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    Charter Communications Inc (CHTR)

    New Share Buyback Program

    Business Description

    Charter Communications, Inc. is a leading broadband connectivity company and cable operator serving over 32 million customers in 41 states under the Spectrum brand. The company offers a comprehensive range of residential and business services, including Internet, TV, Mobile, and Voice services . Charter's product lines include Internet, Video, Voice, Mobile Service, and others, with residential revenue being the largest segment .

    1. Internet - Provides high-speed broadband services to residential and business customers, forming the backbone of Charter's connectivity offerings.
    2. Video - Offers a variety of television services, including cable TV packages with a wide range of channels and on-demand content.
    3. Mobile Service - Delivers mobile phone services with flexible plans and nationwide coverage under the Spectrum brand.
    4. Voice - Supplies residential and business voice services, including landline and VoIP options for clear and reliable communication.
    5. Others - Encompasses additional services such as tailored advertising and production services through Spectrum Reach, and award-winning news and sports programming via Spectrum Networks.

    Q2 2024 Summary

    Initial Price$290.34April 1, 2024
    Final Price$296.02July 1, 2024
    Price Change$5.68
    % Change+1.96%

    What went well

    • Charter is upgrading its network to provide symmetrical and multi-gig speeds everywhere, leveraging its ubiquitous gigabit network, combined with WiFi and CBRS capabilities and a strategic relationship with Verizon to offer seamless connectivity and converged broadband, which is a unique competitive advantage in the market.
    • Mobile net additions improved in the second quarter, even excluding ACP retention offers, driven by the evolution of their mobile offerings, including innovative programs like Anytime Upgrade, Repair and Replacement Plan, and phone balance buyout program, which enhance profitable growth and attract new customer segments.
    • Effective expense management initiatives have resulted in cost reductions and increased efficiency, with the expense management process working better than expected, leading to accelerating EBITDA growth anticipated in the back half of the year.

    What went wrong

    • Shrinking Broadband Market and Loss of ACP Impact: The company indicated that in Q2, "the broadband market actually shrunk as a onetime event" due to factors like reduced housing starts, rental vacancies, and notably, the removal of the Affordable Connectivity Program (ACP) for new connects . The loss of ACP is expected to lead to more non-payment disconnects, with ongoing impacts into Q3 and potentially Q4 . This could result in higher churn rates and pressure on subscriber growth.
    • Increased Competition from Fiber Overbuilds and Alternative Providers: Despite downplaying the impact, there is acknowledgment of competitive fiber overbuilds and the expansion of footprints by fixed wireless and fiber competitors . The presence of "open access and other wholesale providers getting into the mix and increasing the fiber availability" could intensify competitive pressures and affect Charter's market share .
    • Cost Reduction Measures May Impact Service Quality: The company has initiated expense management processes, including vendor cost reductions, reduced overhead expenses, and implementing efficiency tools . While they state they are not impacting sales or service capabilities, such cost reductions could potentially affect service quality if not managed carefully .

    Q&A Summary

    1. Impact of ACP on Net Additions
      Q: How is the Affordable Connectivity Program (ACP) affecting net additions?
      A: The loss of ACP had a significant impact on net additions, resulting in a reduction of well over 100,000 subscribers in the quarter, with about half from voluntary churn and the other half from reduced gross additions. This impact was also seen in the first quarter and is expected to continue into the third quarter with more non-pay disconnects. The company views this as a one-time event and expects market activity to normalize once the ACP impact is flushed out between Q2 and Q3.

    2. Competitive Environment and Market Growth
      Q: How is the competitive environment affecting broadband market growth?
      A: Despite a shrinking broadband market in the second quarter due to factors like reduced housing starts and the removal of ACP for new connects, Charter is competing well against fixed wireless and fiber overbuilds. The pace of competitive fiber overbuild has been steady or slightly lower, and Charter's unique advantage lies in having a gigabit network deployed everywhere, upgrading to symmetrical and multi-gig speeds, and offering seamless connectivity through WiFi and strategic partnerships.

    3. Cost Reductions and Expense Management
      Q: What cost actions is Charter taking, and how will they impact financials?
      A: Charter is implementing extensive expense management initiatives, including vendor cost reductions, reduced spend on discretionary categories, overhead expense reductions, and efficiency improvements. As a result, they now expect programming costs per video customer to be flattish year-over-year, previously expected to grow 1%-2%. Cost to serve is now expected to decline by 1%-2%, inclusive of bad debt expense, compared to previous expectations of being flat with 2023.

