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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From             to             

Commission File Number: 001-33664
https://cdn.kscope.io/668ec2ac23a6d505a105ab26efc8082a-a2014charterlogoa01a02a26.jpg
Charter Communications, Inc.
(Exact name of registrant as specified in its charter)
Delaware
84-1496755
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
400 Washington Blvd.
Stamford
Connecticut
06902
(Address of Principal Executive Offices)
(Zip Code)
(203) 905-7801
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock $.001 Par ValueCHTRNASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x    Accelerated filer o    Non-accelerated filer o    Smaller reporting company      Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No x

Number of shares of Class A common stock outstanding as of March 31, 2023: 150,575,230

Number of shares of Class B common stock outstanding as of March 31, 2023: 1




https://cdn.kscope.io/668ec2ac23a6d505a105ab26efc8082a-a2014charterlogoa01a02a26.jpg
CHARTER COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS
Page No.

This quarterly report on Form 10-Q is for the three months ended March 31, 2023. The United States Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you directly to those documents. In this quarterly report, “Charter,” “we,” “us” and “our” refer to Charter Communications, Inc. and its subsidiaries.

i


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report 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 including, without limitation, the forward-looking statements set forth in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report. 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” in Part I, Item 1A of our most recent Form 10-K filed with the SEC. Many of the forward-looking statements contained in this quarterly report 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,” “grow,” “focused on” and “potential,” among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this quarterly report are set forth in this quarterly report on Form 10-Q, 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:

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;
general business conditions, unemployment levels and the level of activity in the housing sector and economic uncertainty or downturn;
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 and distribution requirements);
our ability to develop and deploy new products and technologies including 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 subsidies to consumers, subsidies and incentives for competitors, costs, disruptions and possible limitations on operating flexibility related to, and our ability to comply with, regulatory conditions applicable to us;
the ability to hire and retain key personnel;
our ability to procure necessary services and equipment from our vendors in a timely manner and at reasonable costs including in connection with our network evolution and rural construction initiatives;
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 quarterly report.

ii


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)

March 31,
2023
December 31,
2022
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$534 $645 
Accounts receivable, less allowance for doubtful accounts of $211 and $219, respectively
2,851 2,921 
Prepaid expenses and other current assets682 451 
Total current assets4,067 4,017 
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of $36,644 and $36,164, respectively
36,602 36,039 
Customer relationships, net of accumulated amortization of $15,777 and $15,478, respectively
2,479 2,772 
Franchises67,366 67,363 
Goodwill29,563 29,563 
Total investment in cable properties, net136,010 135,737 
OTHER NONCURRENT ASSETS4,793 4,769 
Total assets$144,870 $144,523 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities$10,243 $10,555 
Current portion of long-term debt1,999 1,510 
Total current liabilities12,242 12,065 
LONG-TERM DEBT95,973 96,093 
DEFERRED INCOME TAXES19,030 19,058 
OTHER LONG-TERM LIABILITIES4,723 4,758 
SHAREHOLDERS’ EQUITY:
Class A common stock; $0.001 par value; 900 million shares authorized;
153,048,145 and 152,651,396 shares issued, respectively
  
Class B common stock; $0.001 par value; 1,000 shares authorized;
1 share issued and outstanding
  
Preferred stock; $0.001 par value; 250 million shares authorized;
no shares issued and outstanding
  
Additional paid-in capital24,138 23,940 
Accumulated deficit(13,800)(14,821)
Treasury stock at cost; 2,472,915 and no shares, respectively
(920) 
Total Charter shareholders’ equity 9,418 9,119 
Noncontrolling interests3,484 3,430 
Total shareholders’ equity12,902 12,549 
Total liabilities and shareholders’ equity$144,870 $144,523 

The accompanying notes are an integral part of these consolidated financial statements.
1


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
Unaudited

Three Months Ended March 31,
20232022
REVENUES$13,653 $13,200 
COSTS AND EXPENSES:
Operating costs and expenses (exclusive of items shown separately below)
8,511 8,134 
Depreciation and amortization2,206 2,294 
Other operating expenses, net10 1 
10,727 10,429 
Income from operations2,926 2,771 
OTHER INCOME (EXPENSES):
Interest expense, net
(1,265)(1,060)
Other income (expenses), net(104)23 
(1,369)(1,037)
Income before income taxes1,557 1,734 
Income tax expense
(374)(345)
Consolidated net income1,183 1,389 
Less: Net income attributable to noncontrolling interests(162)(186)
Net income attributable to Charter shareholders$1,021 $1,203 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic$6.74 $7.05 
Diluted$6.65 $6.90 
Weighted average common shares outstanding, basic
151,438,371 170,688,127 
Weighted average common shares outstanding, diluted
153,538,359 174,500,472 


