STAMFORD, Conn., July 31, 2020 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and six months ended June 30, 2020.

Key highlights:

• Second quarter total residential and SMB customer relationships¹ increased by 755,000, compared to 203,000 during the second quarter of 2019. Second quarter total residential and SMB Internet customers¹ increased by 850,000, compared to 258,000 during the second quarter of 2019.
• Charter added 325,000 Spectrum Mobile™ lines in the second quarter, and as of June 30, 2020, Charter served a total of 1.7 million mobile lines.
• Second quarter revenue of $11.7 billion grew by 3.1% year-over-year, driven by residential revenue growth of 4.1%, mobile revenue growth of 96.1% and SMB revenue growth of 2.0%.
• Second quarter Adjusted EBITDA² of $4.5 billion grew by 7.3% year-over-year, while second quarter cable Adjusted EBITDA² of $4.6 billion grew by 6.7% year-over-year.
• Net income attributable to Charter shareholders totaled $766 million in the second quarter, compared to $314 million during the same period last year.
• Second quarter capital expenditures totaled $1.9 billion and included $125 million of mobile-related capital expenditures.
• Consolidated free cash flow² for the second quarter of 2020 totaled $1.9 billion, compared to $1.1 billion in 2019. Cable free cash flow² totaled $2.1 billion for the second quarter of 2020, versus $1.4 billion in 2019.
• During the second quarter, Charter purchased approximately 2.3 million shares of Charter Class A common stock and Charter Communications Holdings, LLC ("Charter Holdings") common units for approximately $1.2 billion.

"Our ability to grow our services this year for new and existing customers, is a testament to our operating strategy, the quality of our products and our significant investment in systems and people over the last several years," said Tom Rutledge, CEO and Chairman of Charter Communications, Inc. "We continue to perform in a difficult and disruptive environment, and all of us at Charter are proud of our work in serving the communities in which we operate."

To assist communities impacted by the COVID-19 pandemic, in March, Charter launched its Remote Education Offer providing free Spectrum Internet^® for 60 days to households with K-12 and/or college students as well as educators that did not already have Spectrum Internet service. This offer for new customers ended on June 30, 2020. The majority of customers that participated in the Remote Education Offer chose to be provided with Internet service at flagship speeds (i.e., 200 Mbps or 100 Mbps). Furthermore, as of June 30, 2020, nearly 50% of participants in the Remote Education Offer chose to subscribe to additional services (i.e., video, voice, mobile) from Charter, and were billed for these additional services. Charter also participated in the Federal Communication Commission's ("FCC") Keep Americans Connected Pledge through June 30, 2020, pausing disconnects and collection efforts for residential and SMB customers impacted by COVID-19. In an effort to assist these COVID-19 impacted customers with overdue balances, Charter waived $76 million of residential, $6 million of SMB and $3 million of mobile receivables which were recorded as reductions to revenue in the second quarter of 2020. As a result, these customers no longer have overdue balances. Finally, Charter provided a seasonal plan at reduced rates to SMB and Enterprise customers that have temporarily closed or because these customers have reduced their service offerings to their own customers. The following discussion includes the impact of Charter's COVID-19 related offers and programs, which were generally provided up to June 30, 2020, on customer results and data. See page 3 for the total number of customers participating in these COVID-19 related offers and programs as of June 30, 2020.

During the second quarter of 2020, Charter's residential customer relationships grew by 751,000, while second quarter 2019 residential customer relationships grew by 164,000. As of June 30, 2020, Charter had 28.5 million residential customer relationships, with year-over-year growth of 1.7 million, or 6.5%.

Charter added 842,000 residential Internet customers in the second quarter of 2020, versus second quarter 2019 residential Internet customer net additions of 221,000. As of June 30, 2020, Charter had 26.3 million residential Internet customers, with over 85% subscribing to tiers that provided 100 Mbps or more of speed. Currently, 200 Mbps is the slowest speed offered to new Spectrum Internet customers in approximately 60% of Charter's footprint, with 100 Mbps the slowest speed offered in the remaining 40% of its footprint.

Residential video customers increased by 102,000 in the second quarter of 2020, while second quarter 2019 residential video customers decreased by 150,000. As of June 30, 2020, Charter had 15.7 million residential video customers.

During the second quarter of 2020, residential wireline voice customers increased by 38,000, while second quarter 2019 voice customers declined by 207,000. As of June 30, 2020, Charter had 9.4 million residential wireline voice customers.

