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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Charter Communications, Inc.    CHTR

CHARTER COMMUNICATIONS, INC.

(CHTR)
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Charter Communications : 3Q20 Earnings Presentation

10/30/2020 | 08:50am EST

Third Quarter 2020 Results

October 30, 2020

Cautionary Statement Regarding Forward-Looking Statements

This quarterly presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act, 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 Securities and Exchange Commission (the "SEC"). Many of the forward-looking statements contained in this quarterly presentation 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 quarterly presentation are set forth in this quarterly presentation, 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 video, Internet, 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 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 presentation.

Third Quarter 2020 Results

1

Thomas M. Rutledge

Chairman and CEO, Charter Communications

Third Quarter Overview

Revenue

(In Millions)

Residential

Commercial

Advertising, Mobile, Other

$11,450

5.1%

$12,039

$1,042

30.1%

$801

$1,605

$1,618

(0.8)%

$9,031

4.0%

$9,392

3Q193Q20

Adjusted EBITDA1)

(In Millions) Cable Adjusted EBITDA Mobile Adjusted EBITDA

13.6%$4,639

$4,086

$4,727

$4,231

11.7%

3Q19

3Q20

1) See notes on slide 20.

Operating and Financial Overview

  • Total residential and SMB customer relationship1) growth of 6.8% Y/Y, with net adds of 457k in 3Q20 vs. 310k in 3Q19
  • Total residential and SMB Internet customers up 2.3M Y/Y, or 8.8%
  • Total revenue growth of 5.1% Y/Y
    • Residential revenue growth of 4.0% Y/Y, despite $218M of estimated sports credits to be provided to video customers
    • Commercial revenue declined 0.8% Y/Y, but growth of 0.7% excluding Navisite revenue in 3Q19
    • Advertising revenue growth of 16.8% Y/Y driven by higher political revenue
    • Mobile revenue growth of 91.8% Y/Y
  • Adjusted EBITDA1) growth of 13.6% Y/Y
  • Cable Adjusted EBITDA1) growth of 11.7% Y/Y
  • Net income attributable to Charter shareholders of $814M in 3Q20 vs. $387M in 3Q19

Third Quarter 2020 Results

3

Christopher L. Winfrey

Chief Financial Officer, Charter Communications

Residential and SMB Customers

Customer Relationships1)

Customer Net Additions1)

(In Millions)

Residential

Small and Medium Business

(In '000s)

Residential

Small and Medium Business

29.0

6.8%

30.9

457

41

2.0

4.7%

1.9

310

28

28.9

416

27.0

6.9%

282

3Q19

3Q20

3Q19

3Q20

Residential Net Additions / (Losses)

SMB Net Additions

(In '000s)

(In '000s)

3Q19

3Q20

Y/Y Change

3Q19

3Q20

Y/Y Change

Internet

351

494

143

Internet

29

43

14

Video

(77)

53

130

Video

2

14

12

Voice

(213)

(63)

150

Voice

23

38

15

Mobile Lines

275

348

73

Mobile Lines

1

15

14

1) See notes on slide 20.

Third Quarter 2020 Results

5

Residential and SMB Customers

Customer Relationships1)

YTD Customer Net Additions1)

(In Millions)

Residential

Small and Medium Business

(In '000s)

Residential

Small and Medium Business

29.0

6.8%

30.9

1,698

4.7%

2.0

63

1.9

864

1,635

27.0

6.9%

28.9

97

767

3Q19

3Q20

3Q19 YTD

3Q20 YTD

YTD Residential Net Additions / (Losses)

YTD SMB Net Additions

(In '000s)

(In '000s)

3Q19 YTD

3Q20 YTD

Y/Y Change

3Q19 YTD

3Q20 YTD

Y/Y Change

Internet

970

1,899

929

Internet

96

70

(26)

Video

(379)

85

464

Video

18

6

(12)

Voice

(540)

(108)

432

Voice

69

63

(6)

Mobile Lines

659

942

283

Mobile Lines

12)

36

35

  1. See notes on slide 20.
  2. Mobile launched to SMB customers in 3Q19.

Third Quarter 2020 Results

6

Revenue

Revenue and Y/Y % Growth

(In Millions)

Cable1)

Cable + Mobile2)

$11,450

$11,761

$11,738

$11,696

$12,039

5.1%

4.7%

4.8%

5.1%

3.1%

3.5%

3.4%

3.7%

3.7%

1.8%

3Q19

4Q19

1Q20

2Q20

3Q20

Revenue Split by Type

(In Millions)

3Q19

3Q20

Y/Y Change

Residential

$9,031

$9,392

4.0%

Commercial

1,618

1,605

(0.8)%

Other

215

214

(0.7)%

Cable excl. Adv.