The accompanying notes are an integral part of these consolidated financial statements.
2


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in millions)
Unaudited

Class A Common StockClass B Common StockAdditional Paid-in CapitalAccumulated DeficitTreasury StockTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ Equity
BALANCE, December 31, 2022$ $ $23,940 $(14,821)$ $9,119 $3,430 $12,549 
Consolidated net income   1,021  1,021 162 1,183 
Stock compensation expense  208   208  208 
Exercise of stock options  2   2  2 
Purchases of treasury stock, including excise tax    (920)(920) (920)
Purchase of noncontrolling interest, net of tax  (40)  (40)(68)(108)
Change in noncontrolling interest ownership, net of tax  28   28 (37)(9)
Distributions to noncontrolling interest      (3)(3)
BALANCE, March 31, 2023$ $ $24,138 $(13,800)$(920)$9,418 $3,484 $12,902 


Class A Common StockClass B Common StockAdditional Paid-in CapitalAccumulated DeficitTreasury StockTotal Charter Shareholders’ EquityNon-controlling InterestsTotal Shareholders’ Equity
BALANCE, December 31, 2021$ $ $26,725 $(12,675)$ $14,050 $4,106 $18,156 
Consolidated net income   1,203  1,203 186 1,389 
Stock compensation expense  147   147  147 
Exercise of stock options  1   1  1 
Purchases of treasury stock    (3,333)(3,333) (3,333)
Purchase of noncontrolling interest, net of tax  (197)  (197)(156)(353)
Change in noncontrolling interest ownership, net of tax  189   189 (250)(61)
Distributions to noncontrolling interest      (2)(2)
BALANCE, March 31, 2022$ $ $26,865 $(11,472)$(3,333)$12,060 $3,884 $15,944 

The accompanying notes are an integral part of these consolidated financial statements.
3


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Unaudited
Three Months Ended March 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income $1,183 $1,389 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization2,206 2,294 
Stock compensation expense208 147 
Noncash interest income, net(3)(3)
Deferred income taxes(23)38 
Other, net104 (21)
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable70 49 
Prepaid expenses and other assets(336)(185)
Accounts payable, accrued liabilities and other(86)(61)
Net cash flows from operating activities3,323 3,647 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(2,464)(1,857)
Change in accrued expenses related to capital expenditures(195)10 
Other, net(80)60 
Net cash flows from investing activities(2,739)(1,787)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt7,104 6,713 
Repayments of long-term debt(6,740)(2,954)
Payments for debt issuance costs(18)(37)
Purchase of treasury stock(912)(3,333)
Proceeds from exercise of stock options2 1 
Purchase of noncontrolling interest(122)(416)
Distributions to noncontrolling interest(3)(2)
Other, net(6)(2)
Net cash flows from financing activities(695)(30)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (111)1,830 
CASH AND CASH EQUIVALENTS, beginning of period645 601 
CASH AND CASH EQUIVALENTS, end of period$534 $2,431 
CASH PAID FOR INTEREST$1,189 $982 
CASH PAID FOR TAXES$61 $29 

The accompanying notes are an integral part of these consolidated financial statements.
4


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)


1.    Organization and Basis of Presentation

Organization

Charter Communications, Inc. (together with its controlled subsidiaries, “Charter,” or the “Company”) is a leading broadband connectivity company and cable operator. 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 and sports programming to its 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.

The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company has one reportable segment.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures typically included in the Company's Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The accompanying consolidated financial statements are unaudited and are subject to review by regulatory authorities. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs, pension benefits and income taxes. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform with the 2023 presentation.

Comprehensive income equaled net income attributable to Charter shareholders for the three months ended March 31, 2023 and 2022.


