# Charter Communications, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Charter Communications, Inc.](/companies/chtr.md) (CIK 1091667)
- Form: 10-Q
- Filed: 2024-07-26
- Accepted by EDGAR: Jul 26, 2024, 07:03 ET
- Period: 2024-06-30
- Accession: 0001091667-24-000104
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1091667/000109166724000104/chtr-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1091667/000109166724000104/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $13.69bn | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $27.36bn | us-gaap:Revenues |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $3.26bn | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $6.39bn | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $427.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $873.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $1.23bn | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $2.34bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $8.49 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $16.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $8.58 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $16.24 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 144,914,860 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 145,742,397 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $7.07bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $5.64bn | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-04-01 to 2024-06-30 | $361.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $877.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $602.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $4.13bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $148.61bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $10.73bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-06-30 | $96.69bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $12.88bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,869 characters.

### General

Charter Communications, Inc. (together with its controlled subsidiaries, “Charter”) is a leading broadband connectivity company and cable operator with services available to more than 57 million homes and businesses 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 second quarter of 2024, we lost 149,000 Internet customers while adding 557,000 mobile lines. Our Internet customer growth was challenged by the end of the Federal Communication Commission’s Affordable Connectivity Program ("ACP"), lower customer move rates and the competitive environment. While our retention programs for the customers impacted by the end of ACP subsidies have been successful in retaining the vast majority of ACP customers, the end of the ACP subsidy program was disruptive to our business and resulted in customer losses during the quarter. We expect to see additional one-time impacts on customer net gains, revenue per customer and bad debt in the third and fourth quarters of this year.

Our mobile line growth continued to benefit from our Spectrum One offering and new offerings launched in the second quarter of 2024, including our Anytime Upgrade offering and Phone Balance Buyout program. Our Spectrum One offering provides a differentiated connectivity experience by bringing 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. Anytime Upgrade allows certain customers to upgrade their devices whenever they want, eliminating traditional wait times, upgrade fees and condition requirements. Our Phone Balance Buyout program makes switching mobile providers easier by helping customers pay off balances on ported lines.

We spent $567 million and $994 million on our subsidized rural construction initiative during the three and six months ended June 30, 2024 and activated approximately 89,000 and 162,000 subsidized rural passings, respectively. We currently offer Spectrum Internet products with speeds up to 1 Gbps across our entire footprint. Our network evolution initiative is progressing. We are upgrading our network to deliver symmetrical and multi-gigabit speeds across our footprint and recently began offering symmetrical speeds in our first high split markets. We also continue to evolve our video product and are deploying Xumo stream boxes ("Xumo") to new video customers. Xumo combines a live TV experience with access to hundreds of content applications and features unified search and discovery along with a curated content offering based on a customer’s interests and subscriptions. In the first quarter of 2024, we began offering Disney+ and ESPN+ to customers in certain packages at no additional cost, and in the second quarter of 2024, we reached an agreement with Paramount+ that allows us to include Paramount+ in certain packages and recently launched ViX, a Spanish language direct-to-consumer application, for our Spanish language customers.

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 see operational benefits from the targeted investments we made in employee wages and benefits to build employee skill sets and tenure, as well as the continued investments in digitization of our customer service platforms, 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 June 30, 2024 | 2023 | % Change | Six Months Ended June 30, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $13,685 | $13,659 | 0.2% | $27,364 | $27,312 | 0.2% |
| Adjusted EBITDA | $5,665 | $5,522 | 2.6% | $11,162 | $10,872 | 2.7% |
| Income from operations | $3,263 | $3,240 | 0.7% | $6,394 | $6,166 | 3.7% |

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 our residential mobile service, residential Internet, enterprise and other revenues mostly offset by lower residential video revenue. Adjusted EBITDA and income from operations growth was driven by growth in revenue and decreases in operating costs and expenses, primarily programming expense, partly offset by an increase in mobile device and other mobile direct costs. Income from operations was also affected by an increase in other operating expenses, net.

