What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-01-27 compared with 2022-01-28 · 124 added, 136 removed, 339 unchanged (43% of the section changed)

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Spectrum Reach delivers tailored advertising and production for the modern media landscape.

We also distribute award-winning news coverage, sports and high-quality original programming to our customers through Spectrum Networks and Spectrum Originals.

We also distribute award-winning news coverage and sports programming to our customers through Spectrum Networks.

Business — Products and Services” for further description of these services, including customer statistics for different services.

The COVID-19 pandemic significantly impacted how our customers use our products and services, how they interact with us, and how our employees provide services to our customers.

Customer activity levels remain below normal which contributed to lower operating expense from reduced service transactions and lower bad debt in 2021 along with lower growth in customer relationships.

We cannot predict when trends return to pre-COVID-19 levels as the economy returns to normal activities.

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, we remain focused on driving customer relationship growth by deploying superior products and services with attractive pricing.

In October 2021, we announced and implemented new Spectrum Mobile multi-line pricing designed to drive more mobile line sales per customer, and in turn, drive more broadband sales and the associated retention benefits.

Further, we expect to continue to drive customer relationship growth through sales of Internet connectivity services and improving customer retention despite the expectation for continued losses of video and wireline voice customers.

Our Spectrum Mobile service is offered to customers subscribing to our Internet service and runs on Verizon's mobile network combined with Spectrum WiFi.

We continue to explore ways to drive even more mobile traffic to our network.

We intend to use CBRS PALs we purchased in 2020, along with unlicensed CBRS spectrum, to build our own 5G mobile data-only network on our existing infrastructure in targeted geographies where there is high outdoor cellular traffic volume.

This effort, in combination with our expanding WiFi network and continued 5G enhancements within the Verizon MVNO partnership agreement, should position our mobile product for continued customer experience and cost structure improvements.

During the year ended December 31, 2022, we added 1,728,000 mobile lines, 344,000 Internet customers and 126,000 residential and SMB customer relationships, which excludes mobile-only customers.

We continue to see lower customer move rates and switching behavior among providers, which has reduced our selling opportunities.

In October 2022, we introduced Spectrum One, 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 which contributed to our increase in mobile lines in the fourth quarter.

In 2022, we also made targeted investments in employee wages and benefits inside of our operations to build employee skill sets and tenure as well as continued to invest 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.

We spent $1.8 billion on our rural construction initiative during the year ended December 31, 2022.

We expect that over time, our rural construction initiative will support customer growth and in 2022, we constructed over 200,000 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 nearly 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 the availability of over 500,000 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 CBRS PALs.

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 attract more spend on additional products for our existing customers.

In June 2022, we entered into a joint venture with Comcast to develop and offer a next-generation streaming platform, Xumo, on a variety of streaming devices and smart TVs.

Our investment is approximately $981 million with $271 million paid in 2022 and with the remaining non-cancelable required contributions to be paid over multiple years.

We believe Spectrum-branded mobile services will drive higher sales of our core products, create longer customer lives and increase profitability and cash flow over time.

As a result of growth costs associated with our new mobile product line, we cannot be certain that we will be able to grow revenues or maintain our margins at recent historical rates.

During the years ended December 31, 2021 and 2020, our mobile product line increased revenues by $2.2 billion and $1.4 billion, respectively, reduced Adjusted EBITDA by approximately $311 million and $401 million, respectively, and reduced free cash flow by approximately $853 million and $1.1 billion, respectively.

We expect mobile Adjusted EBITDA will continue to be negative primarily as a result of growth-related sales and marketing and other customer acquisition costs for mobile services, and

depending on the pace of that growth.

We also expect to continue to see negative free cash flow from the timing of device-related cash flows when we sell devices to customers pursuant to equipment installment plans and capital expenditures related to retail store and CBRS build-out.

During the years ended December 31, 2022 and 2021, our mobile product line increased revenues by $3.0 billion and $2.2 billion, respectively, reduced Adjusted EBITDA by approximately $343 million and $311 million, respectively, and reduced free cash flow by approximately $1.1 billion and $853 million, respectively.

Mobile Adjusted EBITDA may continue to be negative primarily as a result of growth-related sales and marketing and other customer acquisition costs for mobile services, and depending on the pace of that growth.

We realized revenue, Adjusted EBITDA and income from operations during the periods presented as follows (in millions;

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Years ended December 31,

2021 2020 2021 vs.

2022 2021 Growth

Revenues $ 54,022 $ 51,682 4.5 %

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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 growth in our residential Internet, mobile and commercial customers and price adjustments.

Adjusted EBITDA and income from operations growth was impacted by growth in revenue and increases in operating costs and expenses, primarily mobile, programming and regulatory, connectivity and produced content costs.