5


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

2.    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following as of March 31, 2023 and December 31, 2022:

March 31, 2023December 31, 2022
Accounts payable – trade$746 $952 
Deferred revenue523 511 
Accrued liabilities:
Programming costs1,882 1,914 
Labor959 1,314 
Capital expenditures1,592 1,792 
Interest1,248 1,165 
Taxes and regulatory fees970 667 
Property and casualty502 505 
Operating lease liabilities292 295 
Other1,529 1,440 
$10,243 $10,555 

3.    Long-Term Debt
A summary of our debt as of March 31, 2023 and December 31, 2022 is as follows:

March 31, 2023December 31, 2022
Principal AmountCarrying ValueFair ValuePrincipal AmountCarrying ValueFair Value
Senior unsecured notes$27,250 $27,159 $23,638 $26,650 $26,567 $22,426 
Senior secured notes and debentures(a)
55,873 56,230 47,636 56,841 57,213 46,905 
Credit facilities(b)
14,640 14,583 14,267 13,877 13,823 13,467 
$97,763 $97,972 $85,541 $97,368 $97,603 $82,798 

(a)Includes the Company's £625 million fixed-rate British pound sterling denominated notes (the “Sterling Notes”) (remeasured at $771 million and $755 million as of March 31, 2023 and December 31, 2022, respectively, using the exchange rate at the respective dates) and the Company's £650 million aggregate principal amount of Sterling Notes (remeasured at $802 million and $786 million as of March 31, 2023 and December 31, 2022, respectively, using the exchange rate at the respective dates).
(b)The Company has availability under the Charter Operating credit facilities of approximately $3.3 billion as of March 31, 2023.

The estimated fair value of the Company’s senior unsecured and secured notes and debentures as of March 31, 2023 and December 31, 2022 is based on quoted market prices in active markets and is classified within Level 1 of the valuation hierarchy, while the estimated fair value of the Company’s credit facilities is based on quoted market prices in inactive markets and is classified within Level 2.

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

6


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

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%.

4.    Common Stock

The following represents the Company's purchase of Charter Class A common stock and the effect on the consolidated statements of cash flows during the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,
20232022
Shares$Shares$
Share buybacks 2,304,419 $863 5,325,594 $3,172 
Income tax withholding127,815 49 264,845 161 
Exercise cost40,681 148,657 
2,472,915 $912 5,739,096 $3,333 

Share buybacks above include shares of Charter Class A common stock purchased from Liberty Broadband Corporation (“Liberty Broadband”) as follows.

Three Months Ended March 31,
20232022
Number of shares purchased120,149 970,241 
Amount of shares purchased$42 $602 

As of March 31, 2023, Charter had remaining board authority to purchase an additional $305 million of Charter’s Class A common stock and/or Charter Holdings common units, excluding purchases from Liberty Broadband. The Company also withholds shares of its Class A common stock in payment of income tax withholding owed by employees upon vesting of equity awards as well as exercise costs owed by employees upon exercise of stock options.

In 2022, Charter’s board of directors approved the retirement of the then currently held treasury stock and those shares were retired as of December 31, 2022. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total shareholders’ equity.

5.    Noncontrolling Interests

Noncontrolling interests represents consolidated subsidiaries of which the Company owns less than 100%. The Company is a holding company whose principal asset is a controlling equity interest in Charter Holdings, the indirect owner of the Company’s cable systems. Noncontrolling interests on the Company’s balance sheet consist primarily of Advance/Newhouse Partnership's (“A/N”) equity interests in Charter Holdings, which is comprised of a common ownership interest.

Net income of Charter Holdings attributable to A/N’s common noncontrolling interest for financial reporting purposes is based on the weighted average effective common ownership interest of approximately 11%, and was $162 million and $186 million for the three months ended March 31, 2023 and 2022, respectively.


7


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N and the effect on total shareholders' equity during the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,
20232022
Number of units purchased324,100 657,268 
Amount of units purchased$122 $416 
Decrease in noncontrolling interest based on carrying value$(68)$(156)
Decrease in additional paid-in-capital, net of tax$(40)$(197)

Total shareholders' equity was also adjusted during the three months ended March 31, 2023 and 2022 due to the changes in Charter Holdings' ownership as follows.