The following table summarizes our customer statistics for Internet, video, voice and mobile as of June 30, 2024 and 2023 (in thousands except per customer data and footnotes).

| Customer Relationships (b) | Approximate as of June 30, 2024 (a) | 2023 (a) |
| --- | ---: | ---: |
| Residential | 29,615 | 30,009 |
| SMB | 2,222 | 2,219 |
| Total Customer Relationships | 31,837 | 32,228 |
| Monthly Residential Revenue per Residential Customer (c) | $120.77 | $120.25 |
| Monthly SMB Revenue per SMB Customer (d) | $165.28 | $164.56 |
| **Internet** |  |  |
| Residential | 28,318 | 28,549 |
| SMB | 2,049 | 2,037 |
| Total Internet Customers | 30,367 | 30,586 |
| **Video** |  |  |
| Residential | 12,718 | 14,071 |
| SMB | 591 | 635 |
| Total Video Customers | 13,309 | 14,706 |
| **Voice** |  |  |
| Residential | 6,170 | 7,248 |
| SMB | 1,276 | 1,294 |
| Total Voice Customers | 7,446 | 8,542 |
| **Mobile Lines (e)** |  |  |
| Residential | 8,531 | 6,410 |
| SMB | 278 | 216 |
| Total Mobile Lines | 8,809 | 6,626 |
| **Enterprise Primary Service Units ("PSUs") (f)** | 312 | 294 |

(a) We calculate the aging of customer accounts based on the monthly billing cycle for each account in accordance with our collection policies. On that basis, as of June 30, 2024 and 2023, customers include approximately 79,400 and 128,600 customers, respectively, whose accounts were over 60 days past due, approximately 10,000 and 47,000 customers, respectively, whose accounts were over 90 days past due and approximately 13,500 and 229,200 customers, respectively, whose accounts were over 120 days past due. The decrease in accounts past due is predominately due to revisions to customer account balances associated with the end of the ACP, including balance write-offs and conversion to payment plans. Bad debt expense associated with these past due accounts was predominantly reflected in our consolidated statements of operations in prior periods.

(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 2023 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 June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $13,685 | $13,659 | $27,364 | $27,312 |
| Costs and Expenses: |  |  |  |  |
| Operating costs and expenses (exclusive of items shown separately below) | 8,173 | 8,305 | 16,569 | 16,816 |
| Depreciation and amortization | 2,170 | 2,172 | 4,360 | 4,378 |
| Other operating (income) expenses, net | 79 | (58) | 41 | (48) |
|  | 10,422 | 10,419 | 20,970 | 21,146 |
| Income from operations | 3,263 | 3,240 | 6,394 | 6,166 |
| Other Income (Expenses): |  |  |  |  |
| Interest expense, net | (1,328) | (1,298) | (2,644) | (2,563) |
| Other expenses, net | (85) | (85) | (174) | (189) |
|  | (1,413) | (1,383) | (2,818) | (2,752) |
| Income before income taxes | 1,850 | 1,857 | 3,576 | 3,414 |
| Income tax expense | (427) | (444) | (873) | (818) |
| Consolidated net income | 1,423 | 1,413 | 2,703 | 2,596 |
| Less: Net income attributable to noncontrolling interests | (192) | (190) | (366) | (352) |
| Net income attributable to Charter shareholders | $1,231 | $1,223 | $2,337 | $2,244 |
| EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS: |  |  |  |  |
| Basic | $8.58 | $8.15 | $16.24 | $14.89 |
| Diluted | $8.49 | $8.05 | $16.03 | $14.69 |
| Weighted average common shares outstanding, basic | 143,329,828 | 150,091,880 | 143,920,073 | 150,761,406 |
| Weighted average common shares outstanding, diluted | 144,914,860 | 151,975,698 | 145,742,397 | 152,727,540 |

***Revenues.*** Total revenues grew $26 million and $52 million for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to growth in residential mobile service, residential Internet, enterprise and other revenues, partly offset by lower residential video revenue.

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 June 30, 2024 | 2023 | % Change | Six Months Ended June 30, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Internet | $5,806 | $5,733 | 1.3% | $11,632 | $11,451 | 1.6% |
| Video | 3,867 | 4,188 | (7.7)% | 7,775 | 8,442 | (7.9)% |
| Voice | 350 | 365 | (4.2)% | 724 | 738 | (1.9)% |
| Mobile service | 737 | 539 | 36.9% | 1,422 | 1,036 | 37.4% |
| Residential revenue | 10,760 | 10,825 | (0.6)% | 21,553 | 21,667 | (0.5)% |
| Small and medium business | 1,101 | 1,094 | 0.6% | 2,189 | 2,185 | 0.2% |
| Enterprise | 721 | 690 | 4.5% | 1,429 | 1,372 | 4.2% |
| Commercial revenue | 1,822 | 1,784 | 2.1% | 3,618 | 3,557 | 1.7% |
| Advertising sales | 397 | 384 | 3.3% | 788 | 739 | 6.5% |
| Other | 706 | 666 | 6.0% | 1,405 | 1,349 | 4.2% |
|  | $13,685 | $13,659 | 0.2% | $27,364 | $27,312 | 0.2% |

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase related to rate and product mix changes | $99 | $189 |
| Decrease in average residential Internet customers | (26) | (8) |
|  | $73 | $181 |

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 decreased by 231,000 customers from June 30, 2023 to June 30, 2024.