Growth in total revenue was primarily due to growth in our residential Internet, mobile and commercial customers, price adjustments and higher advertising sales.

Adjusted EBITDA growth and changes in income from operations were impacted by growth in revenue and increases in operating costs and expenses, primarily mobile, costs to service customers and marketing.

Approximately 90% of our revenues for each of the years ended December 31, 2022 and 2021 are attributable to monthly subscription fees charged to customers for our Internet, video, voice, mobile and commercial services as well as regional sports and news channels.

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• Capitalization of labor and overhead costs

• Valuation and impairment of franchises and goodwill

• Income taxes

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Costs associated with network construction or upgrades, placement of the customer drop to the dwelling and the placement of outlets within a dwelling along with the costs associated with the deployment of new customer premise equipment necessary to provide Internet, video or voice services, are capitalized.

Costs capitalized include materials, direct labor and certain indirect costs.

Costs capitalized include materials, direct labor and certain indirect

These indirect costs consist of compensation and overhead costs associated with support functions.

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The costs of disconnecting service and removing customer premise equipment from a dwelling and the costs to reconnect a customer drop or to redeploy previously installed customer premise equipment are charged to operating expense as incurred.

Costs for repairs and maintenance are charged to operating expense as incurred,

while plant and equipment replacement, including replacement of certain components, betterments, and replacement of cable drops and outlets, are capitalized.

Costs for repairs and maintenance are charged to operating expense as incurred, while plant and equipment replacement, including replacement of certain components, betterments, and replacement of cable drops and outlets, are capitalized.

We make judgments regarding the installation and construction activities to be capitalized.

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We monitor the appropriateness of our capitalization policies, and perform updates to our internal studies on an ongoing basis to determine whether facts or circumstances warrant a change to our capitalization policies.

Valuation and impairment of franchises

The net carrying value of franchises as of both December 31, 2021 and 2020 was approximately $67.3 billion (representing 47% of total assets).

Franchise assets are aggregated into essentially inseparable units of accounting to conduct valuations.

The units of accounting generally represent geographical clustering of our cable systems into groups.

For more information and a complete discussion of how we value and test franchise assets for impairment, see Note 5 to the accompanying consolidated financial statements contained in “Part II.

Financial Statements and Supplementary Data.”

We perform an impairment assessment of franchise assets annually or more frequently as warranted by events or changes in circumstances.

We performed a qualitative assessment in 2021.

Our assessment included consideration of a multitude of factors that affect the fair value of our franchise assets.

Examples of such factors include environmental and competitive changes within our operating footprint, actual and projected operating performance, the consistency of our operating margins, equity and debt market trends, including changes in our market capitalization, and changes in our regulatory and political landscape, among other factors.

Based on our assessment, we concluded that it was more likely than not that the estimated fair values of our franchise assets equals or exceeds their carrying values and that a quantitative impairment test is not required.

Valuation and impairment of goodwill

The net carrying value of goodwill as of both December 31, 2021 and 2020 was approximately $29.6 billion (representing 21% and 20% of total assets, respectively).

We have determined that we have one reporting unit for purposes of the assessment of goodwill impairment.

For more information and a complete discussion on how we test goodwill for impairment, see Note 5 to the accompanying consolidated financial statements contained in “Part II.

Financial Statements and Supplementary

Data.” We perform our impairment assessment of goodwill annually as of November 30.

As with our franchise impairment testing, we elected to perform a qualitative assessment of goodwill in 2021.

Given the completion of the assessment and absence of significant adverse changes in factors impacting our fair value estimates, we concluded that it is more likely than not that our goodwill is not impaired.

As of December 31, 2021, Charter had approximately $714 million of federal tax net operating loss carryforwards resulting in a gross deferred tax asset of approximately $150 million.

These losses resulted from the operations of Charter Communications Holding Company, LLC ("Charter Holdco") and its subsidiaries and from loss carryforwards received as a result of the merger with TWC.

Federal tax net operating loss carryforwards expire in the years 2034 through 2035.

In addition, as of December 31, 2021, Charter had state tax net operating loss carryforwards, resulting in a gross deferred tax asset (net of federal tax benefit) of approximately $175 million.

State tax net operating loss carryforwards generally expire in the years 2022 through 2041.

Charter has federal tax net operating loss carryforwards that expire in 2035 resulting from the operations of Charter Communications Holding Company, LLC and its subsidiaries and from loss carryforwards received as a result of the merger with TWC.

In addition, Charter has state tax net operating loss carryforwards that generally expire in the years 2023 through 2042.

Such tax loss carryforwards can accumulate and be used to offset Charter’s future taxable income.

