Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

Charter Communications, Inc. (together with its controlled subsidiaries, “Charter”) is a leading broadband connectivity company and cable operator serving more than 32 million customers in 41 states through our Spectrum brand. Over an advanced high-capacity, two-way telecommunications network, we offer a full range of state-of-the-art residential and business services including Spectrum Internet, TV, Mobile and Voice. For small and medium-sized companies, Spectrum Business delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise provides highly customized, fiber-based solutions. Spectrum Reach delivers tailored advertising and production for the modern media landscape. We also distribute award-winning news coverage and sports programming to our customers through Spectrum Networks.

Charter is a holding company whose principal asset is a controlling equity interest in Charter Communications Holdings, LLC (“Charter Holdings”), an indirect owner of Charter Communications Operating, LLC (“Charter Operating”) under which substantially all of the operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated.

Overview

In 2022, we remain focused on driving customer relationship growth. Residential and small and medium business ("SMB") customer relationships increased by 17,000 during the third quarter of 2022 and 192,000 from September 30, 2021 to September 30, 2022, which excludes mobile-only customers. We continue to see lower customer move rates and switching behavior among providers, which has reduced our selling opportunities. Our rural construction initiative is underway which we expect will expand our footprint by approximately 1 million homes and businesses over the next six years, and we expect to participate in additional government subsidy programs that would further expand our footprint. We continue to evolve our network to provide increased Internet speeds and reliability and invest in our products and customer service platforms. We offer Spectrum Internet products with speeds up to 1 Gbps across our entire footprint. 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 October, we introduced Spectrum One, which brings together Spectrum Internet, Advanced WiFi and Unlimited Spectrum Mobile™, to offer consumers faster, more reliable and secure online connections on their favorite devices at home and on the go in a high-value package. In addition, we continue to work towards the construction of our own 5G mobile data-only network leveraging the Citizens Broadband Radio Service (“CBRS”) Priority Access Licenses (“PALs”) purchased in 2020. 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. During the nine months ended September 30, 2022, we added 1,113,000 mobile lines and 239,000 Internet customers, and for the quarter ended September 30, 2022, we added 396,000 mobile lines and 75,000 Internet customers.

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. During the three and nine months ended September 30, 2022, our mobile product line increased revenues by $750 million and $2.2 billion, respectively, reduced Adjusted EBITDA by approximately $96 million and $237 million, respectively, and reduced free cash flow by approximately $208 million and $768 million, respectively. During the three and nine months ended September 30, 2021, our mobile product line increased revenues by $535 million and $1.5 billion, respectively, reduced Adjusted EBITDA by approximately $72 million and $219 million, respectively, and reduced free cash flow by approximately $145 million and $606 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 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 CBRS build-out.

We realized revenue, Adjusted EBITDA and income from operations during the periods presented as follows (in millions; all percentages are calculated using whole numbers; minor differences may exist due to rounding):

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2022						2021						% Change						2022						2021						% Change
Revenues			$	13,550					$	13,146					3.1		%				$	40,348					$	38,470					4.9		%
Adjusted EBITDA			$	5,412					$	5,286					2.4		%				$	16,134					$	15,251					5.8		%
Income from operations			$	2,924					$	2,927					(0.1)		%				$	8,922					$	7,570					17.9		%

Adjusted EBITDA is defined as net income attributable to Charter shareholders plus net income attributable to noncontrolling interest, net interest expense, income taxes, depreciation and amortization, stock compensation expense, other income (expenses), net and other operating (income) expenses, net, such as special charges and (gain) loss on sale or retirement of assets. 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 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.

The following table summarizes our customer statistics for Internet, video, voice and mobile as of September 30, 2022 and 2021 (in thousands except per customer data and footnotes).