$10,864

$11,211

3.2%

Advertising

394

460

16.8%

Mobile

192

368

91.8%

Total Revenue

$11,450

$12,039

5.1%

  1. Represents total Y/Y % revenue growth excluding mobile revenue.
  2. Represents total Y/Y % revenue growth including mobile revenue.
  3. Residential Revenue per Residential Customer excludes mobile revenue and customers.

Quarterly Highlights

  • Residential revenue growth of 4.0% Y/Y driven by residential customer growth of 6.9% Y/Y, partly offset by $218M of estimated sports credits to be provided to video customers
  • Total commercial revenue declined 0.8%
    • SMB growth of 1.5%
    • Enterprise declined 4.3%; growth of 5.8% when excluding Navisite and wholesale
  • Ad revenue growth of 16.8% Y/Y driven by political

Residential Revenue per Residential Customer3)

$112.00(2.7)% $109.03

3Q19

3Q20

Third Quarter 2020 Results

7

Adjusted EBITDA1)

Adjusted EBITDA1) and Y/Y % Growth

(In Millions)

Cable Adjusted EBITDA

Adjusted EBITDA

$4,529

$4,396

$4,489

$4,639

$4,086

13.6%

8.9%

8.4%

11.7%

7.3%

5.0%

8.8%

8.1%

6.7%

3.4%

3Q19

4Q19

1Q20

2Q20

3Q20

LTM Adjusted EBITDA1)

(In Millions)

Cable Adjusted EBITDA

Mobile Adjusted EBITDA

Quarterly Highlights

Adjusted EBITDA1) grew 13.6% Y/Y

Cable Adjusted EBITDA1) grew 11.7% Y/Y

Operating costs declined 1.2% Y/Y when

excluding mobile

Programming costs declined 2.3% Y/Y, and

includes a $163M benefit related to sports

network rebates

Regulatory, connectivity and produced content

declined 0.1% Y/Y due to lower regulatory and

franchise fees, offset by higher video CPE sold

to customers and higher sports rights costs

Costs to service customers increased 0.4%

Y/Y vs. 6.8% Y/Y increase in total customer

relationships; growth was driven by previously

$16,490

9.5%$18,053

announced accelerated wage benefits and

higher medical costs, mostly offset by lower

bad debt and productivity improvements

$16,9968.8%$18,496

3Q19

3Q20

1) See notes on slide 20.

Marketing expenses declined 0.7% Y/Y

Other expenses declined 2.5% Y/Y, primarily

due to Navisite costs in the prior year period

Third Quarter 2020 Results

8

3Q20 COVID-19 Related Financial Impacts

Favorable

Impact

(Unfavorable)

In millions

Residential

($227)

SMB

(11)

Advertising Sales

(55)

Total Estimated Revenue Impact

($293)

Programming

$163

Reg., Connect. and Prod. Cont.

-

Costs to Service Customers - Bad Debt

87

Costs to Service Customers - Labor

(86)

Marketing

(4)

Other Impacts

23

Total Estimated Expense Impact

$183

Comments

($218M) estimated sports credits to be provided to video customers1), ($9M) pay-per-view

Seasonal plans for closed businesses

COVID-19 impact based on canceled bookings and mgmt. estimate

Estimated rebates from sports programming networks1)

Additional Lakers games, offset by fewer Dodgers games, the multi- period amortization of sports content cost reductions1) and lower franchise fees

Better payment and collection trends

Wage rate increase, COVID flex time benefits and higher medical costs

Higher medical costs and COVID flex time benefits, partially offset by payroll tax credits

Lower employee travel and ad sales expense, partially offset by higher facilities costs and protective equipment related to COVID-19

Net Impact

($110)

  1. The difference between the $218 million estimated sports credits to be provided to video customers and the $163 million of sports programming network rebates is primarily due to an expected reduction in sports rights content costs which will be recognized in Regulatory, Connectivity and Produced Content expense over the remaining life of the contract, consistent with the deferral of second quarter expense for canceled games.

Third Quarter 2020 Results

9

Net Income

Net Income

(In Millions, except per share data)

3Q20

3Q19

Y/Y Var.

