Financials

Financials — What the Numbers Say

1. Financials in One Page

Charter is a $54.8B-revenue US cable broadband operator running at roughly flat revenue, mid-20s operating margins, and ~40% EBITDA margins — best-in-class for the sector. The catch sits below EBITDA: capex has stepped up to 21% of revenue ($11.7B in FY2025) for the rural buildout and network evolution, compressing free cash flow from a peak of $8.6B in FY2021 to roughly $4.4B in FY2025. Net debt of $95.7B sits at 4.4× EBITDA — high by US telecom standards but stable, and interest is covered 4.3× by EBITDA. With the share price near $140 (down from $343 at end-FY2024) the equity trades at roughly 3.9× FY2025 EPS, ~5.2× EV/EBITDA, and a 25% FCF yield — multiples that price either a permanent broadband loss-share or a value trap. The single financial metric that matters most right now is free cash flow per share: it is the swing variable that turns this from a credit-laden cigar-butt into a compounder.

Term primer for new readers. EBITDA (earnings before interest, tax, depreciation, amortization) is a proxy for cash operating profit before financing and accounting choices — cable operators are measured on it because depreciation here mostly reflects buried plant that does not need to be replaced one-for-one. Free cash flow is operating cash after capex — the money that can be paid to shareholders or used to pay down debt. Net debt / EBITDA is how many years of cash operating profit it would take to repay debt — 4× is high for non-financial businesses, normal for capital-intensive infrastructure. ROIC (return on invested capital) is after-tax operating profit divided by debt + equity — the actual economic return management earns on every dollar in the business.

2. Revenue, Margins, and Earnings Power

Charter is a scale-and-margin story, not a growth story. Revenue more than tripled from $9.8B (FY2015) to $54.8B once the 2016 Time Warner Cable / Bright House acquisitions closed, then compounded mid-single-digit through the broadband upcycle and has been functionally flat since FY2022. The growth phase is over; what's left is operating leverage and price.

What's the gross margin doing? The FY2023 onward collapse in gross margin is a presentation change — Charter began routing programming, mobile-device, and labor costs through cost-of-revenue rather than below-the-line, so "gross profit" effectively disappeared. EBITDA and operating margin are continuous and remain the right earnings-power gauges. Operating margin has marched from 8.5% (FY2016) to 23.6% (FY2025) as the post-merger network leveraged subscriber price increases and tight cost control. EBITDA margin sits at ~39.5% — the highest in the US cable/telecom peer set and a structural feature of cable infrastructure, not a temporary cycle.

The quarterly view exposes the issue the equity has priced. Top-line peaked at $13.93B in Q4 FY2024 and has drifted down for four consecutive quarters to $13.60B in Q1 FY2026 — a roughly 2% sequential erosion. Operating profit is holding flat in absolute dollars, so margins are still expanding, but the absence of organic growth is what the share-price collapse is reacting to. Earnings power on the existing footprint is intact; the question the financials cannot yet answer is whether Spectrum can grow subscribers and ARPU enough to re-accelerate revenue once fixed-wireless and fiber overbuilders fully roll out.

3. Cash Flow and Earnings Quality

The cash-flow statement is where the bull and bear meet. Free cash flow — operating cash flow after capital expenditure — is the cleanest gauge of what's left for shareholders and debt service.

Operating cash flow does convert cleanly. OCF of $16.1B in FY2025 is more than 3× reported net income, which is normal for a cable operator — depreciation of $8.7B is a non-cash charge that runs through net income but does not consume cash. The cash conversion problem is below OCF, in capex. Capex jumped from 14.8% of revenue in FY2020 to 21.3% in FY2025, eating the operating-leverage gains. Management has explicitly tied the elevated spend to (i) the rural broadband subsidy buildout, (ii) the Network Evolution program (DOCSIS 4.0 / fiber overlay), and (iii) Spectrum Mobile growth — these are time-boxed cycles, not permanent. If capex normalizes to ~15% of revenue, FCF would return to roughly $7-8B; if it stays at 21%, FCF stays around $4-5B.

4. Balance Sheet and Financial Resilience

Charter runs the balance sheet of a cable monopoly that has been bought, releveraged, and refinanced over twenty years. The headline number — $96.2B of total debt, $95.7B net of cash — is the single most consequential item in the financials.

The leverage is high but it is managed, not drifting. Net debt / EBITDA has bounced between 4.2× and 4.6× for a decade — that is management's stated target range (4.0× to 4.5×). EBITDA covers cash interest 4.3× over, which is comfortable for an investment-grade-adjacent infrastructure issuer. The company carries essentially no cash on hand ($0.48B) by design: liquidity is provided by an undrawn revolving credit facility, and debt is laddered across the curve through CCO Holdings and Charter Communications Operating notes.

What the balance sheet lets the company do. With EBITDA covering interest 4× and leverage stable, Charter can fund capex internally and still return roughly $5B/year to shareholders. What it forces the company to do. The fixed cost of $5B+ in annual interest means even a modest EBITDA decline would push leverage above 5× — a credit-rating threshold the company has explicitly defended in past cycles by pausing buybacks. The tangible book value is deeply negative because 80% of total assets are franchise rights and goodwill from M&A, not a red flag in cable but a reminder that book equity is an accounting residual rather than a backstop.