			Approximate as of
			September 30,
			2022 (a)						2021 (a)
Customer Relationships (b)
Residential			29,946						29,823
SMB			2,195						2,126
Total Customer Relationships			32,141						31,949
Monthly Residential Revenue per Residential Customer (c)			$	115.16					$	115.15
Monthly SMB Revenue per SMB Customer (d)			$	164.89					$	167.29
Internet
Residential			28,320						27,965
SMB			2,008						1,934
Total Internet Customers			30,328						29,899
Video
Residential			14,642						15,287
SMB			649						604
Total Video Customers			15,291						15,891
Voice
Residential			7,929						8,784
SMB			1,287						1,273
Total Voice Customers			9,216						10,057
Mobile Lines (e)
Residential			4,516						3,085
SMB			161						99
Total Mobile Lines			4,677						3,184
Enterprise Primary Service Units ("PSUs") (f)			282						269

(a)We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, as of September 30, 2022 and 2021, customers include approximately 151,700 and 119,200 customers, respectively, whose accounts were over 60 days past due, approximately 55,500 and 21,100 customers, respectively, whose accounts were over 90 days past due and approximately 149,300 and 31,800 customers, respectively, whose accounts were over 120 days past due. Bad debt expense associated with these past due accounts has been reflected in our consolidated statements of operations. The increase in past due accounts is predominately due to pre-existing and incremental unsubsidized amounts of customers’ bills for those customers participating in government assistance programs, including video services. These customers are downgraded to a fully subsidized Internet-only service.

(b)Customer relationships include the number of customers that receive one or more levels of service, encompassing Internet, video and voice services, without regard to which service(s) such customers receive. Customers who reside in residential multiple dwelling units (“MDUs”) and that are billed under bulk contracts are counted based on the number of billed units within each bulk MDU. Total customer relationships exclude enterprise and mobile-only customer relationships.

(c)Monthly residential revenue per residential customer is calculated as total residential quarterly revenue divided by three divided by average residential customer relationships during the respective quarter and excludes mobile revenue and customers.

(d)Monthly SMB revenue per SMB customer is calculated as total SMB quarterly revenue divided by three divided by average SMB customer relationships during the respective quarter and excludes mobile revenue and customers.

(e)Mobile lines include phones and tablets which require one of our standard rate plans (e.g., "Unlimited" or "By the Gig"). Mobile lines exclude wearables and other devices that do not require standard phone rate plans.

(f)Enterprise PSUs represent the aggregate number of fiber service offerings counting each separate service offering at each customer location as an individual PSU.

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and the means by which we develop estimates therefore, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K. There have been no material changes from the critical accounting policies described in our Form 10-K.

Results of Operations

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Revenues			$	13,550					$	13,146					$	40,348					$	38,470
Costs and Expenses:
Operating costs and expenses (exclusive of items shown separately below)			8,247						7,958						24,574						23,551
Depreciation and amortization			2,177						2,270						6,711						7,065
Other operating (income) expenses, net			202						(9)						141						284
			10,626						10,219						31,426						30,900
Income from operations			2,924						2,927						8,922						7,570
Other Income (Expenses):
Interest expense, net			(1,160)						(1,016)						(3,329)						(3,003)
Other income (expenses), net			(37)						(157)						65						(237)
			(1,197)						(1,173)						(3,264)						(3,240)
Income before income taxes			1,727						1,754						5,658						4,330
Income tax expense			(360)						(347)						(1,194)						(844)
Consolidated net income			1,367						1,407						4,464						3,486
Less: Net income attributable to noncontrolling interests			(182)						(190)						(605)						(442)
Net income attributable to Charter shareholders			$	1,185					$	1,217					$	3,859					$	3,044
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic			$	7.51					$	6.69					$	23.51					$	16.33
Diluted			$	7.38					$	6.50					$	23.06					$	15.78
Weighted average common shares outstanding, basic			157,971,109						181,925,180						164,189,703						186,380,681
Weighted average common shares outstanding, diluted			160,638,186						187,166,071						167,351,777						197,316,667

Revenues. Total revenues grew $404 million and $1.9 billion for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to increases in the number of residential Internet, mobile and commercial customers and price adjustments.