Adjusted EBITDA

1)

$

4,639

$

4,086

$

553

Depreciation and Amortization

2,370

2,415

(45)

Stock Compensation Expense

83

71

12

Other Operating Expenses, Net

14

14

-

Income from Operations

2,172

1,586

586

Interest Expense, Net

(946)

(963)

17

Loss on Extinguishment of Debt

(58)

-

(58)

Gain (Loss) on Financial Instr., Net

69

(34)

103

Other Pension Benefits (Costs), Net

(115)

9

(124)

Other Expense, Net

(13)

(5)

(8)

(1,063)

(993)

(70)

Income before Income Taxes

1,109

593

516

Income Tax Expense

(177)

(126)

(51)

Consolidated Net Income

932

467

465

Less: Noncontrolling Interest

(118)

(80)

(38)

Net Income Attributable to

Charter Shareholders

$

814

$

387

$

427

Earnings per Common Share

Attr. to Charter Shareholders

Basic

$

4.01

$

1.77

$

2.24

Diluted

$

3.90

$

1.74

$

2.16

1) See notes on slide 20.

Quarterly Highlights

  • Depreciation and amortization $45M lower Y/Y
  • Loss on extinguishment of debt of $58M due to the call of CCO Holdings notes in August 2020
  • Change in gain (loss) on financial instruments, net represents fluctuations in the FMV of the Great
    Britain Pound ("GBP") principal debt and the GBP swap
  • Other pension costs of $115M due to net liability remeasurement that resulted in a loss
  • Income tax expense $51M higher Y/Y primarily due to higher pretax income

Third Quarter 2020 Results

10

Capital Investment

Capital Expenditures by NCTA Category

(In Millions)

CPE/Install

Scalable Infrastr.

Line Ext.

Upgrade/Rebuild

Support

$2,282

$1,877

$2,014

$1,651

$567

$1,461

$397

$456

$183

$326

$175

$390

$356

$155

$165

$422

$439

$370

$599

$129

$343

$424

$385

$320

$170

$543

$518

$520

$470

$463

3Q19

4Q19

1Q20

2Q20

3Q20

Capital Expenditures

(In Millions)

LTM

3Q19

3Q20

3Q19

3Q20

Cable

$1,551

$1,875

$6,959

$7,132

Mobile

100

139

387

502

Total

$1,651

$2,014

$7,346

$7,634

Of which: All-digital

-

-

28

-

Of which: Commercial

327

358

1,335

1,300

Highlights

  • 3Q20 capex of $2.0B comprised of $1.9B cable and $139M mobile
    • $130M Y/Y increase in Support due to facility improvements and investments in back office systems and mobile store build-outs
    • $104M Y/Y increase in Scalable Infrastructure primarily due to core network enhancements and node splits given growing customers and traffic
    • $69M Y/Y increase in Line Extensions due to continued network expansion, including to rural areas
    • $50M Y/Y increase in CPE/Install primarily due to higher Internet CPE purchases related to Internet customer growth
    • Mobile capital of $139M for mobile store build- outs and back office systems, most of which are included in support capital

Third Quarter 2020 Results

11

Free Cash Flow1)

Free Cash Flow1)

Quarterly Highlights

(In Millions)

Free Cash Flow1)

3Q20

3Q19

1)

Y/Y Var.

Consolidated Free Cash Flow1) ("FCF") of $1.8B,

Cable Adjusted EBITDA

$ 4,727

$ 4,231

$ 496

$0.5B higher Y/Y

Mobile Adjusted EBITDA1)

(88)

(145)

Cable Capex

(1,875)

(1,551)

Mobile Capex

(139)

(100)

Cash Paid for Interest, Net

(1,034)

(1,040)

Cash Taxes, Net

(33)

(11)

Cable Working Capital

262

(83)

Mobile Working Capital

(38)

(11)

Other

(28)

(19)

Consolidated Free Cash Flow 1)

1,754

1,271

Memo: Cable Free Cash Flow 1)

2,019

1,527

Memo: Mobile Free Cash Flow 1)

(265)

(256)

57

  1. Cable FCF1) of $2.0B, $0.5B higher Y/Y

(39)

6 Financing Activities and Leverage

  1. Borrowings of long-term debt exceeding

345repayments by $1.2B

  1. Payment of $37.5M preferred dividend to A/N

(9)