After December 31, 2021, $714 million of Charter's federal tax loss carryforwards are subject to Section 382 and other restrictions.

Pursuant to these restrictions, Charter estimates that approximately $229 million annually over each of the next three years of federal tax loss carryforwards, should become unrestricted and available for Charter’s use.

Charter’s state tax loss carryforwards are subject to similar but varying restrictions.

Charter's federal tax loss carryforwards are subject to Section 382 and other restrictions.

Charter also has indefinite life carryforwards as a result of Section 163(j) interest limitations.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences.

Approximately $13 million of valuation allowance associated with federal capital loss carryforwards and approximately $23 million of valuation allowance associated with state tax loss carryforwards and other miscellaneous deferred tax assets remains on the December 31, 2021 consolidated balance sheet.

In evaluating the need for a valuation allowance, management takes into account various factors, including the expiration date (if any) of such carryforwards, the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences.

Approximately $11 million of valuation allowance associated with federal capital loss carryforwards and approximately $29 million of valuation allowance associated with state tax loss carryforwards and other miscellaneous deferred tax assets is

recorded on the December 31, 2022 consolidated balance sheet.

No valuation allowance is deemed necessary as of December 31, 2022 related to the Section 163(j) interest limitation, based on the indefinite life carryforward, expected reversal of various deferred tax liabilities (primarily GAAP fixed asset depreciation), and a history of utilizing interest expense disallowance carryovers.

We will continue to monitor this deferred tax asset and update the valuation allowance analysis as needed.

In determining our tax provision for financial reporting purposes, we establish a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits.

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We adjust our uncertain tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations.

Charter is currently under examination by the Internal Revenue Service ("IRS") for income tax purposes for 2019.

Charter is currently under examination by the Internal Revenue Service ("IRS") for income tax purposes for 2016 and 2019.

Charter's 2020 and 2021 tax years remain open for examination and assessment.

Charter’s 2017 tax year remains open solely for purposes of loss and credit carryforwards.

Charter’s 2017 and 2018 tax years remain open solely for purposes of loss and credit carryforwards.

Charter’s short period return dated May 17, 2016 (prior to the merger with TWC and acquisition of Bright House) and prior years remain open solely for purposes of examination of Charter’s loss and credit carryforwards.

The IRS is currently examining Charter Holdings’ income tax return for 2016 and 2019.

Charter Holdings’ 2018 and 2020 tax years remain open for examination and assessment, while 2017 remains open solely for purposes of credit carryforwards.

The IRS is currently examining Charter Holdings’ income tax returns for 2016, 2019 and 2021.

Charter Holdings’ 2020 tax year remains open for examination and assessment, while 2017 and 2018 remain open solely for purposes of credit carryforwards.

The IRS is currently examining TWC’s income tax returns for 2011 through 2015.

TWC’s tax year 2015 remains subject to examination and assessment.

Prior to TWC’s separation from Time Warner Inc.

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federal and certain state income tax returns of Time Warner.

The IRS has examined Time Warner’s 2008 through 2010 income tax returns and the results are under appeal.

The IRS has examined Time Warner’s 2008 through 2010 income tax returns and the appeal results are being evaluated.

We do not anticipate that these examinations will have a material impact on our consolidated financial position or results of operations.

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As of December 31, 2022, the accumulated benefit obligation and fair value of plan assets was $2.2 billion and $2.6 billion, respectively, and the net funded asset was recorded as a $362 million noncurrent asset, $5 million current liability and $17 million long-term liability.

As of December 31, 2020, the accumulated

benefit obligation and fair value of plan assets was $3.7 billion and $3.5 billion, respectively, and the net underfunded liability was recorded as a $1 million noncurrent asset, $5 million current liability and $222 million long-term liability.

As of December 31, 2021, the accumulated benefit obligation and fair value of plan assets was $3.4 billion and $3.5 billion, respectively, and the net funded asset was recorded as a $114 million noncurrent asset, $4 million current liability and $27 million long-term liability.

Pension benefits are based on formulas that reflect the employees’ years of service and compensation during their employment period.

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We use a December 31 measurement date for our pension plans.

We recognized net periodic pension benefit of $305 million and net periodic pension cost of $66 million in 2021 and 2020, respectively.

We recognized net periodic pension benefit of $254 million and $305 million in 2022 and 2021, respectively.

Net periodic pension benefit or expense is determined using certain assumptions, including the expected long-term rate of return on plan assets, discount rate and mortality assumptions.

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We used a discount rate of 5.46% to determine the December 31, 2022 pension plan benefit obligation.

A decrease in the discount rate of 25 basis points would result in a $155 million increase in our pension plan benefit obligation as of December 31, 2021 and net periodic pension expense recognized in 2021 under our mark-to-market accounting policy.