Second quarter 2020 residential revenue per residential customer (excluding mobile) totaled $110.82, and declined by 1.2% compared to the prior year period, given the waiver of overdue customer balances for customers offered protection following Charter's participation in the FCC's Keep Americans Connected Pledge, Charter's Remote Education Offer, a higher percentage of non-video customers and a higher mix of lower priced video packages within Charter's video customer base, partly offset by promotional rate step-ups and rate adjustments.

During the second quarter of 2020, Charter added 325,000 mobile lines, and as of June 30, 2020, Charter served a total of 1.7 million mobile lines. Spectrum Mobile is available to all new and existing Spectrum Internet customers and runs on America's most awarded LTE network combined with Spectrum WiFi. Spectrum Mobile customers can choose one of two simple ways to pay for data, "Unlimited" for $45 a month (per line), or "By the Gig" at $14/GB, in both cases including applicable fees and taxes. Earlier this year, Spectrum Mobile launched 5G service. Customers with a $45/monthly unlimited data plan can use 5G phones to access 5G service at no additional cost in select cities nationwide.

SMB customer relationships grew by 4,000 during the second quarter of 2020, compared to growth of 39,000 during the second quarter of 2019. As of June 30, 2020, Charter had 2.0 million SMB customer relationships, with year-over-year growth of 4.1%. Enterprise PSUs grew by 1,000 during the second quarter of 2020 compared to growth of 5,000 during the second quarter of 2019. As of June 30, 2020, Charter had 270,000 enterprise PSUs, with growth of 4.9% year-over-year.

Second Quarter Financial Results

Revenues

Second quarter revenue increased by 3.1% year-over-year to $11.7 billion, driven by growth in Internet, mobile and SMB. Excluding mobile, revenue grew by 1.8% year-over-year.

Residential revenue totaled $9.4 billion in the second quarter, an increase of 4.1% year-over-year, despite $76 million of customer receivables which Charter has waived to address past due balances for customers offered collection protection following Charter's participation in the FCC's Keep Americans Connected Pledge.

Internet revenue grew by 10.4% compared to the year-ago quarter, to $4.5 billion, driven by growth in Internet customers during the last year, promotional rolloff and rate adjustments, partly offset by the aforementioned waiver of overdue customer balances.

Video revenue totaled $4.4 billion in the second quarter, a decrease of 0.4% compared to the prior year period, driven by a decline in video customers during the last year, a higher mix of lower priced video packages within Charter's video customer base and the aforementioned waiver of overdue customer balances, partly offset by rate adjustments and promotional rolloff.

Voice revenue totaled $451 million in the second quarter, a decrease of 7.7% compared to the second quarter of 2019, driven by a decline in wireline voice customers over the last twelve months and value-based pricing.

Commercial revenue declined to $1.6 billion, a decrease of 1.7% over the prior year period, driven by a decline in enterprise revenue of 7.1%, partly offset by SMB revenue growth of 2.0%. SMB revenue in the second quarter was negatively impacted by $17 million of COVID-19 related seasonal plans and receivables waived to address past due balances for customers offered collection protection following Charter's participation in the FCC's Keep Americans Connected Pledge. Excluding one-time COVID-19 related impacts, SMB revenue grew by 3.8% year-over-year reflecting lower SMB unit growth during the pandemic. Second quarter enterprise revenue was negatively impacted by Charter's sale of Navisite in the third quarter of 2019 and $18 million of COVID-19 related hospitality customer credits. Excluding Navisite revenue from the second quarter of 2019 and one-time COVID-19 related impacts, commercial and enterprise revenue grew by 2.8% and 1.3% year-over-year, respectively.

Second quarter advertising sales revenue of $249 million decreased by 37.0% compared to the year-ago quarter, driven by lower local and national sales due to the COVID-19 pandemic. Excluding political revenue in both periods, advertising sales revenue declined by 40.8% year-over-year.

Second quarter mobile revenue totaled $310 million, an increase of 96.1% year-over-year.

Other revenue totaled $196 million in the second quarter, in-line with the prior year.

Operating Costs and Expenses

Second quarter total operating costs and expenses increased by $45 million, or 0.6% year-over-year. Excluding mobile costs in both periods, operating costs and expenses decreased by 1.3% compared to the year-ago quarter.

Second quarter programming costs increased by $46 million, or 1.6% as compared to the second quarter of 2019, reflecting contractual programming increases and renewals, partly offset by lower video customers and a higher mix of lower cost video packages within Charter's video customer base.