$3.6B of common share and unit repurchases

483

492 Remain within target total leverage range of 4-4.5x

(9)

Since

Buyback Summary

3Q20 Sep 2016

Financing Activities

(2,533)

(1,461)

(1,072)

Common Shares Repurchased (M)

5.5

81.2

Other

(35)

2

(37)

x Avg. Price

$594.40

$374.67

= Total Common Shares Repurchased ($B)

$3.3

$30.4

Change in Cash2)

$

(814)

$

(188)

$

(626)

Total Liquidity3)

A/N Common Units Repurchased (M)

0.6

11.7

$

5,991

$

4,840

$

1,151

x Avg. Price

$568.19

$369.16

Leverage (LTM Adj. EBITDA)1,4)

4.31x

4.47x

-0.16x

= A/N Common Units Repurchased ($B)

$0.4

$4.3

Total Common Shares & Units Repurchased (M)5)

6.1

92.9

Cable Leverage 1,4)

4.21x

4.34x

-0.13x

% of FDSO Repurchased6)

1.9%

29.5%

  1. See notes on slide 20.
  2. Excludes impact of changes to restricted cash of negative $2M in 3Q20.
  3. Includes revolver availability and unrestricted cash on hand.
  4. Leverage is total principal amount of debt less cash and cash equivalents divided by LTM Adjusted EBITDA1) of $18,053M and $16,490M as of 9/30/20 and 9/30/19, respectively. Cable leverage is total principal amount of debt less cash and cash equivalents divided by LTM cable Adjusted EBITDA1) of $18,496M and $16,996M as of 9/30/20 and 9/30/19, respectively. The leverage calculations do not reflect the leverage calculations pursuant to Charter's indentures or credit agreements.

Total Common Share & Units Repurchased ($B)

$3.6

$34.7

  1. Excludes 367,372 shares withheld from employees for the payment of taxes and exercise costs upon the exercise of stock options or vesting of other equity awards during 3Q20, and 3,072,062 since Sep. 2016.
  2. Represents % of fully diluted shares outstanding (FDSO), as-exchanged,as-converted, as of 6/30/16.

Third Quarter 2020 Results

12

Capital Structure Summary

As of Sep 30, 2020

($ In Millions, unlessIssue otherwise noted)

Type

Rates1)

/

Shares

Issuer Amount2)

Equity (Mkt Cap)

Aggregate Leverage

Debt3) Ratio4)

Charter

Communications,

Inc. (CCI)

Charter

Communications

Holdings, LLC (CCH)

Partnership

CCO Holdings, LLC

(CCOH)

Charter

Communications

Operating, LLC

(CCO)

Operating

Subsidiaries

  • Shares Outstanding (S/O)
  • S/O + As-Converted and As- Exchanged CCH Units

A/N Preferred CCH Units

Sr. Notes due 2023-2032

Sr. Sec. Notes due 2021-20551st Lien Bankdue 2023-2027 Total CCO

Equity

200M

225M5)

Convertible6.0% Preferred

High Yield

4.000 - 5.875%

Investment Grade

1.901 - 8.375%

Loans / Revolver

L + 1.25-1.75%

  • $125B
  • $141B

$2,500

$23,500

$45,345 $10,219$55,564

$79,064 4.31x

$55,564 3.01x

  1. Interest rates are stated bank interest rates or bond coupon rates.
  2. Issuer amount includes principal value of debt and current equity market capitalization of shares outstanding based on a closing share price of $624.34 on 9/30/20. Equity market capitalization, on an as-convertedas-exchanged basis, includes the estimated market value of A/N common CCH units and the market value of A/N convertible preferred CCH units with a face value of $2,500M.
  3. Aggregate debt is total principal amount of debt, excluding intercompany loans and $785M of guarantees, letters of credit and finance leases.
  4. Leverage equals aggregate debt less cash and cash equivalents divided by LTM Adjusted EBITDA6) of $18,053M. The leverage calculations do not reflect the leverage calculations pursuant to Charter's indentures or credit agreements.
  5. Assumes exchange and conversion of Advance/Newhouse (A/N) common and preferred CCH units into Charter stock.
  6. See notes on slide 20.

