# Charter Communications, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Charter Communications, Inc.](/companies/chtr.md) (CIK 1091667)
- Form: 10-Q
- Filed: 2023-10-27
- Accepted by EDGAR: Oct 27, 2023, 07:06 ET
- Period: 2023-09-30
- Accession: 0001091667-23-000143
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1091667/000109166723000143/chtr-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1091667/000109166723000143/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $13.58bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $40.90bn | us-gaap:Revenues |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $3.13bn | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $9.29bn | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $369.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $1.19bn | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $1.25bn | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $3.50bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $8.25 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $22.94 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $8.42 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $23.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 152,019,159 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 152,495,273 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $10.58bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $8.26bn | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2023-07-01 to 2023-09-30 | $783.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $2.02bn | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $571.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $4.12bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $146.68bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $12.63bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $95.80bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $2.00bn | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $11.10bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 47,220 characters.

### General

Charter Communications, Inc. (together with its controlled subsidiaries, “Charter”) is a leading broadband connectivity company and cable operator serving more than 32 million customers in 41 states through our Spectrum brand. Over an advanced communications network, we offer 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. We also distribute award-winning news coverage and sports programming to our customers through Spectrum Networks.

Charter is a holding company whose principal asset is a controlling equity interest in Charter Communications Holdings, LLC (“Charter Holdings”), an indirect owner of Charter Communications Operating, LLC (“Charter Operating”) under which substantially all of the operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated.

### Overview

During the third quarter of 2023, we added 594,000 mobile lines, 63,000 Internet customers and 8,000 residential and small and medium business ("SMB") customer relationships, which excludes mobile-only customer relationships. We spent $512 million and $1.4 billion on our subsidized rural construction initiative during the three and nine months ended September 30, 2023, respectively, and activated approximately 78,000 and 190,000 subsidized rural passings, respectively. Our mobile line and Internet customer additions in the third quarter were supported by our Spectrum One offering, which brings together Spectrum Internet, Advanced WiFi and Unlimited Spectrum Mobile to offer consumers fast, reliable and secure online connections on their favorite devices at home and on-the-go in a high-value package and was further supported by growth in our legacy and new subsidized rural markets.

We continue to upgrade our network to provide higher Internet speeds and reliability and invest in our products and customer service platforms. We currently offer Spectrum Internet products with speeds up to 1 Gbps across our entire footprint and we plan to upgrade our network to provide multi-gigabit speeds. Our Advanced WiFi, a managed WiFi service that provides customers an optimized home network while providing greater control of their connected devices with enhanced security and privacy, is available to all Internet customers. We continue to invest in our ability to provide a differentiated Internet connectivity experience for our mobile and fixed Internet customers with increasing availability of out-of-home WiFi access points across our footprint. In addition, we continue to work towards the construction of our own 5G mobile data-only network in targeted areas of our footprint leveraging our Citizen Broadband Radio Service ("CBRS") Priority Access Licenses.

We also continue to evolve our video product. In September 2023, we entered into a new affiliation agreement with Disney which provides a template for a new programming affiliation approach where we partner with content providers to provide access to both linear and app-based direct-to-consumer content. In October 2023, we began deploying Xumo Stream Boxes to new video customers. The Xumo Stream Box combines a live TV experience with access to hundreds of direct-to-consumer TV apps and features unified search and discovery along with a curated content offering based on the customer's interests and subscriptions. By continually improving our product set and offering consumers the opportunity to save money by switching to our services, we believe we can continue to penetrate our expanding footprint and sell additional products to our existing customers. We are also beginning to see benefits from the targeted investments we are making in employee wages and benefits inside of our operations to build employee skill sets and tenure, as well as the continued investments in digitization of our customer service platforms and proactive maintenance, all with the goal of improving the customer experience, reducing transactions and driving customer growth and retention.