A decrease in the discount rate of 25 basis points would result in an $83 million increase in our pension plan benefit obligation as of December 31, 2022 and net periodic pension expense recognized in 2022 under our mark-to-market accounting policy.

The expected long-term rate of return on plan assets used to determine net periodic pension benefit for the year ended December 31, 2023 is expected to be 5.00%.

A decrease in the expected long-term rate of return of 25 basis points to 4.75%, while holding all other assumptions constant, would result in an increase in our 2022 net periodic pension expense of approximately $8 million.

A decrease in the expected long-term rate of return of 25 basis points to 4.75%, while holding all other assumptions constant, would result in

a decrease in our 2023 net periodic pension benefit of approximately $6 million.

See Note 21 to the accompanying consolidated financial statements contained in “Part II.

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A discussion of changes in our results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on January 29, 2021, which is available free of charge on the SECs website at www.sec.gov and on our investor relations website at ir.charter.com.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on January 28, 2022, which is available free of charge on the SEC's website at www.sec.gov and on our investor relations website at ir.charter.com.

The following table sets forth the consolidated statements of operations for the periods presented (dollars in millions, except per share data):

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Interest expense, net (4,556) (4,037)

Other expenses, net (101) (255)

Other income (expenses), net 56 (101)

(4,500) (4,138)

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Weighted average common shares outstanding, diluted 164,433,596 193,042,948

Total revenues grew $3.6 billion or 7.5% during the year ended December 31, 2021 as compared to 2020 primarily due to increases in the number of residential Internet, mobile and commercial customers and price adjustments.

Total revenues grew $2.3 billion or 4.5% during the year ended December 31, 2022 as compared to 2021 primarily due to increases in the number of residential Internet, mobile and commercial customers, price adjustments and higher advertising sales.

Revenues by service offering were as follows (dollars in millions;

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2022 compared to 2021

Increase related to rate, product mix and bundle allocation changes $ 1,490

Increase related to rate and product mix changes $ 634

Increase in average residential Internet customers 494

The increase related to rate, product mix and bundle allocation changes was primarily due to price adjustments, promotional roll-off and higher bundled revenue allocation as well as $34 million of credits related to prior year's Keep Americans Connected ("KAC") Pledge and certain state-mandated programs which reduced revenue during the year ended December 31, 2020.

The increase related to rate and product mix was primarily due to promotional roll-off and rate adjustments.

Residential Internet customers grew by 275,000 in 2022 compared to 2021.

Video revenues consist primarily of revenues from basic and digital video services provided to our residential customers, as well as franchise fees, equipment service fees and video installation revenue.

The increase in video revenues was attributable to the following (dollars in millions):

The decrease in video revenues was attributable to the following (dollars in millions):

2022 compared to 2021

Customer credits due to COVID-19 $ 223

Increase related to rate, product mix and bundle allocation changes 283

Decrease in average residential video customers $ (621)

Decrease in video on demand and pay-per-view (44)

Decrease in installation (14)

We recorded $39 million and $218 million of estimated customer credits related to canceled sporting events during the years ended December 31, 2021 and 2020, respectively, and $44 million of credits related to prior year's KAC program which reduced revenue during the year ended December 31, 2020.

The increase related to rate, product mix and bundle allocation changes was primarily due to price adjustments and promotional roll-off and was partly offset by a higher mix of lower cost video packages within our video customer base and lower bundled revenue allocation.

Increase related to rate and product mix changes 451

Residential video customers decreased by 719,000 in 2022 compared to 2021.

The increase related to rate and product mix was primarily due to price adjustments and promotional roll-off and was partly offset by a higher mix of lower cost video packages within our video customer base

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

2022 compared to 2021

Decrease related to rate and bundle allocation changes $ (132)

Decrease in average residential voice customers $ (137)

The decrease related to rate and bundle allocation changes was impacted by value-based pricing and changes in bundled revenue allocations.

Increase related to rate 98

Residential wireline voice customers decreased by 924,000 in 2022 compared to 2021.

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Increase in SMB customers $ 157

Increase related to COVID-19 programs which reduced prior year revenue 36

Decrease related to rate and product mix changes (26)

SMB customers increased by 64,000 in 2022 compared to 2021.

The decrease related to rate and product mix changes during the year ended December 31, 2021 as compared to 2020 was primarily due to value-based pricing related to SPP net of promotional roll-off and price adjustments.

Enterprise revenues increased $105 million during the year ended December 31, 2021 as compared to the corresponding period in 2020 primarily due to an increase in Internet PSUs, $18 million of impacts from COVID-19 related programs which reduced revenues in the year ended December 31, 2020 as well as a $16 million one-time benefit incurred during the year ended December 31, 2021 offset by lower wholesale PSUs.