Three Months Ended March 31,
20232022
Decrease in noncontrolling interest $(37)$(250)
Increase in additional paid-in-capital, net of tax$28 $189 

6.     Accounting for Derivative Instruments and Hedging Activities

Cross-currency derivative instruments are used to manage foreign exchange risk on the Sterling Notes by effectively converting £1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The fair value of the Company's cross-currency derivatives, which are classified within Level 2 of the valuation hierarchy, was $565 million and $570 million and is included in other long-term liabilities on its consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

The effect of financial instruments are recorded in other income (expenses), net in the consolidated statements of operations and consisted of the following.
Three Months Ended March 31,
20232022
Change in fair value of cross-currency derivative instruments
$5 $(36)
Foreign currency remeasurement of Sterling Notes to U.S. dollars
(32)50 
Gain (loss) on financial instruments, net$(27)$14 


8


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

7.    Revenues

The Company’s revenues by product line are as follows:

Three Months Ended March 31,
20232022
Internet$5,718 $5,452 
Video4,254 4,346 
Voice373 391 
Mobile service497 387 
Residential revenue10,842 10,576 
Small and medium business1,091 1,070 
Enterprise682 661 
Commercial revenue1,773 1,731 
Advertising sales355 383 
Other683 510 
$13,653 $13,200 

As of March 31, 2023 and December 31, 2022, accounts receivable, net on the consolidated balance sheets includes approximately $632 million and $577 million of current equipment installment plan receivables, respectively, and other noncurrent assets includes approximately $352 million and $261 million of noncurrent equipment installment plan receivables, respectively.

8.     Operating Costs and Expenses

Operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, consist of the following for the periods presented:

Three Months Ended March 31,
20232022
Programming$2,799 $2,977 
Other costs of revenue1,328 1,108 
Costs to service customers2,095 1,959 
Sales and marketing946 880 
Other expense1,343 1,210 
$8,511 $8,134 

Programming costs consist primarily of costs paid to programmers for basic, premium, video on demand and pay-per-view programming. Other costs of revenue include costs directly related to providing Internet, video, voice and mobile services including mobile device costs, payments to franchise and regulatory authorities, payments for sports, local and news content produced by the Company and direct costs associated with selling advertising. Also included in other costs of revenue are content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games, which are recorded as games are exhibited over the contract period. Costs to service customers include costs related to field operations, network operations and customer operations for the Company’s products, including mobile, sold to non-bulk residential and SMB customers including internal and third-party labor for the non-capitalizable portion of installations, service and repairs, maintenance, bad debt expense, billing and collection, occupancy and vehicle costs. Sales and marketing costs represent the costs of selling and marketing our Internet, video, voice and mobile services to current and potential non-bulk residential and

9


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

SMB customers, including labor cost. Other expense includes indirect costs associated with the Company’s Spectrum Enterprise, Spectrum Reach and Spectrum Networks businesses, including sales and marketing and bad debt expenses as well as costs associated with selling to and servicing bulk properties. Other expense also includes corporate overhead and stock compensation expense, among others.

9.     Other Operating Expenses, Net

Other operating expenses, net consist of the following for the periods presented:

Three Months Ended March 31,
20232022
Special charges, net$10 $(1)
Loss on disposal of assets, net 2 
$10 $1 

Special charges, net primarily includes net amounts of litigation settlements and employee termination costs.

10.     Other Income (Expenses), Net

Other income (expenses), net consist of the following for the periods presented:

Three Months Ended March 31,
20232022
Gain (loss) on financial instruments, net (see Note 6)$(27)$14 
Net periodic pension benefits2 17 
Loss on equity investments, net(79)(8)
$(104)$23 

11.     Stock Compensation Plans

Charter’s stock incentive plans provide for grants of nonqualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock.  Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the stock incentive plans.

Charter granted the following equity awards for the periods presented.

Three Months Ended March 31,
20232022
Stock options4,235,700 1,372,400 
Restricted stock units1,514,400 423,600 

Stock options and restricted stock units generally cliff vest three years from the date of grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant.

As of March 31, 2023, total unrecognized compensation remaining to be recognized in future periods totaled $643 million for stock options, $0.2 million for restricted stock and $701 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, one month for restricted stock and two years for restricted stock units.


10


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in millions, except per share amounts and where indicated)

The Company recorded stock compensation expense of $208 million and $147 million for the three months ended March 31, 2023 and 2022, respectively, which is included in operating costs and expenses.

