Charter Communications(US:CHTR)2023-10-27 16:37Financial Data and Key Metrics - Revenue was essentially flat year-over-year, with adjusted EBITDA growing at 0.7% year-over-year [3] - Net income attributable to Charter shareholders was $1.3 billion in Q3, up from $1.2 billion last year [27] - Residential revenue declined by 0.3% year-over-year, but grew by 0.3% when excluding Disney-related credits [23] - Enterprise revenue grew by 3.7% year-over-year, driven by a 5.9% increase in enterprise PSUs [24] - Other revenue grew by 28.8% year-over-year, driven by higher mobile device sales [25] - Cost to service customers increased by 3.7% year-over-year, driven by workforce investments and mobile growth [26] Business Line Performance - Mobile lines grew by 594,000 in Q3, with over 7 million total mobile lines and 12% of Internet customers now using mobile services [5][18] - Video customers declined by 327,000, with 100,000 disconnects due to the Disney programming dispute [17] - Residential Internet churn reached a record low in Q3, despite the Disney dispute [19] - Spectrum One promotional lines showed healthy data usage and low incremental churn [20] - Rural subsidized passings achieved nearly 50% penetration at the 12-month mark, exceeding expectations [6] Market Performance - Residential customers grew by 0.2% year-over-year, driven by Internet growth offset by video-only churn [22] - Enterprise revenue growth was driven by strong PSU growth, particularly in non-wholesale segments [24] - Advertising revenue declined by 20.3% year-over-year, primarily due to lower political revenue [59] Strategy and Industry Competition - The company is focused on expanding its rural footprint, with plans to add 300,000 new subsidized rural passings in 2023 and accelerate growth in 2024 [30] - Spectrum One, the company's converged product offering, is performing well with market-leading pricing and differentiated features [10] - The company is modernizing its video distribution agreements, aiming to integrate linear and direct-to-consumer (DTC) services seamlessly [32] - Network evolution is progressing well, with the goal of maintaining the fastest Internet and WiFi service claims across the entire footprint [36] Management Commentary on Operating Environment and Future Outlook - Management expects upward trends in EBITDA growth to continue as operating investments yield benefits [3] - The company is optimistic about the long-term value creation from its strategic initiatives, including network evolution and rural expansion [50] - Pressure on EBITDA growth is expected to abate in 2024 as transaction efficiency improves and employee tenure investments mature [29] - The company is confident in its ability to compete against fiber and fixed wireless access competitors, particularly in high-data-usage segments [53] Other Important Information - The company repurchased 2 million shares and common units, totaling $854 million, at an average price of $421 per share [65] - Capital expenditures for 2023 are expected to total approximately $11.2 billion, with $7.2 billion excluding line extensions [62] - The company is working on additional disclosures to provide more transparency around the value created by rural investments [113] Q&A Session Summary Question: Broadband growth in core markets vs. rural markets [76] - Core markets are progressing slower than expected, partly due to fixed wireless access competition and the Disney programming dispute [81] - Rural markets are performing well, with faster-than-expected penetration rates [78] Question: Video business outlook in 5 years [77] - The traditional video business will still exist, but the company aims to integrate DTC services to increase stickiness and value [82] - Xumo will serve as a marketplace for selling DTC apps, benefiting both customers and programmers [83] Question: ARPU impact of Spectrum One [97] - ARPU growth for Internet was 2.6% year-over-year, with a 1.1% difference due to Spectrum One mobile allocation [124] - As free lines roll off, ARPU is expected to stabilize and potentially see positive pressure [104] Question: CapEx outlook for network evolution, line extensions, and video [152] - Network evolution spend is expected to be around $5.5 billion, with potential timing adjustments [105] - Rural passings are expected to accelerate, with a run rate of 440,000 passings in 2024 [155] Question: BEAD process and line extension spend [134] - The company may not participate in BEAD investments in states with restrictive guidelines, focusing instead on states that allow flexibility and healthy returns [137] Question: EBITDA acceleration outlook [159] - EBITDA growth is expected to improve in 2024, driven by political advertising, mobile free line roll-off, and operational efficiencies [163] Question: ACP program exposure [166] - The company is the largest ACP provider in the country and has tools to retain customers if the program is not renewed [169][171]