Enterprise revenues increased $104 million during the year ended December 31, 2022 as compared to the corresponding period in 2021 primarily due to an increase in Internet PSUs offset by a $16 million one-time benefit incurred during the year ended December 31, 2021 as well as lower wholesale PSUs.

Enterprise PSUs increased by 12,000 in 2022 compared to 2021.

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 $105 million during the year ended December 31, 2021 as compared to the corresponding period in 2020 primarily due to a decrease in political offset by an increase in advanced advertising revenues and local and national advertising revenues as well as the impacts of COVID-19 that lowered revenues in 2020.

During the years ended December 31, 2021 and 2020, mobile revenues included approximately $909 million and $658 million of device revenues, respectively, and approximately $1.3 billion and $706 million of service revenues, respectively.

Advertising sales revenues increased $288 million during the year ended December 31, 2022 as compared to the corresponding period in 2021 primarily due to an increase in political revenue.

During the years ended December 31, 2022 and 2021, mobile revenues included approximately $1.3 billion and $909 million of device revenues, respectively, and approximately $1.7 billion and $1.3 billion of service revenues, respectively.

The increases in revenues are a result of an increase of 1,728,000 lines from December 31, 2021 to December 31, 2022.

Other revenues consist of revenue from regional sports and news channels (excluding intercompany charges or advertising sales on those channels), home shopping, late payment fees, video device sales, wire maintenance fees and other miscellaneous revenues.

Other revenues remained relatively consistent during the year ended December 31, 2021 as compared to the corresponding period in 2020.

Other revenues consist of revenue from processing fees, regional sports and news channels (excluding intercompany charges or advertising sales on those channels), subsidy revenue, home shopping, video device sales, wire maintenance fees and other miscellaneous revenues.

Other revenues increased approximately $34 million during the year ended December 31, 2022 as compared to the corresponding period in 2021 primarily due to subsidy revenue related to our rural construction initiative and an increase in processing fees offset by a decrease in sales of video devices.

Operating costs and expenses .

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Costs to service customers 379

Programming costs were approximately $11.8 billion and $11.4 billion for the years ended December 31, 2021 and 2020, respectively, representing 38% of operating costs and expenses.

Marketing 268

Programming costs were approximately $11.6 billion and $11.8 billion for the years ended December 31, 2022 and 2021, representing 35% and 38% of total operating costs and expenses, respectively.

Programming costs consist primarily of costs paid to programmers for basic, digital, premium, video on demand, and pay-per-view programming.

Programming costs increased as a result of $124 million of more rebates in 2020 than 2021 from sports programming networks as a result of canceled sporting events due to COVID-19, as well as contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent offset by fewer customers and a higher mix of lower cost video packages within our video customer base.

We expect programming rates per customer will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming.

We have been unable to fully pass these increases on to our customers and do not expect to be able to do so in the future without a potential loss of customers.

Regulatory, connectivity and produced content increased $311 million during the year ended December 31, 2021 compared to the corresponding period in 2020 primarily due to higher sports rights costs as a result of more National Basketball Association ("NBA") and Major League Baseball ("MLB") games during 2021 as compared to the corresponding period in 2020 as the prior period had cancelation of MLB games and the current period had additional games due to the delayed start of the 2020 - 2021 NBA season as a result of COVID-19.

Costs to service customers decreased $79 million during the year ended December 31, 2021 compared to the corresponding period in 2020 despite 3.0% customer growth primarily due to fewer transactions and a decrease in bad debt expense partly driven by government stimulus packages offset by the higher labor costs associated with our commitment to a minimum $20 per hour wage in 2022.

Mobile costs of $2.5 billion and $1.8 billion for the years ended December 31, 2021 and 2020, respectively, were comprised of mobile device costs and mobile service, customer acquisition and operating costs.

Programming costs decreased as a result of fewer customers and a higher mix of lower cost video packages within our video customer base offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent.

Regulatory, connectivity and produced content decreased $191 million during the year ended December 31, 2022 compared to the corresponding period in 2021 primarily due to lower costs of video devices sold to customers and regulatory pass-through fees as well as lower sports rights costs as a result of more basketball games during 2021 as compared to 2022 as the prior period had additional games due to the delayed start of the 2020 - 2021 National Basketball Association ("NBA") season as a result of COVID-19.

Costs to service customers increased $379 million during the year ended December 31, 2022 compared to the corresponding period in 2021 primarily due to higher bad debt, adjustments to job structure, pay and benefits to build a more skilled and longer tenured workforce and fuel costs.

