CHTR Financial Analysis

Analysis Date: 2/3/2025

Business Model

Charter Communications generates revenue primarily through residential and commercial services, including Internet, Video, Mobile, Voice, Advertising sales, and Other revenue streams.

Revenue Sources

• Residential Services: Internet, Video, Mobile, Voice
• Commercial Services: SMB and Enterprise Internet, Video, Voice
• Advertising Sales: National and Local advertising markets including political revenue
• Other Revenue: Primarily driven by mobile device sales

Income Statement Analysis

• Total Revenue increased by 1.6% year-over-year, driven by growth in residential mobile service, advertising, other and residential Internet revenues.
• Video revenue decreased by 7.4% year-over-year due to decline in video customers and shift to lower priced packages.
• Mobile service revenue significantly increased by 37.4% year-over-year, indicating strong growth in mobile business.
• Programming costs decreased by 9.1% due to fewer video customers and lower cost packages.
• Other costs of revenue increased by 16.2%, primarily driven by higher mobile device sales and mobile service direct costs.

Balance Sheet Analysis

• Total assets increased by 1.92% year-over-year, indicating overall growth in company resources.
• Long-term debt decreased by 3.8%, suggesting improved debt management or repayment.
• Introduction of 'Equipment installment plan financing facility' in 2024, indicating new financing strategy for equipment.
• Total shareholders' equity significantly increased by 33.89%, reflecting stronger financial position and profitability.

Capital Allocation

Charter Communications is focused on strategic capital allocation. In Q4 2024, they repurchased 292 thousand shares for $113 million. They expect capital expenditures to peak in 2025 and then decline, leading to strong free cash flow growth. Management prioritizes free cash flow for organic opportunities, accretive M&A, and share buybacks. No dividends are mentioned in the provided documents, suggesting reinvestment in the business and share repurchases are primary capital allocation strategies. (Earnings Release.pdf, Transcript.pdf)

Management Commentary

Adj. EBITDA growth of 3.1% Y/Y in FY24 driven by mobile line growth, cost efficiency initiatives and political advert.

Spectrum saves customers $900+/Year with better products.

Net leverage declined from 4.42x to 4.13x.

Fourth quarter total Internet customers decreased by 177,000.

Residential revenue totaled $10.7 billion in the fourth quarter, a decrease of 0.4% year-over-year.

Overall Sentiment: Cautiously optimistic. Management highlights positive EBITDA growth and cost efficiency, emphasizing future free cash flow growth after peak capital expenditures. Customer relationship metrics show mixed results with mobile growth offsetting internet and video customer declines. Focus on value proposition and customer service improvements.

Recommendation

Rating: Hold

Reason for Rating: Hold rating is recommended. While Charter demonstrates strong growth in mobile and improving efficiency leading to EBITDA growth, there are concerns with internet customer losses and competitive pressures. The company is in a significant investment phase which is expected to peak in 2025, potentially limiting near-term free cash flow growth despite long-term positive outlook.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/3/2025, 6:10:55 AM