    4. Mobile Strategy and Growth
      Q: How is Charter evolving its mobile offerings to drive growth?
      A: Charter's mobile lines increased significantly, even excluding the benefit of ACP mobile retention offers. They've introduced new programs like the Anytime Upgrade, service and repair functions, and phone balance buyout options, which are attracting customers without subsidizing phones. Their competitive pricing at $30 for Unlimited and $40 for Unlimited Plus per line offers substantial savings, contributing to strong mobile growth.

    5. Free Cash Flow and Share Repurchases
      Q: What is Charter's outlook on free cash flow and share buybacks?
      A: Charter is working on balance sheet management to extract cash to support the business, potentially doing better than previous flat working capital expectations. They believe they can continue share buybacks over the course of the year while meeting leverage targets, without having to wait until reaching 4.25x leverage before accelerating buybacks.

    6. Video Strategy and Direct-to-Consumer Offers
      Q: How is the take-up of direct-to-consumer in hybrid linear offers progressing?
      A: The take-up of direct-to-consumer (DTC) offerings is going very well, with products like Disney+ Basic growing every month since its launch in January. Charter is adding features like Disney+ Premium, the Disney Duo Basic Bundle, and plans to launch Paramount+ soon. While not expecting to completely arrest the loss of video subscribers, Charter aims to offer valuable video products as part of their broadband packages.

    7. Political Advertising Expectations
      Q: What are Charter's expectations for political advertising revenue?
      A: Political advertising is variable and depends on state-by-state dynamics and swing states. Recent events may have increased national political advertising spending, but it's uncertain whether this will occur in the right states for Charter. The company focuses on the underlying growth of the subscription business, considering political advertising as one-time in nature.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Internet5,7185,7335,7765,80523,0325,8265,8065,872
    Video4,2544,1884,0043,90516,3513,9083,8673,735
    Voice3733653793931,510374350360
    Mobile Service4975395816262,243685737801
    Mobile--------
    Residential Revenue10,84210,82510,74010,72943,13610,79310,76010,768
    - Small and Medium Business1,0911,0941,0851,0834,3531,0881,1011,096
    - Enterprise68269069872,770708721723
    Commercial Revenue1,7731,7841,7831,7837,1231,7961,8221,819
    Advertising Sales3553843844281,551391397452
    Other6836666777712,797699706756
    Total Revenue13,65313,65913,58413,71154,60713,67913,68513,795
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Enterprise PSUs Increased**4,0006,0004,0005,000-20,0004,00017,000
    **Monthly Residential Revenue per Customer ($)**120.56120.25119.28119.41-120.48120.77121.47
    **Monthly SMB Revenue per Customer ($)**164.58164.56162.94162.38-163.44165.28164.38
    **Enterprise PSUs (thousands)**288294298303-308312315
    **Subsidized Rural Passings Activated**44,00068,00078,000105,000-73,00089,000114,000

    Executive Team

    NamePositionStart DateShort Bio
    Christopher L. WinfreyPresident and Chief Executive OfficerDecember 2022Christopher L. Winfrey was named President and Chief Executive Officer of Charter Communications in December 2022. He joined Charter as Chief Financial Officer in 2010 and served as Chief Operating Officer from 2021, overseeing all cable operations .
    Richard J. DiGeronimoPresident, Product and TechnologyDecember 2022Richard J. DiGeronimo has been serving as the President, Product and Technology at Charter Communications since December 2022. He oversees Charter's product, engineering, software development, and other key areas. He joined Charter in 2008 and has held several leadership roles .
    Jessica M. FischerChief Financial OfficerOctober 2021Jessica M. Fischer is the Chief Financial Officer of Charter Communications, having been named to the position in October 2021. She oversees various departments including Accounting, Finance, and Tax, and manages Charter's equity and capital markets strategy .
    Jamal H. HaughtonExecutive Vice President, General Counsel, and Corporate Secretary2023Jamal H. Haughton joined Charter Communications as Executive Vice President, General Counsel, and Corporate Secretary in 2023. He serves as Charter's chief legal officer, overseeing all legal functions across various disciplines .
    Kevin D. HowardExecutive Vice President, Chief Accounting Officer, and Controller2006Kevin D. Howard is the Executive Vice President, Chief Accounting Officer, and Controller at Charter Communications. He joined Charter in 2002 and was promoted to his current role in 2006. He is responsible for Charter's operational and technical accounting, taxes, and financial reporting .
    R. Adam RayExecutive Vice President, Chief Commercial Officer2005R. Adam Ray is the Executive Vice President, Chief Commercial Officer at Charter Communications. He oversees all residential and SMB marketing and sales activity for Charter. Mr. Ray joined Charter in 2005 and has held several leadership positions .
    Scott A. SchwartzGroup Vice President, Corporate Finance and TreasurerN/AScott A. Schwartz serves as the Group Vice President, Corporate Finance and Treasurer of Charter Communications Operating, LLC. However, the documents do not provide specific details about his start date in this role or a detailed biography .

