CHARTER COMMUNICATIONS, INC. /MO/ Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Mobile: Fastest-growing mobile provider in the US, added 500,000 lines in Q3 and 2 million over 12 months. Spectrum Mobile network developed well with 88% of traffic on own network.
• Video: Customer losses improved, launched Spectrum App Store, partnered with Apple, video product seen as competitive advantage for seamless connectivity products.
• Internet: Faced challenges in short term but看好 long-term with network and product advantages. Improving brand perception through marketing, product and service improvements.
• Technology Investment and Cost Control: Improving long-term cost profile via service and technology investments, using AI to enhance service quality and efficiency, reducing service costs.
• Rural Business: Accelerated customer relationship growth in rural areas, BEAD bidding process mostly complete, expected to spend ~$230 million on rural build-out over next several years.

Segment Performance

• Mobile: Added nearly 500,000 Spectrum Mobile lines in the third quarter and 2 million lines over the last 12 months, over 20% growth. Mobile's financial contribution continues to grow with scale.
• Video: Customer losses improved to 70,000, less than 1/4 of last year's third quarter losses. Launched Spectrum App Store and partnered with Apple for Lakers game streaming.
• Internet: Lost 109,000 Internet customers in the third quarter, in line with last year's results. Revenue down about 1% year-over-year. Rural customer relationship growth accelerated, with 52,000 net customer additions in the subsidized rural footprint in the quarter, and 2025 expected subsidized rural passings growth of approximately 450,000.
• Commercial: Total commercial revenue grew by 0.9% year-over-year. Small business revenue declined by 0.9%. Advertising revenue declined by 21%. Other revenue grew by 10.7% primarily driven by higher mobile device sales.

Guidance

• 2025 full year EBITDA growth expected to be flat or marginally positive year-over-year, excluding political advertising has higher underlying growth. 4Q EBITDA pressured by last year's political advertising strength and same macro pressures as 3Q.
• 2025 capital expenditures expected to reach approximately $11.5 billion, lower than original outlook of $12 billion, with some network evolution capital pushed to 2026. 2025 to be peak capital year.
• Third quarter free cash flow $1.6 billion, in line with prior year. Full year change in cable working capital expected to be modestly positive.
• Plan to adjust long-term target leverage to 3.5x - 4.0x post-Cox transaction close and delever to mid-range within 2 - 3 years following close.

Risks

• Macro environment and competition challenges, including muted housing market, slow household formation, low move rates, mobile substitution growth, cellphone Internet competition, fiber overlap growth, impacting Internet gross add level.
• Some marketing offers may put pressure on ARPU growth.
• Regulatory approval and integration risks related to Cox acquisition.

Q: Could you help us think about where broadband is getting better and why we should be optimistic about improving results?

A: High split going well but not actively marketing capabilities yet. Churn better due to mobile relationship, multiple lines and direct-to-consumer app activation. Operating environment still competitive with macro and new competition, but long-term看好 with macro and competitive variable changes.

Q: On EBITDA, reason for 4Q EBITDA pressure being bigger than 3Q and impact of layoffs; impact of competitors' pricing remarks on outlook?

A: Some offers launched in 3Q impacted ARPU more than expected, pulling them from market in early Nov, putting pressure on 4Q ARPU growth. Charter's ARPU and pricing low vs peers, has more room to pass through cost increases, managed base migration to Spectrum pricing and packaging to create customer value.

Q: Is the evolution of marketing methods, like video marketing and 4-line offer, the next step in marketing chain?

A: Different marketing offer expressions to get higher ARPU and margin, saving customers money. 4-line offer a way to express value, customers with 4 lines and Internet line have very low churn and high customer lifetime value.

Q: Progress and timing of Cox acquisition and details of video product improvement?

A: Cox acquisition still mid next year, focus on regulatory communication and preparation for post-close launch. Video product sales up, churn down, app activation accelerated, still room for improvement to make it better for customers.

Q: Future cost saving opportunities from efficiency improvement and non-linear ways to expand addressable market?

A: Cost saving via investing in employees and systems, AI has big potential to reduce cost. Untapped assets in B2B and B2C products, like data offloading with Amazon and Nexar, exploring new products to create new revenue streams.

Q: Debt repayment and reducing leverage?

A: Continuously evaluate target leverage ratio considering interest rates and business growth prospects. Current stand-alone business leverage ~4.25x pro forma for Liberty transaction, post-Cox close target leverage 3.5x - 4.0x, capable of delevering fast if needed with free cash flow growth.