Revenues by service offering were as follows (dollars in millions; all percentages are calculated using whole numbers; minor differences may exist due to rounding):

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2022						2021						% Change						2022						2021						% Change
Internet			$	5,571					$	5,363					3.9		%				$	16,585					$	15,670					5.8		%
Video			4,379						4,502						(2.7)		%				13,209						13,224						(0.1)		%
Voice			391						409						(4.6)		%				1,180						1,202						(1.9)		%
Residential revenue			10,341						10,274						0.7		%				30,974						30,096						2.9		%
Small and medium business			1,082						1,062						1.9		%				3,221						3,116						3.4		%
Enterprise			673						656						2.6		%				2,003						1,930						3.8		%
Commercial revenue			1,755						1,718						2.2		%				5,224						5,046						3.5		%
Advertising sales			481						391						22.9		%				1,324						1,146						15.6		%
Mobile			750						535						40.2		%				2,166						1,546						40.1		%
Other			223						228						(2.1)		%				660						636						3.7		%
			$	13,550					$	13,146					3.1		%				$	40,348					$	38,470					4.9		%

The increase in Internet revenues from our residential customers is attributable to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Increase related to rate and product mix changes			$	124					$	490
Increase in average residential Internet customers			84						425
			$	208					$	915

The increase related to rate and product mix was primarily due to reduced bundle discounts and promotional roll-off. Residential Internet customers grew by 355,000 customers from September 30, 2021 to September 30, 2022.

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

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Decrease in average residential video customers			$	(178)					$	(423)
Increase related to rate and product mix changes			55						408
			$	(123)					$	(15)

Residential video customers decreased by 645,000 from September 30, 2021 to September 30, 2022. 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 is attributable to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Decrease in average residential voice customers			$	(38)					$	(97)
Increase related to rate			20						75
			$	(18)					$	(22)

Residential wireline voice customers decreased by 855,000 customers from September 30, 2021 to September 30, 2022.

The increase in SMB revenues is attributable to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Increase in SMB customers			$	36					$	124
Decrease related to rate and product mix changes			(16)						(19)
			$	20					$	105

SMB customers grew by 69,000 from September 30, 2021 to September 30, 2022.

Enterprise revenues increased $17 million and $73 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to an increase in Internet PSUs offset by a $16 million one-time benefit incurred during the three and nine months ended September 30, 2021 as well as lower wholesale PSUs. Enterprise PSUs increased 13,000 from September 30, 2021 to September 30, 2022.

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 increased $90 million and $178 million during the three and nine months ended September 30, 2022, respectively, as compared to the corresponding periods in 2021 primarily due to an increase in political revenue.

During the three and nine months ended September 30, 2022, mobile revenues included approximately $303 million and $894 million of device revenues, respectively, and approximately $447 million and $1.3 billion of service revenues, respectively. During the three and nine months ended September 30, 2021, mobile revenues included approximately $201 million and $643 million of device revenues, respectively, and approximately $334 million and $903 million of service revenues, respectively. The increases in revenues are a result of an increase of 1,493,000 mobile lines from September 30, 2021 to September 30, 2022.

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 decreased $5 million and increased $24 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. The increase during the nine months ended September 30, 2022 compared to the corresponding prior period in 2021 is 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**.** The increase in our operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, are attributable to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Programming			$	(112)					$	(129)
Regulatory, connectivity and produced content			(47)						(160)
Costs to service customers			83						271
Marketing			73						213
Mobile			239						638
Other			53						190
			$	289					$	1,023

Programming costs were approximately $2.9 billion and $3.0 billion for the three months ended September 30, 2022 and 2021, representing 35% and 37% of total operating costs and expenses, respectively, and $8.8 billion and $8.9 billion for the nine months ended September 30, 2022 and 2021, representing 36% 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 decreased as a result of fewer customers and a higher mix of lower cost video packages within our video customer base along with favorable one-time impacts offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent. 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 decreased $47 million and $160 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to lower costs of video devices sold to customers and regulatory pass-through fees. Regulatory, connectivity and produced content for the nine months ended September 30, 2022 compared to the corresponding prior period also decreased due to 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 NBA season as a result of COVID-19.

Costs to service customers increased $83 million and $271 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to higher bad debt and higher fuel costs offset by lower labor costs as a result of productivity improvements driven by improved network performance and digital self-service platforms.

Marketing increased $73 million and $213 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to higher labor costs associated with higher staffing levels and our commitment to a minimum $20 per hour wage in 2022 as well as insourcing of inbound sales and retention call centers.

Mobile costs of $846 million and $2.4 billion for the three and nine months ended September 30, 2022, respectively, and $607 million and $1.8 billion for the three and nine months ended September 30, 2021, respectively, were comprised of mobile device costs and mobile service, customer acquisition and operating costs. The increase is attributable to an increase in the number of mobile lines.