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 June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Decrease in average residential video customers | $(370) | $(680) |
| Increase related to rate and product mix changes | 49 | 13 |
|  | $(321) | $(667) |

Residential video customers decreased by 1,353,000 from June 30, 2023 to June 30, 2024. The increase related to rate and product mix was primarily due to promotional rate step-ups and video rate adjustments that pass-through programming rate increases, partly offset by a higher mix of lower priced video packages within our video customer base.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Decrease in average residential voice customers | $(52) | $(101) |
| Increase related to rate adjustments | 37 | 87 |
|  | $(15) | $(14) |

Residential wireline voice customers decreased by 1,078,000 customers from June 30, 2023 to June 30, 2024.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase in average residential mobile lines | $190 | $399 |
| Increase (decrease) related to rate | 8 | (13) |
|  | $198 | $386 |

Residential mobile lines increased by 2,121,000 mobile lines from June 30, 2023 to June 30, 2024. The increase related to rate for the three months ended June 30, 2024 compared to the corresponding period in 2023 is primarily related to higher bundled revenue allocation and successful conversion of free lines. The decrease related to rate for the six months ended June 30, 2024 compared to the corresponding period in 2023 is primarily related to the Spectrum One offering and is partly offset by higher bundled revenue allocation.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Increase in SMB customers | $2 | $7 |
| Increase (decrease) related to rate and product mix changes | 5 | (3) |
|  | $7 | $4 |

SMB customers grew by 3,000 from June 30, 2023 to June 30, 2024.

Enterprise revenues increased $31 million and $57 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to an increase in Internet PSUs. Enterprise PSUs increased 18,000 from June 30, 2023 to June 30, 2024.

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 increased $13 million and $49 million during the three and six months ended June 30, 2024, respectively, as compared to the corresponding periods in 2023 primarily due to an increase in political ad revenue and advanced advertising partly offset by lower local 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 $40 million and $56 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to higher mobile device sales.

***Operating costs and expenses.*** The decrease 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 June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Programming | $(268) | $(497) |
| Other costs of revenue | 171 | 301 |
| Costs to service customers | (88) | (89) |
| Sales and marketing | 17 | (9) |
| Other | 36 | 47 |
|  | $(132) | $(247) |

Programming costs were approximately $2.5 billion and $2.7 billion for the three months ended June 30, 2024 and 2023, representing 30% and 33% of total operating costs and expenses, respectively, and $5.0 billion and $5.5 billion for the six months ended June 30, 2024 and 2023, representing 30% and 33% 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 video customers and a higher mix of lower cost video packages within our video customer base, partly offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent.

Other costs of revenue increased $171 million and $301 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to higher mobile service direct costs and mobile device sales due to an increase in mobile lines.

Costs to service customers decreased $88 million and $89 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to lower labor costs and, during the three months ended June 30, 2024, lower bad debt expense.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Property tax and insurance | $33 | $36 |
| Corporate costs | 16 | 20 |
| Stock compensation expense | (15) | (9) |
| Other | 2 | — |
|  | $36 | $47 |

Property tax and insurance increased during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily as a result of an adjustment in 2023 related to favorable development on prior year workers' compensation claims.

***Depreciation and amortization.*** Depreciation and amortization expense decreased by $2 million and $18 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to certain assets becoming fully depreciated partly offset by an increase in depreciation as a result of more recent capital expenditures.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Special charges, net | $128 | $131 |
| (Gain) loss on disposal of assets, net | 9 | (42) |
|  | $137 | $89 |

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

***Interest expense, net.*** Net interest expense increased by $30 million and $81 million for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 primarily due to an increase in weighted average interest rates.