Third Quarter 2020 Results

13

Debt Maturity Profile

As of September 30, 2020; Pro-Forma1) for Recent Transactions

(In Millions) CCO Credit Facilities CCO Secured Notes CCOH Unsecured Notes

$9,820

Weighted Average Cost of Debt = 4.7% Weighted Average Life of Debt = 12.2 Years 93% of debt matures beyond 2022

$7,587

4,500

$5,800

4,050

$5,406

$4,750

$4,038

$3,277

3,000

$3,500

2,500

$2,900

$2,800

$2,750

$2,500

$2,450

$2,265 5,320

$2,300

$1,977

$1,936

$2,000

$2,089

4,000

1,500

3,000

500

3,537

$1,500

$1,500

$1,400

$1,200

$1,250

$1,250

$1,000

2,000

2,406

1,700

2,250

1,000

$500

1,250

$69

277

277

436

265

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2035

2037

2038

2039

2040

2041

2042

2045

2047

2048

2049

2050

2051

2055

1) Pro forma for October 13, 2020 $1.5B add-on to 4.50% CCOH notes due 2032 and subsequent call of $750M 5.375% CCOH notes due 2025. Maturity towers include scheduled amortization for term loans.

Third Quarter 2020 Results

14

Significant Tax Assets Support Cash Flow Growth

Tax Assets as of December 31, 2019

  • $7.5B of loss carryforwards shield cash taxes
  • Charter does not expect to become a meaningful federal cash tax payer until 2022
  • Tax receivable agreement with A/N drives meaningful value for Charter shareholders via basis step-up at point of conversion and/or exchange of partnership units

Estimated Loss Carryforward Availability1)

Valuable Tax Receivables Agreement with A/N

Loss

Carryforwards

~$7.5B

2020 $6.6B

2021+ $0.9B

$6.6B of loss carryforward is unrestricted, or become unrestricted, in 2020

$0.9B of loss carryforward becomes unrestricted at $226M annually, between 2021-2024

  • Charter will receive additional tax basis step-up upon any future A/N conversion and/or exchange of its partnership units into Charter stock
  • Charter retains 50% of the cash tax savings value associated with the tax basis step-up received, if and when A/N converts and/or exchanges partnership units for shares in Charter
  • A/N receives 50% of the net cash tax savings value associated with the tax basis step-up received by Charter, on a with and without FIFO basis, when the step-up benefits are used by Charter

1) Current availability estimates subject to change.

Third Quarter 2020 Results

15

Integrated Operating, Balance Sheet and Capital Allocation Strategy

Unique asset with superior network infrastructure and long runway for growth

  • High-capacitytwo-way network delivering superior connectivity and data-rich wireline and wireless products, with large opportunity for residential and commercial customer growth
  • Only scaled, publicly-tradedpure-play cable operator in US
  • Not reliant on M&A for success

Execution of our customer-focused operating and long-term cash flow growth strategy

  • Extend industry-leading customer and revenue growth to large set of underpenetrated assets
  • Realize operational cost efficiencies by improving products and service, and reducing transactions
  • Additional operating and capital efficiency from larger base of customers on fixed network

Cable offers best connectivity on growing set of services

  • Internet penetration low relative to current and future wireline/wireless capabilities of fully deployed network
  • Traditional video market in transition, but transition manageable even as video units decline
  • Competitive bundled video offering remains central to long-term connectivity strategy
  • Large opportunity to use existing wireless infrastructure with attractive MVNO and capital-light entry into mobile to drive growth of core cable business and future option value

Operating, balance sheet and capital allocation strategy generates significant FCF potential

  • High growth cable company with declining cable capital intensity
  • Charter does not expect to become a meaningful federal cash tax payer until 2022, driving Adjusted EBITDA to free cash flow conversion
  • Together with prudent leverage, innovative capital structure, and ROI-based capital allocation, drives levered equity returns

Third Quarter 2020 Results

16

Investor Inquiries:

Stefan Anninger | 203.905.7955 stefan.anninger@charter.com

Appendix

YTD COVID-19 Related Financial Impacts

Favorable (Unfavorable)

In millions

Impact

1Q20

2Q20

3Q20

YTD

Residential

-

($66)

($227)

($293)

SMB

-

(17)

(11)

(28)

Enterprise

-

(18)

-

(18)

Advertising Sales

(31)

(178)

(55)

(264)

Mobile

-

(3)

-

(3)

Total Estimated Revenue Impact

($31)

($282)

($293)

($606)

Programming

-

-

$163

$163

Reg., Connect. and Prod. Cont.