The increase in other expense is attributable to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Corporate costs			$	9					$	67
Advertising sales expense			27						54
Stock compensation expense			11						28
Enterprise			11						28
Other			(5)						13
			$	53					$	190

Corporate costs increased during the nine months ended September 30, 2022 compared to the corresponding prior period primarily due to higher labor costs and computer and software expense. Advertising sales expense increased due to higher costs of sales fees driven by higher political revenue and higher labor costs.

Depreciation and amortization. Depreciation and amortization expense decreased by $93 million and $354 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 primarily due to certain assets acquired in acquisitions becoming fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

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

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Special charges, net			$	206					$	(107)
(Gain) loss on disposal of assets, net			5						(36)
			$	211					$	(143)

See Note 10 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

Interest expense, net. Net interest expense increased by $144 million and $326 million for the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. The increase in net interest expense is the result of an increase in weighted average debt outstanding of approximately $8.4 billion and $9.0 billion during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021 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):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Loss on extinguishment of debt (see Note 4)			$	69					$	141
Loss on financial instruments, net (see Note 7)			(129)						(71)
Net periodic pension benefits (costs)			222						65
Gain (loss) on equity investments, net			(42)						167
			$	120					$	302

See Note 11 and the Notes referenced above to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

Income tax expense. We recognized income tax expense of $360 million and $1.2 billion for the three and nine months ended September 30, 2022, respectively, and $347 million and $844 million for the three and nine months ended September 30, 2021, respectively. The increase is primarily a result of decreased recognition of excess tax benefits resulting from share-based compensation during 2021 and the change in pretax income.

Net income attributable to noncontrolling interest. Net income attributable to noncontrolling interest for financial reporting purposes represents Advance/Newhouse Partnership's (“A/N”) portion of Charter Holdings’ net income based on its effective common unit ownership interest and the preferred dividend of $70 million for the nine months ended September 30, 2021. For more information, see Note 6 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements.”

Net income attributable to Charter shareholders. Net income attributable to Charter shareholders decreased $32 million and increased $815 million during the three and nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021, primarily as a result of the factors described above.

Use of Adjusted EBITDA and Free Cash Flow

We use certain measures that are not defined by U.S. 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. Adjusted EBITDA and free cash flow are reconciled to net income attributable to Charter shareholders and net cash flows from operating activities, respectively, below.

Adjusted EBITDA eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our businesses as well as other non-cash or special items, and is unaffected by our capital structure or investment activities. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of financing. These costs are evaluated through other financial measures.

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.

Management and Charter’s board of directors use Adjusted EBITDA and free cash flow to assess our performance and our ability to service our debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under our credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the Securities and Exchange Commission (the “SEC”)). 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 were $342 million and $1.0 billion for

the three and nine months ended September 30, 2022, respectively, and $337 million and $979 million for the three and nine months ended September 30, 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):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Net income attributable to Charter shareholders			$	1,185					$	1,217					$	3,859					$	3,044
Plus: Net income attributable to noncontrolling interest			182						190						605						442
Interest expense, net			1,160						1,016						3,329						3,003
Income tax expense			360						347						1,194						844
Depreciation and amortization			2,177						2,270						6,711						7,065
Stock compensation expense			109						98						360						332
Other expenses, net			239						148						76						521
Adjusted EBITDA			$	5,412					$	5,286					$	16,134					$	15,251
Net cash flows from operating activities			$	3,757					$	4,263					$	11,138					$	12,013
Less: Purchases of property, plant and equipment			(2,406)						(1,861)						(6,456)						(5,563)
Change in accrued expenses related to capital expenditures			156						74						284						(51)
Free cash flow			$	1,507					$	2,476					$	4,966					$	6,399

Liquidity and Capital Resources

Introduction

This section contains a discussion of our liquidity and capital resources, including a discussion of our cash position, sources and uses of cash, access to credit facilities and other financing sources, historical financing activities, cash needs, capital expenditures and outstanding debt.

Recent Events

In August 2022, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. jointly issued $1.5 billion of 6.375% senior unsecured notes due September 2029 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.