We realized revenue, Adjusted EBITDA and income from operations during the periods presented as follows (in millions; all percentages are calculated using whole numbers; minor differences may exist due to rounding):

|  | Three Months Ended September 30, 2023 | 2022 | % Change | Nine Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $13,584 | $13,550 | 0.2% | $40,896 | $40,348 | 1.4% |
| Adjusted EBITDA | $5,449 | $5,412 | 0.7% | $16,321 | $16,134 | 1.2% |
| Income from operations | $3,126 | $2,924 | 6.9% | $9,292 | $8,922 | 4.2% |

Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, interest expense, net, income taxes, depreciation and amortization, stock compensation expense, other income (expenses), net and other operating (income) expenses, net, such as special charges and (gain) loss on sale or retirement of assets. See “Use of Adjusted EBITDA and Free Cash Flow” for further information on Adjusted EBITDA and free cash flow.

Growth in total revenue was primarily due to growth in residential Internet customers and residential mobile lines partly offset by lower residential video and advertising sales revenues. Adjusted EBITDA growth and changes in income from operations were impacted by growth in revenue and increases in operating costs and expenses, primarily other costs of revenue and costs to service customers partly offset by a decrease in programming expense.

The following table summarizes our customer statistics for Internet, video, voice and mobile as of September 30, 2023 and 2022 (in thousands except per customer data and footnotes).

| Customer Relationships (b) | Approximate as of September 30, 2023 (a) | 2022 (a) |
| --- | ---: | ---: |
| Residential | 30,012 | 29,946 |
| SMB | 2,224 | 2,195 |
| Total Customer Relationships | 32,236 | 32,141 |
| Monthly Residential Revenue per Residential Customer (c) | $119.28 | $120.00 |
| Monthly SMB Revenue per SMB Customer (d) | $162.94 | $166.84 |
| **Internet** |  |  |
| Residential | 28,606 | 28,320 |
| SMB | 2,043 | 2,008 |
| Total Internet Customers | 30,649 | 30,328 |
| **Video** |  |  |
| Residential | 13,751 | 14,642 |
| SMB | 628 | 649 |
| Total Video Customers | 14,379 | 15,291 |
| **Voice** |  |  |
| Residential | 6,960 | 7,929 |
| SMB | 1,296 | 1,287 |
| Total Voice Customers | 8,256 | 9,216 |
| **Mobile Lines (e)** |  |  |
| Residential | 6,987 | 4,516 |
| SMB | 233 | 161 |
| Total Mobile Lines | 7,220 | 4,677 |
| **Enterprise Primary Service Units ("PSUs") (f)** | 298 | 282 |

(a) We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of September 30, 2023 and 2022, customers include approximately 143,300 and 151,700 customers, respectively, whose accounts were over 60 days past due, approximately 53,400 and 55,500 customers, respectively, whose accounts were over 90 days past due and approximately 261,700 and 149,300 customers, respectively, whose accounts were over 120 days past due. Bad debt expense associated with these past due accounts has been reflected in our consolidated statements of operations. The increase in accounts past due more than 120 days is predominately due to pre-existing and incremental unsubsidized amounts of customers’ bills for those customers participating in government assistance programs, including video services. These customers are downgraded to a subsidized Internet-only service.

(b) Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video, voice and mobile 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.

(c) 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-only customers.

(d) 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-only customers.

(e) Mobile lines include phones and tablets which require one of our standard rate plans (e.g., "Unlimited" or "By the Gig"). Mobile lines exclude wearables and other devices that do not require standard phone rate plans.

(f) Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.

### Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and the means by which we develop estimates therefore, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K. There have been no material changes from the critical accounting policies described in our Form 10-K.

### Results of Operations

The following table sets forth the consolidated statements of operations for the periods presented (dollars in millions, except per share data):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $13,584 | $13,550 | $40,896 | $40,348 |
| Costs and Expenses: |  |  |  |  |
| Operating costs and expenses (exclusive of items shown separately below) | 8,299 | 8,247 | 25,115 | 24,574 |
| Depreciation and amortization | 2,130 | 2,177 | 6,508 | 6,711 |
| Other operating (income) expense, net | 29 | 202 | (19) | 141 |
|  | 10,458 | 10,626 | 31,604 | 31,426 |
| Income from operations | 3,126 | 2,924 | 9,292 | 8,922 |
| Other Income (Expenses): |  |  |  |  |
| Interest expense, net | (1,306) | (1,160) | (3,869) | (3,329) |
| Other income (expenses), net | (15) | (37) | (204) | 65 |
|  | (1,321) | (1,197) | (4,073) | (3,264) |
| Income before income taxes | 1,805 | 1,727 | 5,219 | 5,658 |
| Income tax expense | (369) | (360) | (1,187) | (1,194) |
| Consolidated net income | 1,436 | 1,367 | 4,032 | 4,464 |
| Less: Net income attributable to noncontrolling interests | (181) | (182) | (533) | (605) |
| Net income attributable to Charter shareholders | $1,255 | $1,185 | $3,499 | $3,859 |
| EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS: |  |  |  |  |
| Basic | $8.42 | $7.51 | $23.30 | $23.51 |
| Diluted | $8.25 | $7.38 | $22.94 | $23.06 |
| Weighted average common shares outstanding, basic | 149,004,322 | 157,971,109 | 150,169,275 | 164,189,703 |
| Weighted average common shares outstanding, diluted | 152,019,159 | 160,638,186 | 152,495,273 | 167,351,777 |