    Questions to Ask Management

    1. Given the loss of the Affordable Connectivity Program and its significant impact on broadband subscriber numbers, how does the company plan to mitigate this loss in the long term? What strategies are in place to replace the retention benefits previously provided by ACP, especially considering the potential for higher churn rates among low-income customers?

    2. You mentioned that your 2024 capital expenditures guidance has been reduced due to lower customer net additions and the impact of the end of ACP. Can you elaborate on how this reduction in CapEx might affect your long-term network evolution initiatives and competitive positioning, particularly in light of increasing competition from fiber overbuilds and fixed wireless access providers?

    3. In your prepared remarks, you highlighted that your standalone mobile adjusted EBITDA was positive for the first time, even after subscriber acquisition costs. Can you provide more details on the sustainability of mobile profitability, especially considering the increasingly competitive mobile market and aggressive promotions from other carriers?

    4. Regarding the hybrid direct-to-consumer linear model and inclusion of streaming services like Paramount+, Disney+, and others into your video packages, how confident are you that these partnerships will stabilize or grow your video segment? What metrics will you use to assess the success of this strategy over the next few quarters?

    5. With the expansion of open-access fiber networks and potential increased competition from wholesalers and other converged players, how do you plan to defend your market share and margins in the face of these emerging competitive threats? Specifically, what strategies are you implementing to address the risks posed by these new market entrants?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateN/A
    End Date/DurationN/A
    Total Additional AmountN/A
    Remaining Authorization$599 million
    DetailsCharter has been actively purchasing shares of its Class A common stock since September 2016. As of September 30, 2024, Charter has purchased approximately 162.3 million shares for approximately $73.3 billion.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Cost of Service: Expected to decline by 1% to 2%, inclusive of bad debt expense .
      2. Programming Costs: Expected to be flattish year-over-year .
      3. Sales and Marketing Costs: Expected to be at the low end of the 2% to 3% growth range, if not a bit below .
      4. Capital Expenditures: Expected to total approximately $12 billion, down from the previous range of $12.2 billion to $12.4 billion .
      5. Leverage: Expected to continue moving closer to the middle of their 4 to 4.5x target leverage range .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Capital Expenditures: Expected to total approximately $12 billion, down from the previous guidance of between $12.2 billion and $12.4 billion .
      2. Line Extension Spend: Expected to be approximately $4.5 billion and network evolution spend of approximately $1.6 billion .
      3. Expense Management: Programming cost per video customer expected to be flattish year-over-year. Cost to serve expected to decline by 1% to 2%. Sales and marketing costs expected to be at the low end of the 2% to 3% growth range .
      4. Leverage: Aiming to move closer to the middle of their 4 to 4.5x target leverage range .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Capital Expenditures: Expected to total between $12.2 billion and $12.4 billion, including line extension spend of approximately $4.5 billion and network evolution spend of approximately $1.6 billion .
      2. Leverage Ratio: Aiming to move closer to the middle of their 4 to 4.5x target leverage range .
      3. Rural Passings: Expected to activate approximately 450,000 new subsidized rural passings in 2024 .
      4. Network Evolution Initiative: Completion planned by 2026, at an incremental cost of just over $100 per passing .
      5. EBITDA Growth: Aiming for solid growth despite significant investments and competitive challenges .
      6. Affordable Connectivity Program (ACP) Impact: Expected to be mostly limited to the second and third quarters, with potential onetime pressure on Internet ARPU and bad debt expense .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Capital Expenditures for 2024: Expected to total between $12.2 billion and $12.4 billion, including line extensions of approximately $4.5 billion and network evolution spend of approximately $1.6 billion .
      2. Capital Expenditures Outlook through 2027: Expected to be just over $12 billion in 2024 and fall to approximately $8 billion by 2027 .
      3. Programming Cost per Video Customer for 2024: Expected to grow in the 1% to 2% range year-over-year .
      4. Cash Tax Payments for 2024: Expected to land between $1.5 billion and $1.9 billion .