Overview of Our Contractual Obligations and Liquidity

We have significant amounts of debt. The principal amount of our debt as of September 30, 2022 was $96.8 billion, consisting of $13.4 billion of credit facility debt, $56.7 billion of investment grade senior secured notes and $26.7 billion of high-yield senior unsecured notes. Our business requires significant cash to fund principal and interest payments on our debt.

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 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 $1.5 billion and $5.0 billion for the three and nine months ended September 30, 2022, respectively, and $2.5 billion and $6.4 billion for the three and nine months ended September 30, 2021, respectively. See table below for factors impacting free cash flow during the three and nine months ended September 30, 2022 compared to the corresponding prior periods. As of September 30, 2022, the amount available under our credit facilities was approximately $4.6 billion and cash on hand was approximately $480 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. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations. Additionally, we may, from time to time, and depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings to retire our debt through open market purchases, privately negotiated purchases, tender offers or redemption provisions. 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 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 4.5 times Adjusted EBITDA as of September 30, 2022. As Adjusted EBITDA grows, we expect to increase the total amount of our indebtedness to maintain leverage within Charter's target leverage range. Excluding purchases from Liberty Broadband Corporation (“Liberty Broadband”) discussed below, during the three and nine months ended September 30, 2022, Charter purchased in the public market approximately 3.3 million and 12.6 million shares of Charter Class A common stock, respectively, for approximately $1.4 billion and $6.5 billion, respectively, and during the three and nine months ended September 30, 2021, Charter purchased in the public market approximately 3.5 million and 11.5 million shares of Charter Class A common stock, respectively, for approximately $2.7 billion and $7.8 billion, respectively. Since the beginning of its buyback program in September 2016 through September 30, 2022, Charter has purchased approximately 145.7 million shares of Class A common stock and Charter Holdings common units for approximately $67.2 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”). The LBB Letter Agreement implements Liberty Broadband’s obligations under the Amended and Restated Stockholders Agreement among Charter, Liberty Broadband and A/N, dated as of May 23, 2015 (as amended, the “Stockholders Agreement”) to participate in share repurchases by Charter. 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 1.7 million and 5.0 million shares of Charter Class A common stock for approximately $796 million and $2.6 billion during the three and nine months ended September 30, 2022, respectively, and 1.2 million and 4.0 million shares of Charter Class A common stock for approximately $880 million and $2.6 billion during the three and nine months ended September 30, 2021, respectively. In October 2022, Charter purchased from Liberty Broadband an additional 0.5 million shares of Charter Class A common stock for approximately $183 million.

In December 2016, Charter and A/N entered into a letter agreement, as amended in December 2017 (the "A/N Letter Agreement"), that requires A/N to sell to Charter or to Charter Holdings, on a monthly basis, a number of shares of Charter Class A common stock or Charter Holdings common units that represents a pro rata participation by A/N and its affiliates in any repurchases of shares of Charter Class A common stock from persons other than A/N effected by Charter during the immediately preceding calendar month, at a purchase price equal to the average price paid by Charter for the shares repurchased from persons other than A/N during such immediately preceding calendar month. A/N and Charter both have the right to terminate or suspend the pro rata repurchase arrangement on a prospective basis. During the three and nine months ended September 30, 2022, Charter Holdings purchased from A/N 0.8 million and 2.6 million Charter Holdings common units for approximately $385 million and $1.4 billion, respectively, and during the three and nine months ended September 30, 2021, Charter Holdings purchased from A/N 0.6 million and 2.3 million Charter Holdings common units for approximately $410 million and $1.5 billion, respectively.

As of September 30, 2022, Charter had remaining board authority to purchase an additional $680 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. Purchases may include open market purchases, tender offers or negotiated transactions.

As possible acquisitions, swaps or dispositions arise, we actively review them against our objectives including, among other considerations, improving the operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate return targets, and we may participate to the extent we believe these possibilities present attractive opportunities. 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.