Mobile costs of $3.4 billion and $2.5 billion for the years ended December 31, 2022 and 2021, respectively, were comprised of mobile device, mobile service, customer acquisition and operating costs.

The increase is attributable to an increase in the number of mobile lines.

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2022 compared to 2021

Stock compensation expense $ 79

Enterprise 21

Corporate costs 20

Property tax and insurance 17

Advertising sales expense $ 84

Stock compensation expense increased primarily due to changes in certain equity award provisions that result in additional expense at the time of grant.

Corporate costs 78

Enterprise 43

Stock compensation expense 40

Advertising sales expense increased during the year ended December 31, 2022 compared to the corresponding prior period due to higher costs of sales fees driven by higher political revenue.

Corporate costs increased primarily due to higher computer and software expense and labor costs.

Depreciation and amortization.

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Other operating expenses, net.

The increase in other operating expenses, net was attributable to the following (dollars in millions):

The decrease in other operating expenses, net was attributable to the following (dollars in millions):

2022 compared to 2021

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Interest expense, net.

Net interest expense increased by $189 million in 2021 from 2020 primarily due to an increase in weighted average debt outstanding of approximately $7.1 billion primarily as a result of the issuance of notes in 2020 and 2021 for general corporate purposes including stock buybacks and debt repayments offset by a decrease in weighted average interest rates.

Other expenses, net.

The decrease in other expenses, net is attributable to the following (dollars in millions):

Net interest expense increased by $519 million in 2022 from 2021 primarily due to an increase in weighted average debt outstanding of approximately $8.3 billion as well as an increase in weighted average interest rates.

The increase in weighted average debt outstanding is primarily due to the issuance of notes throughout 2021 and 2022.

Other income (expenses), net.

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

2022 compared to 2021

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Income tax expense.

We recognized income tax expense of $1.1 billion and $626 million for the years ended December 31, 2021 and 2020, respectively .

Income tax expense increased during the year ended December 31, 2021 compared to the corresponding period in 2020 primarily as a result of higher pretax income.

We recognized income tax expense of $1.6 billion and $1.1 billion for the years ended December 31, 2022 and 2021, respectively .

Income tax expense increased during the year ended December 31, 2022 compared to the corresponding period in 2021 primarily as a result of an increase in pretax income, lower benefit from state tax rate changes and decreased recognition of excess tax benefits resulting from share-based compensation during 2021.

For more information, see Note 17 to the accompanying consolidated financial statements contained in “Part II.

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Net income attributable to noncontrolling interest.

Net income attributable to noncontrolling interest for financial reporting purposes represents A/N’s portion of Charter Holdings’ net income based on its effective common unit ownership interest and the preferred dividend of $70 million and $150 million for the years ended December 31, 2021 and 2020, respectively.

For more information, see Note 10 to the accompanying consolidated financial statements contained in “Part II.

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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 other companies.

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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 fees were in the amount of $1.3 billion for each of the years ended December 31, 2021 and 2020.

Our debt covenants refer to these expenses as management fees, which fees were in the amount of $1.4 billion and $1.3 billion for the years ended December 31, 2022 and 2021, 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):

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Our business requires significant cash to fund principal and interest payments on our debt.

As of December 31, 2022, $70.7 billion of our debt was rated investment grade and $26.7 billion was rated high yield debt.

This split rating allows us to access both the investment grade debt market and the high yield debt market.

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 mobile services, we expect an initial funding period to grow a new product as well as 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 expects to become a meaningful federal cash tax payer as the majority of net operating losses will have been utilized.

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 has become a meaningful federal cash tax payer as the majority of our net operating losses have been utilized.

Free cash flow was $6.1 billion and $8.7 billion for the years ended December 31, 2022 and 2021, respectively.

See table below for factors impacting free cash flow during the year ended December 31, 2022 compared to 2021.

As of December 31, 2021, the amount available under our credit facilities was

approximately $3.9 billion and cash on hand was approximately $601 million.

As of December 31, 2022, the amount available under our credit facilities was approximately $4.0 billion and cash on hand was approximately $645 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.

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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 expanding the capacity of our network, the expansion of our network through our rural broadband construction project, 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 consolidated first lien level.

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 expanding the capacity of our network, the expansion of our network through our rural broadband construction initiative, 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 4.47 times Adjusted EBITDA as of December 31, 2022.

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Excluding purchases from Liberty Broadband discussed below, during the years ended December 31, 2022 and 2021, Charter purchased in the public market approximately 14.5 million and 15.9 million shares, respectively, of Charter Class A common stock for approximately $7.1 billion and $10.9 billion, respectively.