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

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Gain on extinguishment of debt (see Note 3) | $9 | $9 |
| Loss on financial instruments, net (see Note 7) | (11) | 12 |
| Net periodic pension benefits | — | (1) |
| Loss on equity investments, net | 2 | (5) |
|  | $— | $15 |

See Note 11 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 $427 million and $873 million for the three and six months ended June 30, 2024, respectively, and $444 million and $818 million for the three and six months ended 2023, 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 6 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 $8 million and $93 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding periods in 2023 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 $366 million and $737 million for the three and six months ended June 30, 2024, respectively, and $335 million and $709 million for the three and six months ended 2023, 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 June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to Charter shareholders | $1,231 | $1,223 | $2,337 | $2,244 |
| Plus: Net income attributable to noncontrolling interest | 192 | 190 | 366 | 352 |
| Interest expense, net | 1,328 | 1,298 | 2,644 | 2,563 |
| Income tax expense | 427 | 444 | 873 | 818 |
| Depreciation and amortization | 2,170 | 2,172 | 4,360 | 4,378 |
| Stock compensation expense | 153 | 168 | 367 | 376 |
| Other, net | 164 | 27 | 215 | 141 |
| Adjusted EBITDA | $5,665 | $5,522 | $11,162 | $10,872 |
| Net cash flows from operating activities | $3,853 | $3,311 | $7,065 | $6,634 |
| Less: Purchases of property, plant and equipment | (2,853) | (2,834) | (5,644) | (5,298) |
| Change in accrued expenses related to capital expenditures | 296 | 191 | 233 | (4) |
| Free cash flow | $1,296 | $668 | $1,654 | $1,332 |

### 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 May 2024, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $1.5 billion of 6.100% senior secured notes due June 2029 at a price of 99.944% of the aggregate principal amount and $1.5 billion of 6.550% senior secured notes due June 2034 at a price of 99.755% of the aggregate principal amount. The net proceeds were used to fund a concurrent tender offer to repurchase $2.7 billion in aggregate principal amount of Charter Operating's 4.908% senior secured notes due July 2025, to prepay Charter Operating's outstanding Term B-1 Loan and to pay related fees and expenses.

### Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt and require significant cash to fund principal and interest payments on our debt. The principal amount of our debt as of June 30, 2024 was $96.5 billion, consisting of $13.1 billion of credit facility debt, $56.2 billion of investment grade senior secured notes and $27.3 billion of high-yield senior unsecured notes. Our split credit rating allows us to access both the investment grade debt market and the high yield debt market.

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. Free cash flow was $1.3 billion and $1.7 billion for the three and six months ended June 30, 2024, respectively, and $668 million and $1.3 billion for the three and six months ended June 30, 2023, respectively. See the table below for factors impacting free cash flow during the three and six months ended June 30, 2024 compared to the corresponding prior periods. As of June 30, 2024, the amount available under our credit facilities was approximately $4.1 billion and cash on hand was approximately $602 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 investing in our business growth and other strategic opportunities, including expanding the capacity of our network, the expansion of our network through our rural broadband construction initiative, 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. Charter's leverage ratio was 4.3 times Adjusted EBITDA as of June 30, 2024. 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 six months ended June 30, 2024, Charter purchased in the public market approximately 1.2 million and 2.4 million shares of Charter Class A common stock, respectively, for approximately $323 million and $714 million, respectively, and during the three and six months ended June 30, 2023, Charter purchased in the public market approximately 1.0 million and 3.1 million shares of Charter Class A common stock, respectively, for approximately $324 million and $1.1 billion, respectively. Since the beginning of its buyback program in September 2016 through June 30, 2024, Charter has purchased approximately 161.5 million shares of Class A common stock and Charter Holdings common units for approximately $73.0 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. During the three and six months ended June 30, 2024, Charter purchased from Liberty Broadband 0.1 million and 0.3 million shares of Charter Class A common stock, respectively, for approximately $35 million and $116 million, respectively, and 0.1 million shares of Charter Class A common stock for approximately $42 million during the six months ended June 30, 2023.

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 six months ended June 30, 2024, Charter Holdings purchased from A/N 0.2 million and 0.4 million Charter Holdings common units, respectively, for approximately $46 million and $141 million, respectively, and during the three and six months ended June 30, 2023, Charter Holdings purchased from A/N 0.2 million and 0.5 million Charter Holdings common units, respectively, for approximately $54 million and $176 million, respectively.

