(3,361)



(2,767)



(6,868)



(4,568)


Proceeds from exercise of stock options

50



25



171



106


Purchase of noncontrolling interest

(366)



(339)



(884)



(593)


Distributions to noncontrolling interest

(37)



(38)



(114)



(116)


Borrowings for real estate investments through variable interest entities, net

39





63




Other, net

(1)



(6)



(30)



(133)


Net cash flows from financing activities

(2,494)



(1,461)



(7,089)



(3,081)










NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(816)



(249)



(2,263)



(168)


CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

2,102



846



3,549



765


CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

$

1,286



$

597



$

1,286



$

597










CASH PAID FOR INTEREST

$

1,038



$

1,048



$

3,023



$

3,065


CASH PAID FOR TAXES

$

34



$

12



$

84



$

55


 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 

UNAUDITED SUMMARY OF OPERATING STATISTICS

(in thousands, except per customer and penetration data)




Approximate as of



September 30,
2020 (a)


June 30,
2020 (a)


December 31,
2019 (a)


September 30,
2019 (a)

Footprint (b)









Estimated Passings


53,022



52,714



52,154



51,940











Customer Relationships (c)









Residential


28,912



28,496



27,277



27,037


SMB


2,021



1,980



1,958



1,930


Total Customer Relationships


30,933



30,476



29,235



28,967











Residential


416



751



240



282


SMB


41



4



28



28


Total Customer Relationships Net Additions


457



755



268



310











Total Customer Relationship Penetration of Estimated Passings (d)


58.3

%


57.8

%


56.1

%


55.8

%










Monthly Residential Revenue per Residential Customer (e)


$

109.03



$

110.82



$

113.79



$

112.00


Monthly SMB Revenue per SMB Customer (f)


$

164.77



$

166.06



$

169.06



$

169.44











Residential Customer Relationships Penetration









Single Play Penetration (g)


44.2

%


44.0

%


43.0

%


42.7

%

Double Play Penetration (g)


32.3

%


31.7

%


30.7

%


29.9

%

Triple Play Penetration (g)


23.5

%


24.3

%


26.2

%


27.3

%










% Residential Non-Video Customer Relationships


45.7

%


45.1

%


42.7

%


41.8

%










Internet









Residential


26,807



26,313



24,908



24,595


SMB


1,826



1,783



1,756



1,730


Total Internet Customers


28,633



28,096



26,664



26,325











Residential


494



842



313



351


SMB


43



8



26



29


Total Internet Net Additions


537



850



339



380











Video









Residential


15,705



15,652



15,620



15,725


SMB


530



516



524



520


Total Video Customers


16,235



16,168



16,144



16,245











Residential


53



102



(105)



(77)


SMB


14



(8)



4



2


Total Video Net Additions


67



94



(101)



(75)











Voice









Residential


9,335



9,398



9,443



9,595


SMB


1,207



1,169



1,144



1,120


Total Voice Customers


10,542



10,567



10,587



10,715











Residential


(63)



38



(152)



(213)


SMB


38



7



24



23


Total Voice Net Additions


(25)



45



(128)



(190)











Mobile Lines









Residential


2,020



1,672



1,078



793


SMB


40



25



4



1


Total Mobile Lines


2,060



1,697



1,082



794











Residential


348



313



285



275


SMB


15



12



3



1


Total Mobile Lines Net Additions


363



325



288



276











Enterprise (h)









Enterprise Primary Service Unites ("PSUs")


272



270



267



264


Enterprise Net Additions


2



1



3



6




(a)

We calculate the aging of customer accounts based on the monthly billing cycle for each account.  On that basis, at September 30, 2020, June 30, 2020, December 31, 2019 and September 30, 2019, customers included approximately 181,700, 124,500, 154,200 and 148,000 customers, respectively, whose accounts were over 60 days past due, approximately 52,300, 18,400, 13,500 and 16,400 customers, respectively, whose accounts were over 90 days past due and approximately 26,000, 10,400, 10,000 and 14,100 customers, respectively, whose accounts were over 120 days past due.  Included in the September 30, 2020 aging statistics are approximately 60,200 customers that would have been disconnected under our normal collection policies, but were not due to certain state mandates in place.



(b)

Passings represent our estimate of the number of units, such as single family homes, apartment and condominium units and SMB 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)

Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video 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 and mobile-only customer relationships.



(d)

Penetration represents residential and SMB customers as a percentage of estimated passings.  Penetration excludes mobile-only customers.



(e)

Monthly residential revenue per residential customer is calculated as total residential quarterly revenue divided by three divided by average residential customer relationships during the respective quarter and excludes mobile revenue and customers.



(f)

Monthly SMB revenue per SMB customer is calculated as total SMB quarterly revenue divided by three divided by average SMB customer relationships during the respective quarter and excludes mobile revenue and customers.



(g)

Single play, double play and triple play penetration represents the number of residential single play, double play and triple play cable customers, respectively, as a percentage of residential customer relationships, excluding mobile.



(h)

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
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

Net income attributable to Charter shareholders

$

814



$

387



$

1,976



$

954


Plus:  Net income attributable to noncontrolling interest

118



80



299



216


Interest expense, net

946



963



2,883



2,833


Income tax expense

177



126



372



329


Depreciation and amortization

2,370



2,415



7,295



7,465


Stock compensation expense

83



71



263



238


Loss on extinguishment of debt

58





121




(Gain) loss on financial instruments, net

(69)



34



185



116


Other pension (benefits) costs, net

115



(9)



94



(27)


Other, net

27



19



36



202


Adjusted EBITDA (a)

4,639



4,086



13,524



12,326


Less:  Mobile revenue

(368)



(192)



(936)



(490)


Plus:  Mobile costs and expenses

456



337



1,243



874


Cable Adjusted EBITDA

$

4,727



$

4,231



$

13,831



$

12,710










Net cash flows from operating activities

$

3,664



$

2,943



$

10,413



$

8,390


Less:  Purchases of property, plant and equipment

(2,014)



(1,651)



(5,352)



(4,913)


Change in accrued expenses related to capital expenditures

104



(21)



(70)



(449)


Free cash flow

1,754



1,271



4,991



3,028


Plus:  Mobile net cash outflows from operating activities

126



156



407



563


          Purchases of mobile property, plant and equipment

139



100



351



281


Cable free cash flow

$

2,019



$

1,527



$

5,749



$

3,872




(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
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

Customer premise equipment (a)

$

520



$

470



$

1,501



$

1,527


Scalable infrastructure (b)

424



320



979



840


Line extensions (c)

439



370



1,204



1,054


Upgrade/rebuild (d)

175



165



459



451


Support capital (e)

456



326



1,209



1,041


   Total capital expenditures

2,014



1,651



5,352



4,913


Less:  Mobile capital expenditures

(139)



(100)



(351)



(281)


Cable capital expenditures

$

1,875



$

1,551



$

5,001



$

4,632










Capital expenditures included in total related to:








Commercial services

$

358



$

327



$

942



$

956




(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).

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/charter-announces-third-quarter-2020-results-301163589.html

SOURCE Charter Communications, Inc.

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