Since the beginning of its buyback program in September 2016 through the year ended December 31, 2021, Charter has purchased in the public market approximately 125.6 million shares of Class A common stock and Charter Holdings common units for approximately $56.8 billion, including purchases from Liberty Broadband discussed below.

Since the beginning of its buyback program in September 2016 through the year ended December 31, 2022, Charter has purchased in the public market approximately 149.4 million

shares of Class A common stock and Charter Holdings common units for approximately $68.5 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”).

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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 6.1 million shares of Charter Class A common stock for approximately $4.2 billion during the year ended December 31, 2021.

Charter purchased from Liberty Broadband 6.2 million and 6.1 million shares of Charter Class A common stock for approximately $3.0 billion and $4.2 billion during the years ended December 31, 2022 and 2021, respectively.

In January 2023, Charter purchased from Liberty Broadband an additional 0.1 million shares of Charter Class A common stock for approximately $42 million.

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During the years ended December 31, 2022 and 2021, Charter Holdings purchased from A/N 3.2 million and 3.3 million Charter Holdings common units, respectively, for approximately $1.6 billion and $2.2 billion, respectively.

As of December 31, 2021, Charter had remaining board authority to purchase an additional $1.9 billion of Charter’s Class A common stock and/or Charter Holdings common units, excluding purchases from Liberty Broadband.

As of December 31, 2022, Charter had remaining board authority to purchase an additional $414 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.

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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.

Recent Events

In January 2022, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp.

jointly issued $1.2 billion of 4.750% senior unsecured notes due February 2032 at par.

The net proceeds were used for general corporate purposes, including to fund buybacks of Charter Class A common stock and Charter Holdings common units, to repay certain indebtedness and to pay related fees and expenses.

In addition to the debt issued in January 2022 as described above, CCO Holdings and CCO Holdings Capital Corp.

jointly issued $3.75 billion aggregate principal amount of senior unsecured notes in 2021 at varying rates, prices and maturity dates, and Charter Operating and Charter Communications Operating Capital Corp.

jointly issued $9.8 billion aggregate principal amount of senior secured notes in 2021 at varying rates, prices and maturity dates.

The net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

Free Cash Flow

Free cash flow increased $1.6 billion during the year ended December 31, 2021 compared to the corresponding prior period due to the following (dollars in millions).

Free cash flow decreased $2.6 billion during the year ended December 31, 2022 compared to the corresponding prior period due to the following (dollars in millions):

2022 compared to 2021

Increase in Adjusted EBITDA $ 2,112

Increase in capital expenditures $ (1,741)

Increase in cash paid for taxes, net (1,168)

Increase in cash paid for interest, net (460)

Change in working capital, excluding change in accrued interest (109)

Increase in Adjusted EBITDA 986

Change in working capital, excluding change in accrued interest and taxes 188

Other, net (387)

Free cash flow was reduced by $853 million and $1.1 billion during the years ended December 31, 2021 and 2020, respectively, due to mobile with impacts negatively affecting working capital, capital expenditures and Adjusted EBITDA.

Free cash flow was reduced by $1.1 billion and $853 million during the years ended December 31, 2022 and 2021, respectively, due to mobile impacts negatively affecting working capital, capital expenditures and Adjusted EBITDA.

The increase in capital expenditures is primarily due to the rural construction initiative of $1.8 billion during the year ended December 31, 2022.

paid for taxes, net increased as Charter has become a meaningful federal cash tax payer in 2022.

Other, net for the year ended December 31, 2022 includes the payment of litigation settlements including the payment of a previously recorded litigation settlement with Sprint Communications Company L.P.

and T-Mobile USA, Inc.

See Note 14 to the accompanying consolidated financial statements contained in “Part II.

Financial Statements and Supplementary Data.”

Historical Operating, Investing, and Financing Activities

Cash and Cash Equivalents.

We held $601 million and $1.0 billion in cash and cash equivalents as of December 31, 2021 and 2020, respectively.

We held $645 million and $601 million in cash and cash equivalents as of December 31, 2022 and 2021, respectively.

Operating Activities.

Net cash provided by operating activities increased $1.7 billion during the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to an increase in Adjusted EBITDA of $2.1 billion offset by changes in working capital, excluding the change in accrued interest and accrued expenses related to capital expenditures, that used $266 million more cash and $193 million higher cash paid for interest.

Net cash provided by operating activities decreased $1.3 billion during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in cash paid for taxes, higher cash paid for interest and the payment of litigation settlements offset by an increase in Adjusted EBITDA of $986 million.

Investing Activities.

Net cash used in investing activities for the years ended December 31, 2022 and 2021 was $9.1 billion and $7.8 billion, respectively.

The decrease in cash used was primarily due the purchase of spectrum wireless licenses in 2020 offset by an increase in capital expenditures in 2021.