12.    Earnings Per Share

Basic earnings per common share is computed by dividing net income attributable to Charter shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share considers the impact of potentially dilutive securities using the treasury stock and if-converted methods and is based on the weighted average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, restricted stock, restricted stock units, equity awards with market conditions and Charter Holdings common units. Charter Holdings common units of 18 million and 21 million for the three months ended March 31, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share as their effect would have been antidilutive.

The following is the computation of diluted earnings per common share for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,
20232022
Numerator:
Net income attributable to Charter shareholders$1,021 $1,203 
Denominator:
Weighted average common shares outstanding, basic151,438,371 170,688,127 
Effect of dilutive securities:
Assumed exercise or issuance of shares relating to stock plans2,099,988 3,812,345 
Weighted average common shares outstanding, diluted153,538,359 174,500,472 
Basic earnings per common share attributable to Charter shareholders$6.74 $7.05 
Diluted earnings per common share attributable to Charter shareholders$6.65 $6.90 


11


Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Beginning in the first quarter of 2023, we removed separate mobile reporting, among several other changes, to better reflect the converged and integrated nature of our business and operations. We made the following changes to our reporting:

Residential and small and medium business (“SMB”) monthly revenue per customer calculations now include mobile service revenue
Residential mobile service revenue previously included in mobile revenue is now separately reported in residential revenue
SMB mobile service revenue previously included in mobile revenue is now included in SMB revenue
Mobile equipment revenue previously included in mobile revenue is now included in other revenue
Mobile expenses are no longer reported separately and are included in applicable expense categories
Other costs of revenue includes regulatory, connectivity and produced content costs as well as mobile device costs and direct costs associated with mobile and selling advertising
Costs to service customers now also includes costs related to field operations, network operations and customer operations for mobile customers but no longer includes costs to service bulk properties
Sales and marketing expense, which previously included sales and marketing for Spectrum Enterprise, Spectrum Reach and Spectrum Networks as well as costs associated with selling to and servicing bulk properties, now only consists of residential and SMB sales and marketing expenses, including sales and marketing for mobile
Other expense now also includes sales and marketing for Spectrum Enterprise, Spectrum Reach and Spectrum Networks as well as costs associated with selling to and servicing bulk properties but no longer includes direct costs associated with selling advertising
Reclasses within capital expenditure categories were made to reclassify all costs associated with our network evolution initiative to upgrade/rebuild
Line extensions capital expenditures are now broken out between subsidized rural construction line extensions and other line extensions
Subsidized rural construction initiative capital expenditures subcategory only includes rural construction projects for which we are receiving subsidies from federal, state or local governments

There were no changes to total revenue, Adjusted EBITDA, capital expenditures or net income. Prior periods have been revised to conform with the presentation noted above.

During the first quarter of 2023, we added 686,000 mobile lines, 76,000 Internet customers and 16,000 residential and SMB customer relationships, which excludes mobile-only customers. 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, contributed to our increase in mobile lines in the first quarter. We continue to see lower customer move rates and switching behavior among providers, which has reduced our selling opportunities. We are 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.

12



We spent $391 million on our subsidized rural construction initiative during the three months ended March 31, 2023. We expect that over time, our subsidized rural construction initiative will support customer growth, and in the first quarter of 2023, we activated approximately 44,000 subsidized rural passings. In addition, we continue to evolve and 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 over the next three years, 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 leveraging our Citizen Broadband Radio Service ("CBRS") Priority Access Licenses. 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 capture more spend on additional products for our existing customers.

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 March 31,
20232022% Change
Revenues$13,653 $13,200 3.4 %
Adjusted EBITDA$5,350 $5,213 2.6 %
Income from operations$2,926 $2,771 5.6 %

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 pass-through of programming cost increases to video customers and other price adjustments and growth in our residential mobile, Internet and commercial customers. 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.


13


The following table summarizes our customer statistics for Internet, video, voice and mobile as of March 31, 2023 and 2022 (in thousands except per customer data and footnotes).