    Latest news

    Recent developments and announcements about CHTR.

    Financial Actions

      Debt Issuance

      ·
      Dec 9, 2024, 10:51 PM

      Charter Communications (CHTR) has recently created a direct financial obligation or entered into an off-balance sheet arrangement. This is detailed under the heading 'Amendment No. 6 to the Amended and Restated Credit Agreement' . Such financial obligations can significantly impact the company's balance sheet and financial health. Direct financial obligations typically involve commitments that require the company to make future payments, which can affect liquidity and leverage ratios. Off-balance sheet arrangements, on the other hand, might not appear on the balance sheet but can still pose risks if they involve significant commitments or potential liabilities. Monitoring these obligations is crucial for assessing the company's financial stability and potential risks.

      New Share Buyback Program

      ·
      Nov 13, 2024, 12:00 AM

      Charter Communications (CHTR) has announced a new buyback program as part of its merger agreement with Liberty Broadband. The key points of the program are as follows:

      • Monthly Repurchases: Charter will repurchase shares of its common stock from Liberty Broadband each month during the merger period. The repurchase amount will be the greater of $100 million or an amount ensuring Liberty Broadband meets its liquidity requirements .
      • Repurchase Price: The repurchase price will be determined based on the existing letter agreement, with adjustments if no shares are repurchased during the relevant period .
      • Liquidity and MAE Events: If a liquidity event or material adverse effect (MAE) event occurs, the repurchase amount will be adjusted or tolled until the event no longer exists .
      • Loans in Lieu of Repurchases: If repurchases are not permitted under applicable law or would reduce Liberty Broadband's equity interest below 25.25%, Charter will provide loans to Liberty Broadband instead .
      • Use of Proceeds: Proceeds from repurchases or loans will be used by Liberty Broadband to repay its outstanding debt .

      This program is designed to support Liberty Broadband's liquidity and debt repayment needs during the merger process, ensuring financial stability and compliance with regulatory requirements.**

    Legal & Compliance

      Legal Proceedings

      ·
      Dec 9, 2024, 10:51 PM

      Summary of the Legal Matter Involving Charter Communications (CHTR):

      • Key Parties Involved:

        • Charter Communications Operating, LLC (the Borrower)
        • CCO Holdings, LLC (Holdings)
        • Bank of America, N.A. (Administrative Agent)
        • Various Lenders and Issuing Lenders

      • Nature of the Proceedings:

        • The document outlines an amendment (Amendment No. 6) to the existing credit agreement, which involves establishing new classes of commitments and loans, converting existing loans, and making other amendments to the credit agreement. Specifically, it includes the conversion of Revolving B Commitments to Revolving C Commitments, Term A-5 Loans to Term A-7 Loans, and Term B-2 Loans to Term B-5 Loans .

      • Potential Financial or Operational Consequences:

        • The amendment could impact Charter Communications' financial structure by altering the terms and conditions of its existing loans and commitments. This may affect the company's liquidity and financial flexibility, depending on the terms of the new loans and commitments .

      • Legal and Compliance Aspects:

        • The amendment is governed by the law of the State of New York, and all parties involved have waived their right to a jury trial in any legal proceedings related to this amendment .
        • The document also includes provisions for electronic execution of documents and compliance with the USA Patriot Act and Beneficial Ownership Regulation .

      • Operational Implications:

        • The changes in loan structures and commitments may require adjustments in financial reporting and compliance with new terms set forth in the amendment .

      This summary provides an overview of the legal and financial implications of the recent amendment to Charter Communications' credit agreement, highlighting the key parties, nature of the proceedings, and potential impacts on the company. The amendment reflects strategic financial management to optimize the company's debt structure and maintain compliance with regulatory requirements.