As of June 30, 2024, Charter had remaining board authority to purchase an additional $406 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 increased $628 million and $322 million during the three and six months ended June 30, 2024, respectively, compared to the corresponding prior periods in 2023 due to the following (dollars in millions):

|  | Three months ended June 30, 2024 compared to three months ended June 30, 2023 Increase / (Decrease) | Six months ended June 30, 2024 compared to six months ended June 30, 2023 Increase / (Decrease) |
| --- | ---: | ---: |
| Changes in working capital, excluding mobile devices | $273 | $450 |
| Increase in Adjusted EBITDA | 143 | 290 |
| Decrease in cash paid for taxes, net | 276 | 245 |
| Changes in working capital, mobile devices | 207 | 171 |
| Increase in capital expenditures | (19) | (346) |
| Increase in cash paid for interest, net | (122) | (167) |
| Other, net | (130) | (321) |
|  | $628 | $322 |

Other, net primarily includes the payment of a litigation settlement during the six months ended June 30, 2024 compared to the corresponding period in 2023.

### 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 June 30, 2024, there was no default under any of these indentures, and CCO Holdings met its leverage ratio test based on June 30, 2024 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 $602 million and $709 million in cash and cash equivalents as of June 30, 2024 and December 31, 2023, respectively. In addition, we held $40 million in restricted cash included in prepaid and other current assets in our consolidated balance sheets as of June 30, 2024.

***Operating Activities.*** Net cash provided by operating activities increased $431 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to an increase in Adjusted EBITDA, a decrease in cash paid for taxes and favorable changes in working capital, partly offset by the payment of litigation settlements in 2024 and an increase in cash paid for interest.

***Investing Activities.*** Net cash used in investing activities was $5.6 billion for both the six months ended June 30, 2024 and 2023 driven by an increase in capital expenditures, offset by changes in accrued expenses related to capital expenditures.

***Financing Activities.*** Net cash used in financing activities increased $284 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to an increase in the amount by which repayments of long-term debt exceeded borrowings, partly offset by a decrease in the purchase of treasury stock and noncontrolling interest.

### Capital Expenditures

We have significant ongoing capital expenditure requirements. Capital expenditures were $2.9 billion and $5.6 billion for the three and six months ended June 30, 2024, respectively, and $2.8 billion and $5.3 billion for the three and six months ended June 30, 2023, respectively. The increase during the six months ended June 30, 2024 as compared to the corresponding prior year period was primarily driven by higher spend on network evolution and an increase in line extensions in connection with our subsidized rural construction initiative and continued residential and commercial network expansion, as well as an increase in customer premise equipment, particularly Xumo. See the table below for more details.

We currently expect full year 2024 capital expenditures to total approximately $12.0 billion, including line extensions of approximately $4.5 billion and network evolution spend of approximately $1.6 billion. The actual amount of capital expenditures in 2024 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 expenses related to capital expenditures increased by $233 million and decreased by $4 million for the six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024 and 2023. 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 June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Customer premise equipment (a) | $562 | $576 | $1,197 | $1,113 |
| Scalable infrastructure (b) | 362 | 353 | 690 | 707 |
| Upgrade/rebuild (c) | 389 | 392 | 870 | 681 |
| Support capital (d) | 421 | 431 | 809 | 825 |
| Capital expenditures, excluding line extensions | 1,734 | 1,752 | 3,566 | 3,326 |
| Subsidized rural construction line extensions | 565 | 529 | 992 | 900 |
| Other line extensions | 554 | 553 | 1,086 | 1,072 |
| Total line extensions (e) | 1,119 | 1,082 | 2,078 | 1,972 |
| Total capital expenditures | $2,853 | $2,834 | $5,644 | $5,298 |
| Of which: |  |  |  |  |
| Commercial services | $382 | $409 | $757 | $776 |
| Subsidized rural construction initiative (f) | $567 | $541 | $994 | $932 |
| Mobile | $64 | $82 | $123 | $159 |

(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.

(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, 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, 2023 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, 177 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, 2023.

## Controls and procedures

As filed, 1,631 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 June 30, 2024, 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, 6,357 characters.

Our Annual Report on Form 10-K for the year ended December 31, 2023 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 except as described below.