21

125

-

146

Costs to Service Customers - Bad Debt

(25)

48

87

110

Costs to Service Customers - Labor

(35)

(44)

(86)

(165)

Marketing

(4)

29

(4)

21

Other Impacts

-

42

23

65

Total Estimated Expense Impact

($43)

$200

$183

$340

Net Impact

($74)

($82)

($110)

($266)

Third Quarter 2020 Results

19

Use of Non-GAAP Financial Metrics and Additional Information

We use certain measures that are not defined by U.S. generally accepted accounting principles ("GAAP") to evaluate various aspects of our 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 us, 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 appendix of this presentation.

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, 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 our businesses as well as other non-cash or special items, and is unaffected by our 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 our 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 our 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 Securities and Exchange Commission (the "SEC")). For the purpose of calculating compliance with leverage covenants, we use Adjusted EBITDA, as presented, excluding certain expenses paid by our operating subsidiaries to other Charter entities. Our 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. Mobile Adjusted EBITDA is defined as mobile revenue less mobile 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. Mobile free cash flow is defined as mobile net cash outflows from operating activities plus mobile capital expenditures. Management and Charter's board of directors use cable Adjusted EBITDA, mobile Adjusted EBITDA, cable free cash flow and mobile 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 provide the handset or tablet to customers pursuant to equipment installment plans.

For a reconciliation of Adjusted EBITDA, cable Adjusted EBITDA, mobile Adjusted EBITDA, free cash flow, cable free cash flow and mobile free cash flow to the most directly comparable GAAP financial measure, see slides 21, 22 and 23.

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

Third Quarter 2020 Results

20

GAAP Reconciliations

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(DOLLARS IN MILLIONS)

Three Months Ended

September 30,

September 30,

2020

2019

Net income attributable to Charter shareholders

$

814

$

387

Plus: Net income attributable to noncontrolling interest

118

80

Interest expense, net

946

963

Income tax expense

177

126

Depreciation and amortization

2,370

2,415

Stock compensation expense

83

71

Loss on extinguishment of debt

58

-

(Gain) loss on financial instruments, net

(69)

34

Other pension (benefits) costs, net

115

(9)

Other, net

27

19

Adjusted EBITDA1)

4,639

4,086

Less: Mobile revenue1), 2)

(368)

(192)

Plus: Mobile costs and expenses1), 2)

456

337

Cable Adjusted EBITDA1)

$

4,727

$

4,231

Net cash flow s from operating activities

$

3,664

$

2,943

Less: Purchases of property, plant and equipment

(2,014)

(1,651)

Change in accrued expenses related to capital expenditures

104

(21)

Free cash flow 1)

1,754

1,271

Plus: Mobile net cash outflow s from operating activities1), 3)

126

156

Plus: Purchases of mobile property, plant and equipment1), 3)

139

100

Cable free cash flow 1)

$

2,019

$

1,527

The above schedule is presented in order to reconcile Adjusted EBITDA, cable Adjusted EBITDA, mobile Adjusted EBITDA, free cash flow , cable free cash flow and mobile free cash flow , non-GAAP measures, to the most directly comparable GAAP measures in accordance w ith Section 401(b) of the Sarbanes-Oxley Act.

  1. See notes on slide 20.
  2. Mobile Adjusted EBITDA is calculated as mobile revenue less mobile costs and expenses, and totaled negative $88 million and negative $145 million, for the three months ended September 30, 2020 and 2019, respectively.
  3. Mobile free cash flow is calculated as mobile net cash outflows from operating activities plus mobile capital expenditures, and totaled negative $265 million and negative $256 million for the three months ended September 30, 2020 and 2019, respectively.

Third Quarter 2020 Results

21

GAAP Reconciliations

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(DOLLARS IN MILLIONS)

Net income attributable to Charter shareholders

Plus: Net income attributable to noncontrolling interest Interest expense, net

Income tax expense Depreciation and amortization Stock compensation expense Loss on extinguishment of debt (Gain) loss on financial instruments, net Other pension (benefits) costs, net Other, net

Adjusted EBITDA1) Less: Mobile revenue1)

Plus: Mobile costs and expenses1) Cable Adjusted EBITDA1)

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

$

814

$

766

$

396

$

714

$

387

118

110

71

108

80

946

957

980

964

963

177

166

29

110

126

2,370

2,428

2,497

2,461

2,415

83

90

90

77

71

58

36

27

25

-

(69)

(64)

318

(62)

34

115

(11)

(10)

96

(9)

27

11

(2)

36

19

4,639

4,489

4,396

4,529

4,086

(368)

(310)

(258)

(236)

(192)

456

413

374

372

337

$

4,727

$

4,592

$

4,512

$

4,665

$

4,231

The above schedule is presented in order to reconcile Adjusted EBITDA, cable Adjusted EBITDA and mobile Adjusted EBITDA, non-GAAP measures, to the most directly comparable GAAP measures in accordance w ith Section 401(b) of the Sarbanes-Oxley Act.