The increase in cash used was primarily due to an increase in capital expenditures, offset by changes in accrued expenses related to capital expenditures that increased by $473 million.

Financing Activities.

Net cash used in financing activities decreased $68 million during the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to an increase in the amount by which borrowings of long-term debt exceeded repayments offset by an increase in the purchase of treasury stock and noncontrolling interest and a decrease in equity exercises.

Net cash used in financing activities decreased $3.1 billion during the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a decrease in the purchase of treasury stock and noncontrolling interest offset by a decrease in the amount by which borrowings of long-term debt exceeded repayments.

Capital Expenditures

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Capital expenditures were $9.4 billion and $7.6 billion for the years ended December 31, 2022 and 2021, respectively.

The increase was primarily due to an increase in scalable infrastructure driven by augmentation of network capacity for customer growth and usage, with incremental spending to reclaim network headroom maintained prior to COVID-19.

The increase was primarily due to an increase in line extensions and customer premise equipment.

The increase in line extensions was primarily due to the rural construction initiative.

See the table below for more details.

We currently expect full year 2022 cable capital expenditures, excluding capital expenditures associated with our rural construction initiative, to be between $7.1 billion and $7.3 billion.

The actual amount of our capital expenditures in 2022 will depend on a number of factors including further spend related to product development and growth rates of both our residential and commercial businesses as well as the pace of rural construction.

We currently expect full year 2023 capital expenditures, excluding line extensions, to be between $6.5 billion and $6.8 billion.

We expect 2023 line extensions capital expenditures to approximate $4 billion.

The actual amount of capital expenditures in 2023 will depend on a number of factors including, but not limited to, the pace of our network evolution and rural construction initiatives, supply chain timing and growth rates in our residential and commercial businesses.

Our capital expenditures are funded primarily from cash flows from operating activities and borrowings on our credit facility.

In addition, our accrued liabilities related to capital expenditures increased $80 million and decreased $77 million for the years ended December 31, 2021 and 2020, respectively.

In addition, our accrued liabilities related to capital expenditures increased $553 million and $80 million for the years ended December 31, 2022 and 2021, respectively.

The following tables present our major capital expenditures categories in accordance with National Cable and Telecommunications Association (“NCTA”) disclosure guidelines for the years ended December 31, 2022 and 2021.

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Capital expenditures included in total related to:

Capital expenditures, excluding line extensions $ 6,386 $ 5,993

Line extensions (c)

Total capital expenditures $ 9,376 $ 7,635

Commercial services $ 1,511 $ 1,445

Mobile $ 376 $ 482

Rural construction initiative (f)

(a) Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units, including customer installation costs and customer premise equipment (e.g., digital receivers and cable modems).

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(e) Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

(f) The rural construction initiative subcategory includes expenditures associated with our Rural Construction Initiative (for which separate reporting was initiated in 2022), excluding customer premise equipment and installation.

As of December 31, 2022, the accreted value of our total debt was approximately $97.6 billion, as summarized below (dollars in millions):

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4.500% senior notes due 2032 2,900 2,924 5/1 & 11/1 5/1/2032

Charter Communications Operating, LLC:

4.500% senior notes due 2033 1,750 1,730 6/1 & 12/1 6/1/2033

4.250% senior notes due 2034 2,000 1,983 1/15 & 7/15 1/15/2034

Charter Communications Operating, LLC:

Senior floating rate notes due 2024 900 901 2/1, 5/1, 8/1 & 11/1 2/1/2024

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3.850% senior notes due 2061 1,850 1,810 4/1 & 10/1 4/1/2061

4.400% senior notes due 2061 1,400 1,389 6/1 & 12/1 12/1/2061

3.950% senior notes due 2062 1,400 1,379 6/30 & 12/30 6/30/2062

5.500% senior notes due 2063 1,000 986 4/1 & 10/1 4/1/2063

Credit facilities 13,877 13,823 Varies

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(d) Principal amount includes £650 million valued at $786 million as of December 31, 2022 using the exchange rate as of December 31, 2022.

In 2022, Charter Operating entered into an amendment to its credit agreement.

Also in 2022, CCO Holdings and CCO Holdings Capital Corp.

jointly issued $2.7 billion aggregate principal amount of senior unsecured notes and Charter Operating and Charter Communications Operating Capital Corp.

jointly issued $3.5 billion aggregate principal amount of senior secured notes.

The notes were issued at varying rates, prices and maturity dates and the net proceeds were used to pay related fees and expenses and for general corporate purposes, including funding buybacks of Charter Class A common stock and Charter Holdings common units as well as repaying certain indebtedness.

See Note 8 to the accompanying consolidated financial statements contained in “Part II.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis