Charter Communications, Inc. (CHTR) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Spectrum Mobile Growth: Added over 550,000 Spectrum Mobile lines in the quarter, with a year-over-year increase of close to 2.2 million lines.
• Revenue and EBITDA Growth: Revenue increased slightly, while adjusted EBITDA grew by 2.6%.
• Network Expansion and Upgrades: Charter has a one gigabit network across 58 million passings and is evolving towards a symmetrical, multi-gig capable network with an incremental investment of just $100 per passing.
• Converged Network Advantages: The company's converged network, combining wireline and mobile capabilities, is positioned competitively with higher quality products and lower pricing.
• Video and DTC Strategy: Despite video losses, Charter is enhancing its video product with hybrid linear DTC bundles, more economical package choices, and agreements with Paramount, Disney, and others to offer DTC services at no additional cost.

Pessimistic Highlights

• Internet Customer Losses: Lost 149,000 internet customers in the quarter, primarily due to the end of the Affordable Connectivity Program (ACP).
• Video Customer Decline: Video customers declined by 408,000, partly due to the loss of ACP and customers making choices based on affordability.
• ACP Program End Impact: The end of the ACP program is expected to drive higher levels of market churn and affect the company's ability to retain customers in the short term.

Company Outlook

• Long-term Growth Confidence: Despite the short-term impacts of the ACP program ending, Charter is confident in its ability to return to healthy, long-term growth based on its network capabilities, product offerings, and competitive positioning.
• Focus on Retention and Growth: The company is actively working to retain ACP customers and expects to have a better view of the total ACP impact by the fourth quarter.
• Investments and Expense Management: Charter is focused on driving growth through significant investments in its network and services while managing expenses to support EBITDA growth.

Q & A Highlights

• Q: Can you provide more detail on the ACP impacts, particularly on reduced gross additions and ARPU? (Craig Moffett, MoffettNathanson)

  A: The ACP impact was significant, with over 100,000 net additions loss attributed to it. Half of this was from voluntary churn and the other half from reduced gross additions. Internet ARPU increased by 1.7%, but adjusting for one-time ACP items, it would have been 2.7%. (Chris Winfrey and Jessica Fischer)

• Q: How are you competing against fixed wireless and fiber, and how does the increase in fiber availability impact your competitive environment? (Sebastiano Petti, JP Morgan)

  A: The pace of competitive fiber overbuild has been steady, and Charter is maintaining its competitiveness. The company's unique converged network capabilities provide a strategic advantage. (Chris Winfrey)

• Q: Can you discuss underlying broadband market growth and free cash flow management? (Jonathan Chaplin, New Street Research)

  A: Broadband market growth was impacted by the ACP program, but Charter is managing through this one-time event. The company is managing working capital to support investments and maintain flexibility for share repurchases. (Chris Winfrey and Jessica Fischer)

• Q: What cost actions are being taken, and how do you expect political advertising to impact the second half? (Benjamin Swinburne, Morgan Stanley)

  A: Charter is focused on being a better service operator to reduce costs without impacting customer-facing resources. Political advertising is expected to pick up in the second half, but its impact varies by state. (Chris Winfrey and Jessica Fischer)

• Q: Looking beyond the ACP program, how do you plan to manage retention and churn among former ACP subscribers? (Peter Cipino, Wolfe Research)

  A: Charter aims to offer value through its Internet 100 and Spectrum 1 offers, effectively providing savings similar to the ACP benefit. The company is positioned to address the market with its product set despite higher market activity expected post-ACP. (Chris Winfrey)