Charter Communications, Inc. — FY 2023 Form 10-K
Reporting period: Year ended December 31, 2023; this is an annual filing, not a standalone Q4 report. Charter operates broadband, video, voice, mobile, commercial, and advertising services under the Spectrum brand in 41 states. Its network passes an estimated 57 million homes and businesses and serves approximately 32.1 million customer relationships.
Financial and Operating Performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $54.607 billion | $54.022 billion | +1.1% |
| Adjusted EBITDA | $21.894 billion | $21.616 billion | +1.3% |
| Income from operations | $12.559 billion | $11.962 billion | +5.0% |
| Net income attributable to Charter shareholders | $4.557 billion | $5.055 billion | −9.9% |
| Diluted earnings per share | $29.99 | $30.74 | −2.4% |
| Net cash from operating activities | $14.433 billion | $14.925 billion | −$492 million |
| Capital expenditures | $11.115 billion | $9.376 billion | +$1.739 billion |
| Free cash flow (non-GAAP) | $3.490 billion | $6.102 billion | −$2.612 billion |
Adjusted EBITDA margin was approximately 40.1% and operating margin approximately 23.0% in 2023, calculated from reported figures. Revenue rose modestly, but higher interest expense and other non-operating items contributed to lower net income. Net interest expense increased $632 million to $5.188 billion.
Revenue Mix and Customer Trends
- Internet revenue grew 3.6% to $23.032 billion; video revenue fell 6.4% to $16.351 billion.
- Mobile service revenue rose 32.1% to $2.243 billion; mobile device sales also supported growth in other revenue, which increased 28.7% to $2.797 billion.
- Advertising revenue decreased 17.6% to $1.551 billion, primarily due to lower political advertising.
- At year-end, residential Internet customers were 28.544 million, up 132,000 for the year; total Internet customers, including SMB, were 30.588 million, up 155,000.
- Residential mobile lines increased 2.403 million during the year; total mobile lines reached 7.766 million, up 2.474 million.
- Residential video customers declined 994,000 to 13.503 million; residential voice customers declined 985,000 to 6.712 million.
Debt, Liquidity and Capital Allocation
- Total debt principal was approximately $97.6 billion at year-end; leverage was 4.42x Adjusted EBITDA, within Charter’s stated 4.0x–4.5x target range. Approximately 14% of borrowings were variable-rate.
- Cash and cash equivalents were $709 million; approximately $5.2 billion was available under credit facilities. Management said it believes available liquidity and capital-market access are sufficient for projected needs.
- The blended weighted-average debt interest rate was 5.3%, versus 5.1% in 2022. Cash interest paid was $5.020 billion.
- 2023 free cash flow was pressured by higher capital spending, working-capital changes, interest, and taxes. Capital expenditures were $11.115 billion.
- Charter repurchased approximately $3.1 billion of its Class A shares in 2023, including purchases involving Liberty Broadband; Charter does not pay a cash dividend and said it does not intend to in the foreseeable future.
Outlook, Commentary and Key Risks
- Management expects 2024 capital expenditures of $12.2–$12.4 billion, including approximately $4.5 billion for line extensions and $1.6 billion for network evolution. No specific revenue or earnings guidance is provided in the filing.
- Charter expects to invest over $8 billion in its subsidized rural construction initiative in total. It had spent $3.4 billion and activated approximately 420,000 passings since the initiative began in 2022; the goal is to reach over 1.6 million passings. Construction timing depends in part on permitting and utility-pole work, and missed subsidy milestones could result in penalties.
- Network upgrades are intended to enable symmetrical and multi-gigabit speeds; Charter expects the broader network evolution to be completed in 2026. The company also plans targeted expansion of its own 5G data network.
- The FCC’s Affordable Connectivity Program (ACP) funding was expected to run out in April 2024, and new customer enrollment had been prohibited after February 7, 2024. Charter warns that a failure to extend funding could reduce customers and revenue.
- Key risks include intense broadband, mobile, and video competition; ongoing losses in video and voice customers; rising programming and retransmission costs; high leverage, refinancing and interest-rate exposure; regulatory changes; cybersecurity and service-disruption risks; and execution, permitting, and grant-compliance risks in network investment.
Unusual Items and Contingencies
- Temporary loss of Disney programming in 2023 generated $68 million in customer credits and a $61 million reduction in programming costs, for a net revenue impact described by the company as part of the year’s results.
- A $262 million gain on sale of towers contributed to the year-over-year change in other operating income/expense.
- Net periodic pension cost was $216 million in 2023, compared with a $254 million benefit in 2022; the 2023 amount reflected, in part, measurement on a plan-termination basis. Charter announced plans to terminate its qualified pension plan.
- Net losses from investments were $343 million, primarily related to the Xumo joint venture.
- Entropic patent litigation was settled and dismissed with prejudice in December 2023. Other intellectual-property claims and ordinary-course matters remain; the filing says outcomes and potential losses cannot be predicted for certain claims.
Investor Verification Priorities
- Track broadband customer additions and churn against continuing fiber and fixed-wireless competition, and assess whether Internet and mobile growth offsets video, voice, and advertising declines.
- Verify 2024 capital spending and rural-build progress against the $12.2–$12.4 billion capex outlook, grant milestones, and expected returns.
- Monitor ACP funding status and the customer and revenue effects if the program ends.
- Review free-cash-flow conversion, working-capital trends, interest expense, debt maturities, refinancing access, and leverage relative to the 4.0x–4.5x target.
- Assess whether higher network and customer-service investment improves customer experience and retention, and whether programming-cost savings are sustainable.