Approximate as of
March 31,
2023 (a)
2022 (a)
Customer Relationships (b)
Residential 29,996 30,035 
SMB2,215 2,163 
Total Customer Relationships32,211 32,198 
Monthly Residential Revenue per Residential Customer (c)
$120.56 $117.58 
Monthly SMB Revenue per SMB Customer (d)
$164.58 $165.58 
Internet
Residential28,479 28,301 
SMB2,030 1,973 
Total Internet Customers30,509 30,274 
Video
Residential14,260 15,093 
SMB646 628 
Total Video Customers14,906 15,721 
Voice
Residential7,473 8,465 
SMB1,290 1,288 
Total Voice Customers8,763 9,753 
Mobile Lines (e)
Residential5,782 3,805 
SMB196 132 
Total Mobile Lines5,978 3,937 
Enterprise Primary Service Units ("PSUs") (f)
288274 

(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of March 31, 2023 and 2022, customers include approximately 119,800 and 132,500 customers, respectively, whose accounts were over 60 days past due, approximately 42,100 and 29,000 customers, respectively, whose accounts were over 90 days past due and approximately 217,800 and 74,500 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 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 fully 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.

14


(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 March 31,
20232022
Revenues$13,653 $13,200 
Costs and Expenses:
Operating costs and expenses (exclusive of items shown separately below)
8,511 8,134 
Depreciation and amortization2,206 2,294 
Other operating expenses, net10 
10,727 10,429 
Income from operations2,926 2,771 
Other Income (Expenses):
Interest expense, net(1,265)(1,060)
Other income (expenses), net(104)23 
(1,369)(1,037)
Income before income taxes1,557 1,734 
Income tax expense(374)(345)
Consolidated net income 1,183 1,389 
Less: Net income attributable to noncontrolling interests(162)(186)
Net income attributable to Charter shareholders$1,021 $1,203 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic$6.74 $7.05 
Diluted$6.65 $6.90 
Weighted average common shares outstanding, basic
151,438,371 170,688,127 
Weighted average common shares outstanding, diluted
153,538,359 174,500,472 

Revenues. Total revenues grew $453 million for the three months ended March 31, 2023 compared to the corresponding period in 2022 primarily due to price adjustments and increases in the number of residential mobile, Internet and commercial customers.

15


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 March 31,
20232022% Change
Internet$5,718 $5,452 4.9 %
Video4,254 4,346 (2.1)%
Voice373 391 (4.6)%
Mobile service497 387 28.3 %
Residential revenue10,842 10,576 2.5 %
Small and medium business1,091 1,070 2.0 %
Enterprise682 661 3.1 %
Commercial revenue1,773 1,731 2.4 %
Advertising sales355 383 (7.2)%
Other683 510 34.0 %
$13,653 $13,200 3.4 %

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

Three months ended
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Increase related to rate and product mix changes$226 
Increase in average residential Internet customers40 
$266 

The increase related to rate and product mix was primarily due to promotional roll-off and rate adjustments. Residential Internet customers grew by 178,000 customers from March 31, 2022 to March 31, 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
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Decrease in average residential video customers$(223)
Increase related to rate and product mix changes131 
$(92)

Residential video customers decreased by 833,000 from March 31, 2022 to March 31, 2023. The increase related to rate and product mix was primarily due to pass-through of programming cost increases and promotional roll-off and was partly offset by a higher mix of lower cost video packages within our video customer base.


16


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

Three months ended
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Decrease in average residential voice customers$(44)
Increase related to rate26 
$(18)

Residential wireline voice customers decreased by 992,000 customers from March 31, 2022 to March 31, 2023.

Residential mobile service revenues increased $110 million during the three months ended March 31, 2023 compared to the corresponding period in 2022 primarily due to an increase of 1,977,000 mobile lines from March 31, 2022 to March 31, 2023.

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

Three months ended
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Increase in SMB customers$28 
Decrease related to rate and product mix changes(7)
$21 

SMB customers grew by 52,000 from March 31, 2022 to March 31, 2023.

Enterprise revenues increased $21 million during the three months ended March 31, 2023 compared to the corresponding period in 2022 primarily due to an increase in Internet PSUs partly offset by lower wholesale PSUs. Enterprise PSUs increased 14,000 from March 31, 2022 to March 31, 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 $28 million during the three months ended March 31, 2023 as compared to the corresponding period in 2022 primarily due to a decrease in political and local ad revenue partly offset by higher advanced advertising.

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 $173 million during the three months ended March 31, 2023 compared to the corresponding period in 2022 primarily due to higher mobile device sales.