***Changes to the existing legal and regulatory framework under which we operate or the regulatory programs in which we or our competitors participate could adversely affect our business.***

There are ongoing efforts to amend or expand the federal, state and local regulation of some of the services offered over our cable systems, particularly our retail broadband Internet access service. Potential legislative and regulatory changes could adversely impact our business by increasing our costs and competition and limiting our ability to offer services in a manner that would maximize our revenue potential. These changes have in the past, and could in the future, include, for example, the reclassification of Internet services as regulated telecommunications services or other utility-style regulation of Internet services; restrictions on how we manage our Internet access services and networks; the adoption of new customer service or service quality requirements for our Internet access services; the adoption of new privacy restrictions on our collection, use and disclosure of certain customer information; new data security and cybersecurity mandates that could result in additional network and information security and cyber incident reporting requirements for our business; new restraints on our discretion over programming decisions; new restrictions on the rates we charge to consumers for one or more of the services or equipment options we offer; changes to the cable industry’s compulsory copyright to retransmit broadcast signals; new requirements to assure the availability of navigation devices from third-party providers; new Universal Service Fund contribution obligations on our Internet service revenues that would add to the cost of that service; increases in government-administered broadband subsidies to rural areas that could result in subsidized overbuilding of our facilities; changes to the Federal Communications Commission’s ("FCC") administration of spectrum; pending court challenges to the legality of the FCC’s Universal Service programs, which, if successful, could adversely affect our receipt of universal service funds, including but not limited to FCC Rural Development Opportunity Fund (“RDOF”) grants to expand our network, FCC E-rate funds to serve schools and libraries and FCC Rural Health Care funds to serve eligible health care providers; and changes in the regulatory framework for voice over Internet protocol ("VoIP") telephone service, including the scope of regulatory obligations associated with our VoIP telephone service and our ability to interconnect our VoIP telephone service with incumbent providers of traditional telecommunications service.

We participated in the ACP and continue to participate in the RDOF subsidy program. The ACP program previously provided up to a $30 monthly subsidy enabling eligible low-income households to purchase our Internet products at a discount or, for a portion of those households, at no cost. The FCC prohibited service providers from enrolling new participants into the ACP after February 7, 2024 and April 2024 was the last month ACP households received the full ACP subsidy. ACP households received a $14 federally funded ACP subsidy in May 2024. As of June 1, 2024, ACP households no longer received the ACP benefit. The end of the ACP benefit has been, and will continue to be, disruptive to our business. We have lost and will continue to lose customers and revenues and could face greater difficulty in providing services to low-income households in the future.

As a winning bidder in the FCC’s RDOF auction in 2020, we must comply with numerous FCC and state requirements to continue receiving such funding. To comply with these requirements, in RDOF areas, we have chosen to offer certain of our VoIP telephone services, such as our Lifeline services, subject to certain traditional federal and state common carrier regulations. Additionally, in some areas where we are building pursuant to subsidy programs, we will offer certain of our broadband Internet access services subject to required discounts and other marketing-related terms. If we fail to comply with those requirements, the governing regulatory agency could consider us in default and we could incur substantial penalties or forfeitures. If we fail to attain certain specified infrastructure build-out requirements under the RDOF program, the FCC could also withhold future support payments until those shortcomings are corrected. Any failure to comply with the rules and requirements of a subsidy grant could result in us being suspended or disbarred from future governmental programs or contracts for a significant period of time, which could adversely affect our results of operations and financial condition.

Participation in ACP, RDOF, and other government programs, including state subsidized builds, creates the risk of claims of our failure to adequately comply with the regulatory requirements of those programs. The FCC, and various state and federal agencies and attorney generals, may subject those programs, or other industry practices, to audits and investigations, which could result in enforcement actions, litigation, fines, settlements or reputational harm, and/or operational and financial conditions being placed on us, any of which could adversely affect our results of operations and financial condition.

If any laws or regulations are enacted that would expand the regulation of our services, they could affect our operations and require significant expenditures. We cannot predict future developments in these areas, and any changes to the regulatory framework for our Internet, video, mobile or VoIP services could have a negative impact on our business and results of operations.

It remains uncertain what rule changes, if any, will ultimately be adopted by Congress, the FCC, the Federal Trade Commission and state legislatures and regulatory agencies, and what operating or financial impact any such rules might have on us, including on the operation of our broadband networks, customer privacy and the user experience.

Filed Jul 26, 2024.
Source: SEC EDGAR, the filing index for accession 0001091667-24-000104. Last ingested by Listed: Nov 6, 2026, 11:35 ET. No prices; not investment advice.