Regulatory, connectivity and produced content expenses decreased by $109 million, or 18.3% year-over-year, primarily driven by delayed sports rights costs.

Costs to service customers increased by $81 million, or 4.6% year-over-year, despite year-over-year residential and SMB customer growth of 6.3%. In addition to customer growth and record transaction volume for new sales and service, the year-over-year increase in costs to service customers was driven by previously announced accelerated wage benefits for hourly field operations and call center employees and COVID-19 related flex time, partly offset by lower medical costs and a one-time payroll tax credit. While bad debt increased 5.0% year-over-year, bad debt in the second quarter benefited from the revenue reduction for Keep Americans Connected customers and better collections from other customers as a result of Federal stimulus under the CARES Act.

Marketing expenses decreased by $49 million, or 6.3% year-over-year, primarily driven by better media placement rates and a one-time payroll tax credit.

Other expenses decreased by $60 million, or 6.6% as compared to the second quarter of 2019 primarily driven by lower advertising sales expense, enterprise costs from the sale of Navisite, employee travel expense and insurance costs.

Second quarter mobile costs totaled $413 million, an increase of 48.6% year-over-year, and were comprised of device costs, customer acquisition costs, and service and operating costs.

Adjusted EBITDA

Second quarter Adjusted EBITDA of $4.5 billion grew by 7.3% year-over-year, reflecting growth in revenue and operating expenses of 3.1% and 0.6%, respectively. Second quarter cable Adjusted EBITDA grew by 6.7% year-over-year reflecting growth in cable revenue of 1.8% and a decline in cable operating expenses of 1.3%.

Net Income Attributable to Charter Shareholders

Net income attributable to Charter shareholders totaled $766 million in the second quarter of 2020, compared to $314 million in the second quarter of 2019. The year-over-year increase in net income attributable to Charter shareholders was primarily driven by higher Adjusted EBITDA, a non-cash gain on financial instruments in the current year period versus a loss in the prior year period and lower depreciation and amortization, partly offset by higher tax expense.

Net income per basic common share attributable to Charter shareholders totaled $3.72 in the second quarter of 2020 compared to $1.41 during the same period last year. The increase was primarily the result of the factors described above in addition to a 7.5% decrease in weighted average common shares outstanding versus the prior year period.

Capital Expenditures

Property, plant and equipment expenditures totaled $1.9 billion in the second quarter of 2020, compared to $1.6 billion during the second quarter of 2019, primarily driven by increases in scalable infrastructure, line extensions and Internet CPE. The year-over-year increase in scalable infrastructure spending was primarily due to core network enhancements and node splits to maintain excess network capacity with growing customers and traffic. The increase in line extensions was driven by continued network expansion, including to rural areas. The increase in Internet CPE spending was due to higher Internet customer growth. Second quarter capital expenditures included $125 million of mobile costs, most of which are included in support capital.

Charter currently expects 2020 cable capital expenditures to decline as a percentage of cable revenue versus 2019.

Cash Flow and Free Cash Flow

During the second quarter of 2020, net cash flows from operating activities totaled $3.5 billion, compared to $2.8 billion in the prior year quarter. The year-over-year increase in net cash flows from operating activities was primarily due to higher Adjusted EBITDA and a favorable change in working capital.

Consolidated free cash flow for the second quarter of 2020 totaled $1.9 billion, compared to $1.1 billion during the same period last year. Cable free cash flow for the second quarter of 2020 totaled $2.1 billion, compared to $1.4 billion during the same period last year. The year-over-year increases in consolidated free cash flow and cable free cash flow were driven by an increase in net cash flows from operating activities.

Liquidity & Financing

As of June 30, 2020, total principal amount of debt was $77.8 billion and Charter's credit facilities provided approximately $4.7 billion of additional liquidity in excess of Charter's $2.1 billion cash position.

In April 2020, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. issued $1.6 billion of 2.800% senior secured notes due 2031 and $1.4 billion of 3.700% senior secured notes due 2051. The proceeds were used to pay related fees and expenses and for general corporate purposes.

In June 2020, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. redeemed all of their 3.579% senior secured notes due July 2020.

In July 2020, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. issued $3.0 billion of 4.250% senior unsecured notes due 2031. The proceeds will be used to pay related fees and expenses and for general corporate purposes, including repaying certain indebtedness, including all of CCO Holdings' 5.875% senior notes due 2024, as well as funding buybacks of Charter Class A common stock and/or Charter Holdings common units.