Free Cash Flow

Free cash flow decreased $969 million and $1.4 billion during the three and nine months ended September 30, 2022 compared to the corresponding prior periods in 2021 due to the following (dollars in millions):

			Three months ended September 30, 2022 compared to three months ended September 30, 2021 Increase / (Decrease)						Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 Increase / (Decrease)
Increase in capital expenditures			$	(545)					$	(893)
Increase in cash paid for taxes, net			(383)						(789)
Increase in cash paid for interest, net			(57)						(209)
Increase in Adjusted EBITDA			126						883
Changes in working capital, excluding change in accrued interest and taxes			96						(38)
Other, net			(206)						(387)
			$	(969)					$	(1,433)

Free cash flow was reduced by $208 million and $768 million during the three and nine months ended September 30, 2022, respectively, and $145 million and $606 million during the three and nine months ended September 30, 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 $525 million and $1.1 billion during the three and nine months ended September 30, 2022, respectively. Cash paid for taxes, net increased as Charter has become a meaningful federal cash tax payer in 2022. Other, net for the three and nine months ended September 30, 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 for the nine months ended September 30, 2022. See Note 10 to the accompanying consolidated financial statements contained in “Item 1. Financial Statements” for more information.

Limitations on Distributions

Distributions by our subsidiaries to a parent company for payment of principal on parent company notes are restricted under CCO Holdings indentures governing CCO Holdings' indebtedness, unless there is no default under the applicable indenture, and unless CCO Holdings' leverage ratio test is met at the time of such distribution. As of September 30, 2022, there was no default under any of these indentures, and CCO Holdings met its leverage ratio test based on September 30, 2022 financial results. There can be no assurance that CCO Holdings will satisfy its leverage ratio test at the time of the contemplated distribution.

In addition to the limitation on distributions under the various indentures, distributions by our subsidiaries may be limited by applicable law, including the Delaware Limited Liability Company Act, under which our subsidiaries may only make distributions if they have “surplus” as defined in the act.

Historical Operating, Investing, and Financing Activities

Cash and Cash Equivalents. We held $480 million and $601 million in cash and cash equivalents as of September 30, 2022 and December 31, 2021, respectively.

Operating Activities. Net cash provided by operating activities decreased $875 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to an increase in cash paid for taxes, changes in working capital, the payment of litigation settlements and higher cash paid for interest, offset by an increase in Adjusted EBITDA of $883 million.

Investing Activities. Net cash used in investing activities was $6.3 billion and $5.8 billion for the nine months ended September 30, 2022 and 2021, respectively. 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 $335 million.

Financing Activities. Net cash used in financing activities decreased $1.9 billion during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to a decrease in the purchase of treasury stock and noncontrolling interest and an increase in the amount by which borrowings of long-term debt exceeded repayments.

Capital Expenditures

We have significant ongoing capital expenditure requirements. Capital expenditures were $2.4 billion and $6.5 billion for the three and nine months ended September 30, 2022, respectively, and $1.9 billion and $5.6 billion for the three and nine months ended September 30, 2021, respectively. The increase was primarily due to an increase in line extensions and customer premise equipment, partly offset by a decrease in support capital. 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, growth rates of both our residential and commercial businesses, supply chain timing and the pace of rural construction.

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 by $284 million and decreased by $51 million for the nine months ended September 30, 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 three and nine months ended September 30, 2022 and 2021. These disclosure guidelines are not required disclosures under GAAP, nor do they impact our accounting for capital expenditures under GAAP (dollars in millions):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Customer premise equipment (a)			$	577					$	513					$	1,606					$	1,496
Scalable infrastructure (b)			418						375						1,178						1,223
Line extensions (c)			826						392						2,062						1,191
Upgrade/rebuild (d)			208						178						535						484
Support capital (e)			377						403						1,075						1,169
Total capital expenditures			$	2,406					$	1,861					$	6,456					$	5,563
Of which: Commercial services			$	369					$	353					$	1,110					$	1,083
Capital expenditures included in total related to:
Core cable (f)			$	1,785					$	1,742					$	5,077					$	5,208
Mobile			96						119						265						355
Rural construction initiative (g)			525						—						1,114						—
Total capital expenditures			$	2,406					$	1,861					$	6,456					$	5,563

(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).

(b)Scalable infrastructure includes costs not related to customer premise equipment, to secure growth of new customers and revenue generating units, or provide service enhancements (e.g., headend equipment).

(c)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(d)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.

(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)Core cable represents total capital expenditures excluding mobile and rural construction initiative capital expenditures.

(g)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.

Recently Issued Accounting Standards

See Note 24 to the Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of recently issued accounting standards. There have been no material changes from the recently issued accounting standards described in our Form 10-K.