17


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
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Programming$(178)
Other costs of revenue220 
Costs to service customers136 
Sales and marketing66 
Other133 
$377 

Programming costs were approximately $2.8 billion and $3.0 billion for the three months ended March 31, 2023 and 2022, representing 33% and 37% 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 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. First quarter 2023 programming costs include $50 million of favorable adjustments, which is similar in size to sports network rebates and other favorable adjustments in the first quarter of 2022.

Other costs of revenue increased $220 million during the three months ended March 31, 2023 compared to the corresponding period in 2022 primarily due to higher mobile device sales and higher other mobile direct costs due to an increase in mobile lines.

Costs to service customers increased $136 million during the three months ended March 31, 2023 compared to the corresponding period 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 increased $66 million during the three months ended March 31, 2023 compared to the corresponding period in 2022 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
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Stock compensation expense$61 
Corporate costs36 
Enterprise14 
Other 22 
$133 

Stock compensation expense increased during the three months ended March 31, 2023 compared to the corresponding prior period primarily due to an increase in equity awards granted. Corporate and enterprise costs increased primarily due to higher labor costs.

Depreciation and amortization. Depreciation and amortization expense decreased by $88 million during the three months ended March 31, 2023 compared to the corresponding period 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.

18



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

Three months ended
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Special charges, net$11 
Loss on disposal of assets, net(2)
$

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 $205 million for the three months ended March 31, 2023, compared to the corresponding period 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 $4.7 billion during the three months ended March 31, 2023 compared to the corresponding period in 2022. The increase in weighted average debt outstanding is primarily due to the issuance of notes throughout 2022 and 2023.

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

Three months ended
March 31, 2023
compared to
three months ended
March 31, 2022
Increase / (Decrease)
Gain (loss) on financial instruments, net (see Note 6)$(41)
Net periodic pension benefits(15)
Loss on equity investments, net(71)
$(127)

See Note 10 and the Note 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 $374 million and $345 million for the three months ended March 31, 2023 and 2022, respectively. The increase is primarily a result of decreased recognition of excess tax benefits resulting from share-based compensation partly offset by lower pretax income.

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 decreased $182 million during the three months ended March 31, 2023 compared to the corresponding period in 2022, 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

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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 $374 million and $342 million for the three months ended March 31, 2023 and 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 March 31,
20232022
Net income attributable to Charter shareholders$1,021 $1,203 
Plus: Net income attributable to noncontrolling interest162 186 
Interest expense, net1,265 1,060 
Income tax expense374 345 
Depreciation and amortization2,206 2,294 
Stock compensation expense208 147 
Other, net114 (22)
Adjusted EBITDA$5,350 $5,213 
Net cash flows from operating activities$3,323 $3,647 
Less: Purchases of property, plant and equipment(2,464)(1,857)
Change in accrued expenses related to capital expenditures(195)10 
Free cash flow$664 $1,800 

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.

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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%.

Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt. The principal amount of our debt as of March 31, 2023 was $97.8 billion, consisting of $14.6 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 $664 million and $1.8 billion for the three months ended March 31, 2023 and 2022, respectively. See the table below for factors impacting free cash flow during the three months ended March 31, 2023 compared to the corresponding prior period. As of March 31, 2023, the amount available under our credit facilities was approximately $3.3 billion and cash on hand was approximately $534 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 March 31, 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 months ended March 31, 2023 and 2022, Charter purchased in the public market approximately 2.2 million and 4.4 million shares of Charter Class A common stock, respectively, for approximately $821 million and $2.6 billion, respectively. Since the beginning of its buyback program in September 2016 through March 31, 2023, Charter has purchased approximately 152.0 million shares of Class A common stock and Charter Holdings common units for approximately $69.4 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 and 1.0 million shares of Charter Class A common stock for approximately $42 million and $602 million during the three months ended March 31, 2023 and 2022, respectively.


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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 months ended March 31, 2023 and 2022, Charter Holdings purchased from A/N 0.3 million and 0.7 million Charter Holdings common units for approximately $122 million and $416 million, respectively.

As of March 31, 2023, Charter had remaining board authority to purchase an additional $305 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 $1.1 billion during the three months ended March 31, 2023 compared to the corresponding prior period in 2022 due to the following (dollars in millions):