Share Repurchases

During the three months ended June 30, 2020, Charter purchased approximately 2.3 million shares of Charter Class A common stock and Charter Holdings common units for approximately $1.2 billion.

Conference Call

Charter will host a conference call on Friday, July 31, 2020 at 8:30 a.m. Eastern Time (ET) related to the contents of this release.

The conference call will be webcast live via the Company's investor relations website at ir.charter.com. The call will be archived under the "Financial Information" section two hours after completion of the call. Participants should go to the webcast link no later than 10 minutes prior to the start time to register.

Those participating via telephone should dial 866-919-0894 no later than 10 minutes prior to the call. International participants should dial 706-679-9379. The conference ID code for the call is 5936339.

A replay of the call will be available at 855-859-2056 or 404-537-3406 beginning two hours after the completion of the call through the end of business on August 14, 2020. The conference ID code for the replay is 5936339.

Additional Information Available on Website

The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020, which will be posted on the "Financial Information" section of our investor relations website at ir.charter.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available in the "Financial Information" section.

Use of Adjusted EBITDA and Free Cash Flow Information

The company uses certain measures that are not defined by U.S. generally accepted accounting principles ("GAAP") to evaluate various aspects of its 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 Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, in the Addendum to this release.

Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, net interest expense, income taxes, depreciation and amortization, stock compensation expense, loss on extinguishment of debt, (gain) loss on financial instruments, net, other pension (benefits) costs, net, other (income) expense, net and other operating (income) expenses, such as special charges and (gain) loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's 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 the cash cost of financing. These costs are evaluated through other financial measures.     

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.   

Management and Charter's board of directors use Adjusted EBITDA and free cash flow to assess Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's 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 the SEC). For the purpose of calculating compliance with leverage covenants, the Company uses Adjusted EBITDA, as presented, excluding certain expenses paid by its operating subsidiaries to other Charter entities. The Company's debt covenants refer to these expenses as management fees, which were $308 million and $619 million for the three and six months ended June 30, 2020, respectively, and $299 million and $599 million for the three and six months ended June 30, 2019, respectively.

Cable Adjusted EBITDA is defined as Adjusted EBITDA less mobile revenues plus mobile operating costs and expenses. Cable free cash flow is defined as free cash flow plus mobile net cash outflows from operating activities and mobile capital expenditures. Management and Charter's board of directors use cable Adjusted EBITDA and cable free cash flow to provide management and investors a more meaningful year-over-year perspective on the financial and operational performance and trends of our core cable business without the impact of the revenue, costs and capital expenditures in the initial funding period to grow a new product line as well as the negative working capital impacts from the timing of device-related cash flows when we sell the handset or tablet to customers pursuant to equipment installment plans. 

About Charter

Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband connectivity company and cable operator serving more than 30 million customers in 41 states through its Spectrum brand. Over an advanced communications network, the company offers 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. The company also distributes award-winning news coverage, sports and high-quality original programming to its customers through Spectrum Networks and Spectrum Originals. More information about Charter can be found at corporate.charter.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies and prospects, both business and financial.  Although we believe that our plans, intentions and expectations as reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations.  Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the SEC.  Many of the forward-looking statements contained in this communication may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity," "tentative," "positioning," "designed," "create," "predict," "project," "initiatives," "seek," "would," "could," "continue," "ongoing," "upside," "increases," "focused on" and "potential," among others.  Important factors that could cause actual results to differ materially from the forward-looking statements we make in this communication are set forth in our annual report on Form 10-K, and in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

• the impact of the COVID-19 pandemic on the economy, our customers, our vendors, local, state and federal governmental responses to the pandemic and our businesses generally;
• our ability to sustain and grow revenues and cash flow from operations by offering Internet, video, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our service areas and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;
• the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite ("DBS") operators, wireless broadband and telephone providers, digital subscriber line ("DSL") providers, fiber to the home providers and providers of video content over broadband Internet connections;
• our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
• our ability to develop and deploy new products and technologies including mobile products and any other consumer services and service platforms;
• any events that disrupt our networks, information systems or properties and impair our operating activities or our reputation;
• the effects of governmental regulation on our business including costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us as a result of the Time Warner Cable Inc. and Bright House Networks, LLC Transactions;
• general business conditions, economic uncertainty or downturn, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector;
• the ability to retain and hire key personnel;
• the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
• our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement.  We are under no duty or obligation to update any of the forward-looking statements after the date of this communication.