1) See notes on slide 20.

Third Quarter 2020 Results

22

GAAP Reconciliations

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(DOLLARS IN MILLIONS)

Last Tw elve Months Ended September 30,

2020

2019

Net income attributable to Charter shareholders

$

2,690

$

1,250

Plus: Net income attributable to noncontrolling interest

407

280

Interest expense, net

3,847

3,743

Income tax expense

482

331

Depreciation and amortization

9,756

9,999

Stock compensation expense

340

310

Loss on extinguishment of debt

146

-

Loss on financial instruments, net

123

226

Other pension costs, net

190

28

Other, net

72

323

Adjusted EBITDA1)

18,053

16,490

Less: Mobile revenue1)

(1,172)

(579)

Plus: Mobile costs and expenses1)

1,615

1,085

Cable Adjusted EBITDA1)

$

18,496

$

16,996

The above schedule is presented in order to reconcile Adjusted EBITDA, cable Adjusted EBITDA and mobile Adjusted EBITDA, non-GAAP measures, to the most directly comparable GAAP measures in accordance w ith Section 401(b) of the Sarbanes- Oxley Act.

1) See notes on slide 20.

Third Quarter 2020 Results

23

Shares

Shares Outstanding as of September 30, 2020

Class A Common Shares

199,869,136

Class B Common Shares1)

1

Restricted Stock2)

5,992

Total Outstanding Common Shares

199,875,129

As-converted,as-exchanged Charter Holdings Partnership Units3)

25,539,293

Total Shares (as-converted/as-exchanged)

225,414,422

Fully Diluted Shares (as-converted/as-exchanged)4),5)

231,307,650

Note: Charter's financial statements only include partnership units, restricted stock units and options, in diluted weighted average common shares outstanding when such inclusion is dilutive to earnings per common share attributable to Charter shareholders.

  1. Class B Common is a special class of stock solely owned by Advance/Newhouse and provides it with governance rights at Charter, reflecting Advance/Newhouse's ownership in the Charter Holdings Partnership.
  2. Unvested restricted stock has voting rights and is therefore included in total issued and outstanding shares. Vesting occurs depending upon the terms of each award agreement.
  3. Includes 16,205,793 of Advance/Newhouse as-exchanged common partnership units in Charter Holdings, and 9,333,500 of Advance/Newhouse as-converted,as-exchanged preferred partnership units in Charter Holdings.
  4. Includes 1,047,904 restricted stock units based on the treasury stock method, and which vest over various periods of time depending upon the terms of each award agreement. As of September 30, 2020, there were an additional 217,008 performance - based restricted stock units which contain price vesting hurdles, in addition to time vesting requirements, included in fully diluted shares based on the treasury stock method, as their price vesting thresholds would have been met as of September 30, 2020.
  5. Includes 2,372,000 outstanding options based on the treasury stock method, with various time vesting requirements. As of September 30, 2020, there were an additional 2,256,316 performance-based options which contain price vesting hurdles, in addition to time vesting requirements, included in fully diluted shares based on the treasury stock method, as their price vesting thresholds would have been met as of September 30, 2020.

Third Quarter 2020 Results

24

Disclaimer

Charter Communications Inc. published this content on 30 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2020 13:49:00 UTC


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Financials (USD)
Sales 2020 48 049 M - -
Net income 2020 3 024 M - -
Net Debt 2020 80 205 M - -
P/E ratio 2020 44,6x
Yield 2020 -
Capitalization 126 B 126 B -
EV / Sales 2020 4,29x
EV / Sales 2021 4,11x
Nbr of Employees 95 100
Free-Float 63,8%
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NameTitle
Thomas M. Rutledge Chairman & Chief Executive Officer
John Bickham President & Chief Operating Officer
Christopher L. Winfrey Chief Financial Officer
James A. Blackley EVP-Engineering & Information Technology
Richard J. DiGeronimo Chief Product & Technology Officer
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