5. Returns, Reinvestment, and Capital Allocation

Charter's economics look very different through the return-on-capital lens versus the per-share lens.

ROIC of ~7% is the honest measure of the business economics. That's a single-digit return on a heavily capex-burdened asset base — respectable for regulated-style infrastructure, unimpressive for a growth name. The high ROE (29%) is largely an artifact of leverage: with $96B of debt against $20B of book equity, every dollar of operating profit on the same capital base produces an outsized return on the small equity residual. Read ROIC, not ROE, to judge the underlying economics.

Charter has been one of the most aggressive buyback stories in US large-cap. From the post-merger peak of 269M shares in FY2016 to 127M at year-end FY2025, the share count is down 53% — and the company has bought back over $70B of stock cumulatively. With shares now near $140 and consensus PT near $315, management has explicit incentive to lean in; FY2025 buybacks re-accelerated to $5.1B from $1.2B in FY2024. The Cox Communications transaction (pending close) will reintroduce stock issuance, but the directional bias toward per-share value compounding is the defining capital-allocation choice of the last decade.

Capital-allocation judgment: Management is compounding per-share value through fewer shares × stable EBITDA, not through reinvestment at attractive returns. ROIC has held at 7% even as capex has climbed — the marginal capex dollar is not earning incremental returns, it is defending the existing footprint and franchise. That's still acceptable as long as buybacks happen at prices below intrinsic value; the case that today's $140 is cheap is the central reason equity returns can still work.

6. Segment and Unit Economics

Charter does not report multi-segment financials — the entire business is the Spectrum cable network (residential broadband, video, voice, mobile, and small-/medium-business). It does, however, disclose revenue by service line and subscriber metrics in its 10-K. The economic mix that matters:

The economics are carried by residential broadband. Charter does not publicly split EBITDA by line, but industry economics imply broadband generates the bulk of contribution profit while video is essentially pass-through (programming costs roughly equal video revenue) and mobile is still scaling. The investment thesis is therefore not really about the $54.8B in headline revenue — it is about the ~$23B of residential broadband revenue, its ARPU, its net adds, and whether the mobile business can fund itself out of the spend cycle into a third growth leg.

7. Valuation and Market Expectations

This is the section that defines the trade. The stock has been revalued violently — from $342.77 at end-FY2024 to $208.75 at end-FY2025 (-39%) and to roughly $140 in mid-FY2026 (another -33%). Multiples have compressed across the board.

Every multiple is at or near its 10-year low. Using the latest share price near $140 and unchanged debt:

Choosing the right multiple. For a capital-intensive levered cable operator, EV/EBITDA is the right primary lens (it captures the whole capital structure) and P/FCF is the secondary lens (because FCF is what services debt and returns capital). P/E understates the leverage burden; P/B is meaningless because of the franchise-rights intangibles.

At the current price, CHTR trades just below Comcast on EV/EBITDA and roughly half the multiple of T-Mobile — and yet it has the highest EBITDA margin and the second-highest FCF margin (after a normalization) in the group. The bear case is the leverage column: at 4.4× net debt / EBITDA, Charter has the least room to absorb a broadband-subscriber decline, and the market's compression of the multiple is paying for that asymmetric tail risk rather than treating CHTR as merely "cheaper than CMCSA."

8. Peer Financial Comparison

The peer-gap that matters. CHTR has the best operating margin and EBITDA margin in the group, and trades at one of the cheapest EV/EBITDA multiples — only Comcast is comparable. Against the wireless-led names (T, VZ, TMUS) it screens cheaper and more profitable on each operating dollar; against TMUS specifically it trades at half the multiple. The reason the gap doesn't close is the net-debt-to-EBITDA column: TMUS earns its premium by carrying half the leverage relative to its FCF, and the market is willing to pay 10×+ for that combination. CHTR's "discount deserved" sits in two questions the financials can't yet answer:

1. Will broadband subscribers stabilize or keep eroding to fiber and fixed-wireless?
2. Will the pending Cox transaction be a synergy story (positive) or a re-leveraging story (negative)?

Answer those two questions favorably and the setup supports a re-rate toward TMUS-light multiples (8×+) and a scenario value near $300/share. Answer them unfavorably and the comparable becomes CABO — high leverage, vanishing growth, deep discount.

9. What to Watch in the Financials

What the financials confirm. Charter is a high-margin, cash-generative business with disciplined leverage and a long record of per-share value compounding through buybacks. Operating profit, EBITDA margin, and ROIC are stable and best-in-class for the sector. The income statement and operating cash flow do not show a broken business.

What the financials contradict. They cannot confirm the market's pricing. At ~5× EV/EBITDA and ~4× P/FCF — with no comparable cyclical or structural pressure visible in the financials yet — the equity is priced for a non-trivial chance of meaningful broadband-subscriber erosion that has not yet shown up in the reported margin or EBITDA lines. The disconnect lives in the operating metrics (subscriber net adds, ARPU per relationship, capex efficiency), not in the GAAP statements.

The first financial metric to watch is free cash flow per share — specifically, whether FCF returns to a $40+/share run-rate over the next four quarters as capex peaks and buybacks continue. If it does, the current ~$140 share price looks like a value mis-pricing. If FCF stalls below $35/share while subscribers continue to bleed and leverage tightens, the current multiple compression is justified.