***Revenues.*** Total revenues grew $34 million and $548 million for the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to growth in residential Internet customers and residential mobile lines partly offset by lower residential video and advertising sales revenues as well as $68 million of total customer credits related to the temporary loss of Disney programming during the third quarter of 2023.

Revenues by service offering were as follows (dollars in millions; all percentages are calculated using whole numbers; minor differences may exist due to rounding):

|  | Three Months Ended September 30, 2023 | 2022 | % Change | Nine Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Internet | $5,776 | $5,571 | 3.7% | $17,227 | $16,585 | 3.9% |
| Video | 4,004 | 4,379 | (8.6)% | 12,446 | 13,209 | (5.8)% |
| Voice | 379 | 391 | (3.0)% | 1,117 | 1,180 | (5.3)% |
| Mobile service | 581 | 435 | 33.8% | 1,617 | 1,237 | 30.7% |
| Residential revenue | 10,740 | 10,776 | (0.3)% | 32,407 | 32,211 | 0.6% |
| Small and medium business | 1,085 | 1,095 | (0.9)% | 3,270 | 3,257 | 0.4% |
| Enterprise | 698 | 673 | 3.7% | 2,070 | 2,003 | 3.3% |
| Commercial revenue | 1,783 | 1,768 | 0.8% | 5,340 | 5,260 | 1.5% |
| Advertising sales | 384 | 481 | (20.3)% | 1,123 | 1,324 | (15.2)% |
| Other | 677 | 525 | 28.8% | 2,026 | 1,553 | 30.4% |
|  | $13,584 | $13,550 | 0.2% | $40,896 | $40,348 | 1.4% |

The increase in Internet revenues from our residential customers is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase related to rate and product mix changes | $146 | $499 |
| Increase in average residential Internet customers | 59 | 143 |
|  | $205 | $642 |

The increase related to rate and product mix was primarily due to promotional rate step-ups and rate adjustments, partly offset by lower bundled revenue allocation. Residential Internet customers grew by 286,000 customers from September 30, 2022 to September 30, 2023.

Video revenues consist primarily of revenues from video services provided to our residential customers, as well as franchise fees, equipment service fees and video installation revenue. The decrease in video revenues is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Decrease in average residential video customers | $(232) | $(699) |
| Change related to rate and product mix changes | (143) | (64) |
|  | $(375) | $(763) |

Residential video customers decreased by 891,000 from September 30, 2022 to September 30, 2023. The change related to rate and product mix was affected by a higher mix of lower cost video packages within our video customer base and $63 million of customer credits related to the temporary loss of Disney programming in the third quarter of 2023, offset by the pass-through of programming cost increases and promotional rate step-ups.

The decrease in voice revenues from our residential customers is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Decrease in average residential voice customers | $(46) | $(136) |
| Increase related to rate adjustments | 34 | 73 |
|  | $(12) | $(63) |

Residential wireline voice customers decreased by 969,000 customers from September 30, 2022 to September 30, 2023.

The increase in mobile service revenues from our residential customers is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase in average residential mobile lines | $239 | $656 |
| Decrease related to rate | (93) | (276) |
|  | $146 | $380 |

Residential mobile lines increased by 2,471,000 mobile lines from September 30, 2022 to September 30, 2023. The decrease related to rate is primarily related to the Spectrum One offering and is partly offset by higher bundled revenue allocation.

The change in SMB revenues is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase in SMB customers | $16 | $66 |
| Decrease related to rate and product mix changes | (26) | (53) |
|  | $(10) | $13 |

SMB customers grew by 29,000 from September 30, 2022 to September 30, 2023. The decrease related to rate and product mix changes were primarily due to a higher mix of lower priced video packages and a lower number of voice lines per SMB customer relationship.

Enterprise revenues increased $25 million and $67 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to an increase in Internet PSUs partly offset by lower wholesale PSUs. Enterprise PSUs increased 16,000 from September 30, 2022 to September 30, 2023.

Advertising sales revenues consist primarily of revenues from commercial advertising customers, programmers and other vendors, as well as local cable and advertising on regional sports and news channels. Advertising sales revenues decreased $97 million and $201 million during the three and nine months ended September 30, 2023, respectively, as compared to the corresponding periods in 2022 primarily due to a decrease in political ad revenue.

Other revenues consist of revenue from mobile and video device sales, processing fees, regional sports and news channels (excluding intercompany charges or advertising sales on those channels), subsidy revenue, home shopping, wire maintenance fees and other miscellaneous revenues. Other revenues increased $152 million and $473 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to higher mobile device sales partially offset by lower processing fees.

***Operating costs and expenses.*** The increase in our operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, are attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Programming | $(276) | $(686) |
| Other costs of revenue | 183 | 585 |
| Costs to service customers | 76 | 284 |
| Sales and marketing | (13) | 84 |
| Other | 82 | 274 |
|  | $52 | $541 |

Programming costs were approximately $2.6 billion and $2.9 billion for the three months ended September 30, 2023 and 2022, representing 31% and 35% of total operating costs and expenses, respectively, and $8.1 billion and $8.8 billion for the nine months ended September 30, 2023 and 2022, representing 32% and 36% of total operating costs and expenses, respectively. Programming costs consist primarily of costs paid to programmers for basic, premium, video on demand, and pay-per-view programming. Programming costs decreased as a result of fewer customers, a higher mix of lower cost video packages within our video customer base and a $61 million benefit related to the temporary loss of Disney programming during the third quarter of 2023, partly offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent.

Other costs of revenue increased $183 million and $585 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to higher mobile device sales and higher other mobile direct costs due to an increase in mobile lines, partially offset by lower regulatory pass-through fees and original content costs.

Costs to service customers increased $76 million and $284 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to adjustments to job structure, pay and benefits to build a more skilled and longer tenured workforce resulting in lower frontline employee attrition compared to 2022, and additional activity to support the accelerated growth of Spectrum Mobile.

Sales and marketing costs decreased $13 million and increased $84 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The increase during the nine months ended September 30, 2023 compared to the prior year period is primarily due to higher staffing across sales channels and the accelerated growth of Spectrum Mobile.

The increase in other expense is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Stock compensation expense | $55 | 180 |
| Corporate costs | 22 | 57 |
| Costs to sell and service bulk properties | 11 | 36 |
| Enterprise | 2 | 26 |
| Property tax and insurance | 4 | (18) |
| Other | (12) | (7) |
|  | $82 | $274 |

Stock compensation expense increased during the three and nine months ended September 30, 2023 compared to the corresponding prior periods primarily due to an increase in equity awards granted. Corporate and enterprise costs increased during the three and nine months ended September 30, 2023 compared to the corresponding prior periods in 2022 primarily due to higher labor costs. Property tax and insurance expense decreased during the nine months ended September 30, 2023 compared to the corresponding prior periods primarily as a result of an adjustment related to favorable development on prior year workers' compensation claims.

***Depreciation and amortization.*** Depreciation and amortization expense decreased by $47 million and $203 million during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022 primarily due to certain assets acquired in acquisitions becoming fully depreciated partly offset by an increase in depreciation as a result of more recent capital expenditures.

***Other operating (income) expense, net.*** The change in other operating (income) expense, net is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Special charges, net | $(180) | $(158) |
| Loss on disposal of assets, net | 7 | (2) |
|  | $(173) | $(160) |

See Note 9 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

***Interest expense, net.*** Net interest expense increased by $146 million and $540 million for the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The increase in net interest expense is the result of an increase in weighted average interest rates as well as an increase in weighted average debt outstanding of approximately $1.2 billion and $2.7 billion during the three and nine months ended September 30, 2023, respectively, compared to the corresponding periods in 2022. The increase in weighted average debt outstanding is primarily due to an increase in the Charter Operating credit facilities.

***Other income (expenses), net.*** The change in other income (expenses), net is attributable to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Loss on extinguishment of debt (see Note 3) | $— | $3 |
| Gain (loss) on financial instruments, net (see Note 6) | 263 | 218 |
| Net periodic pension benefits | (205) | (236) |
| Gain (loss) on equity investments, net | (36) | (254) |
|  | $22 | $(269) |

See Note 10 and the Notes referenced above to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

***Income tax expense.*** We recognized income tax expense of $369 million and $1.2 billion for the three and nine months ended September 30, 2023, respectively, and $360 million and $1.2 billion for the three and nine months ended September 30, 2022, respectively.

***Net income attributable to noncontrolling interest.*** Net income attributable to noncontrolling interest for financial reporting purposes represents Advance/Newhouse Partnership's (“A/N”) portion of Charter Holdings’ net income based on its effective common unit ownership interest. For more information, see Note 5 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

***Net income attributable to Charter shareholders.*** Net income attributable to Charter shareholders increased $70 million and decreased $360 million during the three and nine months ended September 30, 2023 compared to the corresponding periods in 2022, respectively, primarily as a result of the factors described above.

### Use of Adjusted EBITDA and Free Cash Flow

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, below.

Adjusted EBITDA 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 our performance and our ability to service our 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 $345 million and $1.1 billion for the three and nine months ended September 30, 2023, respectively, and $342 million and $1.0 billion for the three and nine months ended September 30, 2022, respectively.

A reconciliation of Adjusted EBITDA and free cash flow to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, is as follows (dollars in millions):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to Charter shareholders | $1,255 | $1,185 | $3,499 | $3,859 |
| Plus: Net income attributable to noncontrolling interest | 181 | 182 | 533 | 605 |
| Interest expense, net | 1,306 | 1,160 | 3,869 | 3,329 |
| Income tax expense | 369 | 360 | 1,187 | 1,194 |
| Depreciation and amortization | 2,130 | 2,177 | 6,508 | 6,711 |
| Stock compensation expense | 164 | 109 | 540 | 360 |
| Other, net | 44 | 239 | 185 | 76 |
| Adjusted EBITDA | $5,449 | $5,412 | $16,321 | $16,134 |
| Net cash flows from operating activities | $3,944 | $3,757 | $10,578 | $11,138 |
| Less: Purchases of property, plant and equipment | (2,961) | (2,406) | (8,259) | (6,456) |
| Change in accrued expenses related to capital expenditures | 114 | 156 | 110 | 284 |
| Free cash flow | $1,097 | $1,507 | $2,429 | $4,966 |

### Liquidity and Capital Resources

### Introduction

This section contains a discussion of our liquidity and capital resources, including a discussion of our cash position, sources and uses of cash, access to credit facilities and other financing sources, historical financing activities, cash needs, capital expenditures and outstanding debt.

### Recent Events

In February 2023, CCO Holdings, LLC (“CCO Holdings”) and CCO Holdings Capital Corp. jointly issued $1.1 billion of 7.375% senior unsecured notes due March 2031 at par. The net proceeds were used for general corporate purposes, including repaying certain indebtedness, funding buybacks of Charter Class A common stock and Charter Holdings common units and to pay related fees and expenses.

In February 2023, Charter Operating entered into an amendment to its credit agreement to replace London Interbank Offering Rate (“LIBOR”) as the benchmark rate applicable to the Term B loans with Secured Overnight Financing Rate (“SOFR”) and in March 2023, Charter Operating entered into another amendment to its credit agreement to incur a new Term B-3 loan with an aggregate principal amount of $750 million maturing in 2030 concurrently with the cancelation of certain of Charter Operating's existing Term B-1 and B-2 loans, among other amendments. Pricing on the new Term B-3 loan is SOFR plus 2.25%. After giving effect to the amendments, the aggregate principal amount of Term B-1 loans is $2.3 billion with pricing unchanged at SOFR plus 1.75% and the aggregate principal amount of Term B-2 loans is $3.1 billion with pricing unchanged at SOFR plus 1.75%.

As of July 1, 2023, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, ceased publishing remaining U.S. Dollar LIBOR rates. The Charter Operating senior secured floating rate notes due 2024 (the "Floating Rate Notes") used LIBOR as a benchmark for establishing the interest rate of the Floating Rate Notes. As of July 1, 2023, SOFR is being used as the benchmark replacement for calculations of the amount of interest payable on the Floating Rate Notes with respect to interest periods with interest determination dates occurring after June 30, 2023.

### Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt. The principal amount of our debt as of September 30, 2023 was $97.6 billion, consisting of $14.5 billion of credit facility debt, $55.9 billion of investment grade senior secured notes and $27.3 billion of high-yield senior unsecured notes. Our business requires significant cash to fund principal and interest payments on our debt.

Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures. As we continue to grow our market penetration of our mobile product, we will continue to experience negative working capital impacts from the timing of device-related cash flows when we sell devices to customers pursuant to equipment installment plans. Further, in 2022, Charter became a meaningful federal cash tax payer as the majority of our net operating losses have been utilized. Free cash flow was $1.1 billion and $2.4 billion for the three and nine months ended September 30, 2023, respectively, and $1.5 billion and $5.0 billion for the three and nine months ended September 30, 2022, respectively. See the table below for factors impacting free cash flow during the three and nine months ended September 30, 2023 compared to the corresponding prior periods. As of September 30, 2023, the amount available under our credit facilities was approximately $3.3 billion and cash on hand was approximately $571 million. We expect to utilize free cash flow, cash on hand and availability under our credit facilities as well as future refinancing transactions to further extend the maturities of our obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations. Additionally, we may, from time to time, and depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings to retire our debt through open market purchases, privately negotiated purchases, tender offers or redemption provisions. We believe we have sufficient liquidity from cash on hand, free cash flow and Charter Operating’s revolving credit facility as well as access to the capital markets to fund our projected cash needs.

We continue to evaluate the deployment of our cash on hand and anticipated future free cash flow including to invest in our business growth and other strategic opportunities, including our network evolution and expansion initiatives, the build-out and deployment of our CBRS spectrum, and mergers and acquisitions as well as stock repurchases and dividends. Charter's target leverage of net debt to the last twelve months Adjusted EBITDA remains at 4 to 4.5 times Adjusted EBITDA, and up to 3.5 times Adjusted EBITDA at the Charter Operating first lien level. Our leverage ratio was 4.5 times Adjusted EBITDA as of September 30, 2023. As Adjusted EBITDA grows, we expect to increase the total amount of our indebtedness to maintain leverage within Charter's target leverage range. Excluding purchases from Liberty Broadband Corporation (“Liberty Broadband”) discussed below, during the three and nine months ended September 30, 2023, Charter purchased in the public market approximately 1.8 million and 5.0 million shares of Charter Class A common stock, respectively, for approximately $776 million and $1.9 billion, respectively, and during the three and nine months ended September 30, 2022, Charter purchased in the public market approximately 3.3 million and 12.6 million shares of Charter Class A common stock, respectively, for approximately $1.4 billion and $6.5 billion, respectively. Since the beginning of its buyback program in September 2016 through September 30, 2023, Charter has purchased approximately 155.1 million shares of Class A common stock and Charter Holdings common units for approximately $70.7 billion, including purchases from Liberty Broadband and A/N discussed below.

In February 2021, Charter and Liberty Broadband entered into a letter agreement (the “LBB Letter Agreement”). The LBB Letter Agreement implements Liberty Broadband’s obligations under the Amended and Restated Stockholders Agreement among Charter, Liberty Broadband and A/N, dated as of May 23, 2015 (as amended, the “Stockholders Agreement”) to participate in share repurchases by Charter. Under the LBB Letter Agreement, Liberty Broadband will sell to Charter, generally on a monthly basis, a number of shares of Charter Class A common stock representing an amount sufficient for Liberty Broadband’s ownership of Charter to be reduced such that it does not exceed the ownership cap then applicable to Liberty Broadband under the Stockholders Agreement at a purchase price per share equal to the volume weighted average price per share paid by Charter for shares repurchased during such immediately preceding calendar month other than (i) purchases from A/N, (ii) purchases in privately negotiated transactions or (iii) purchases for the withholding of shares of Charter Class A common stock pursuant to equity compensation programs of Charter. Charter purchased from Liberty Broadband 0.1 million shares of Charter Class A common stock for approximately $42 million during the nine months ended September 30, 2023, and 1.7 million and 5.0 million shares of Charter Class A common stock for approximately $796 million and $2.6 billion during the three and nine months ended September 30, 2022, respectively.

In December 2016, Charter and A/N entered into a letter agreement, as amended in December 2017 (the “A/N Letter Agreement”), that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis. During the three and nine months ended September 30, 2023, Charter Holdings purchased from A/N 0.2 million and 0.7 million Charter Holdings common units for approximately $78 million and $254 million, respectively, and during the three and nine months ended September 30, 2022, Charter Holdings purchased from A/N 0.8 million and 2.6 million Charter Holdings common units for approximately $385 million and $1.4 billion, respectively.

As of September 30, 2023, Charter had remaining board authority to purchase an additional $672 million of Charter’s Class A common stock and/or Charter Holdings common units, excluding purchases from Liberty Broadband. Although Charter expects to continue to buy back its common stock consistent with its leverage target range, Charter is not obligated to acquire any particular amount of common stock, and the timing of any purchases that may occur cannot be predicted and will largely depend on market conditions and other potential uses of capital. Purchases may include open market purchases, tender offers or negotiated transactions.

As possible acquisitions, swaps or dispositions arise, we actively review them against our objectives including, among other considerations, improving the operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate return targets, and we may participate to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisitions, dispositions or system swaps, or that any such transactions will be material to our operations or results.

### Free Cash Flow

Free cash flow decreased $410 million and $2.5 billion during the three and nine months ended September 30, 2023 compared to the corresponding prior periods in 2022 due to the following (dollars in millions):

|  | Three months ended September 30, 2023 compared to three months ended September 30, 2022 Increase / (Decrease) | Nine months ended September 30, 2023 compared to nine months ended September 30, 2022 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase in capital expenditures | $(555) | $(1,803) |
| Changes in working capital, excluding mobile devices | (114) | (529) |
| Increase in cash paid for interest, net | (131) | (403) |
| Decrease (increase) in cash paid for taxes, net | 169 | (255) |
| Changes in working capital, mobile devices | 4 | (170) |
| Increase in Adjusted EBITDA | 37 | 187 |
| Other, net | 180 | 436 |
|  | $(410) | $(2,537) |

### Limitations on Distributions

Distributions by our subsidiaries to a parent company for payment of principal on parent company notes are restricted under CCO Holdings indentures governing CCO Holdings' indebtedness, unless there is no default under the applicable indenture, and unless CCO Holdings' leverage ratio test is met at the time of such distribution. As of September 30, 2023, there was no default under any of these indentures, and CCO Holdings met its leverage ratio test based on September 30, 2023 financial results. There can be no assurance that CCO Holdings will satisfy its leverage ratio test at the time of the contemplated distribution.

In addition to the limitation on distributions under the various indentures, distributions by our subsidiaries may be limited by applicable law, including the Delaware Limited Liability Company Act, under which our subsidiaries may only make distributions if they have “surplus” as defined in the act.

### Historical Operating, Investing, and Financing Activities

***Cash and Cash Equivalents.*** We held $571 million and $645 million in cash and cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

***Operating Activities.*** Net cash provided by operating activities decreased $560 million during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to negative changes in working capital and an increase in cash paid for interest and taxes, partly offset by an increase in Adjusted EBITDA of $187 million and the payment of litigation settlements in 2022.

***Investing Activities.*** Net cash used in investing activities was $8.5 billion and $6.3 billion for the nine months ended September 30, 2023 and 2022, respectively. The increase in cash used was primarily due to an increase in capital expenditures and changes in accrued expenses related to capital expenditures.

***Financing Activities.*** Net cash used in financing activities decreased $2.7 billion during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to a decrease in the purchase of treasury stock and noncontrolling interest partly offset by a decrease in the amount by which borrowings of long-term debt exceeded repayments.

### Capital Expenditures

We have significant ongoing capital expenditure requirements. Capital expenditures were $3.0 billion and $8.3 billion for the three and nine months ended September 30, 2023, respectively, and $2.4 billion and $6.5 billion for the three and nine months ended September 30, 2022, respectively. The increase was primarily due to an increase in line extensions in connection with our subsidized rural construction initiative and continued residential and commercial network expansion. The increase in capital expenditures excluding line extensions was primarily driven by higher spend on network evolution, support capital and customer premise equipment, particularly Xumo Stream boxes. See the table below for more details.

We currently expect full year 2023 capital expenditures, excluding line extensions, to be approximately $7.2 billion. We continue to expect 2023 line extensions capital expenditures to total approximately $4 billion. The actual amount of capital expenditures in 2023 will depend on a number of factors including, but not limited to, the pace of our network evolution and expansion initiatives, supply chain timing and growth rates in our residential and commercial businesses.

Our capital expenditures are funded primarily from cash flows from operating activities and borrowings on our credit facility. In addition, our accrued liabilities related to capital expenditures increased by $110 million and $284 million for the nine months ended September 30, 2023 and 2022, respectively.

The following tables present our major capital expenditures categories in accordance with National Cable and Telecommunications Association (“NCTA”) disclosure guidelines for the three and nine months ended September 30, 2023 and 2022. These disclosure guidelines are not required disclosures under GAAP, nor do they impact our accounting for capital expenditures under GAAP (dollars in millions):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Customer premise equipment (a) | $659 | $577 | $1,772 | $1,606 |
| Scalable infrastructure (b) | 308 | 413 | 1,015 | 1,156 |
| Upgrade/rebuild (c) | 509 | 218 | 1,190 | 566 |
| Support capital (d) | 420 | 372 | 1,245 | 1,068 |
| Capital expenditures, excluding line extensions | 1,896 | 1,580 | 5,222 | 4,396 |
| Subsidized rural construction line extensions | 498 | 427 | 1,398 | 897 |
| Other line extensions | 567 | 399 | 1,639 | 1,163 |
| Total line extensions (e) | 1,065 | 826 | 3,037 | 2,060 |
| Total capital expenditures | $2,961 | $2,406 | $8,259 | $6,456 |
| Of which: |  |  |  |  |
| Commercial services | $403 | $369 | $1,179 | $1,110 |
| Subsidized rural construction initiative (f) | $512 | $440 | $1,444 | $937 |
| Mobile | $76 | $96 | $235 | $265 |

(a) Customer premise equipment includes equipment and devices located at the customer's premise used to deliver our Internet, video and voice services (e.g., modems, routers and set-top boxes), as well as installation costs.

(b) Scalable infrastructure includes costs, not related to customer premise equipment or our network, to secure growth of new customers or provide service enhancements (e.g., headend equipment).

(c) Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including our network evolution initiative which started in 2022.

(d) Support capital includes costs associated with the replacement or enhancement of non-network assets (e.g., back-office systems, non-network equipment, land and buildings, vehicles, tools and test equipment).

(e) Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(f) The subsidized rural construction initiative subcategory includes projects for which we are receiving subsidies from federal, state and local governments (for which separate reporting was initiated in 2022), excluding customer premise equipment and installation.

### Recently Issued Accounting Standards

See Note 22 to the Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of recently issued accounting standards. There have been no material changes from the recently issued accounting standards described in our Form 10-K.

## Market risk

As filed, 368 characters.

There have been no material changes to the interest rate risk as previously disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022. See Note 3 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for a discussion of notes issued during the nine months ended September 30, 2023.

## Controls and procedures

As filed, 1,635 characters.

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our design and operation of disclosure controls and procedures with respect to the information generated for use in this quarterly report. The evaluation was based upon reports and certifications provided by a number of executives. Based on, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the evaluation, we believe that our controls provide such reasonable assurances.

During the quarter ended September 30, 2023, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 202 characters.

Our Annual Report on Form 10-K for the year ended December 31, 2022 includes "Risk Factors" under Item 1A of Part I. There have been no material changes from the risk factors described in our Form 10-K.

Filed Oct 27, 2023.
Source: SEC EDGAR, the filing index for accession 0001091667-23-000143. Last ingested by Listed: Nov 6, 2026, 11:35 ET. No prices; not investment advice.