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A Look at Charter Communications’s Recent EBITDA Margin

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Charter’s EBITDA margin

In the previous article, we discussed Charter Communications’s (CHTR) revenue trend over the last few quarters. In this article, we’ll take a look at CHTR’s EBITDA[1. earnings before interest, tax, depreciation, and amortization] margin. The growth trend in the company’s core operating profitability further strengthened during 4Q16.

Charter Communications posted adjusted EBITDA of $3.9 billion in 4Q16 compared to $3.4 billion in 4Q15. The company’s adjusted EBITDA margin was 37.5% in 4Q16, up from 35.7% in 4Q15. This increase was attributable to the operating momentum at legacy Charter, as well as a realization of ~$150 million in deal synergies.

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During Charter Communications’s 4Q16 earnings conference call on February 16, 2017, the company’s CFO, Christopher Winfrey, stated, “In 2016 in other words from May, we realized over $300 million in hard synergies. We continue to expect over $700 million in run rate transaction synergies at the first anniversary of the closing of our transactions. And I believe we’ll exceed $1 billion in synergies after three years from close.”

CHTR’s peer comparison of EBITDA margin in 4Q16

According to company filings, AT&T (T) and Verizon (VZ) had adjusted EBITDA margins of 35.7% and 35.5%, respectively, in 4Q16. AT&T is enjoying higher margins than Verizon due to cost synergies associated with its DIRECTV acquisition. Also, Frontier Communications’s (FTR) adjusted EBITDA margin was 40.0% in 4Q16.

Charter Communications expects its EBITDA to increase going forward, primarily to reflect solid cost management and the company’s improved outlook for merger synergies.

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