Title

Presentation

Liberty Broadband Corporation misses on earnings expectations. Reported EPS is $0.47 EPS, expectations were $1.32.

Operator: Welcome to the Liberty Broadband 2023 Q1 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference will be recorded on May 2nd. I would now like to turn the conference over to Shane Kleinstein, Vice President, Investor Relations. Please go ahead.

Shane Kleinstein: Thank you and good afternoon. Before we begin, we’d like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in most recent Forms 10-K and 10-Q filed by Liberty Broadband and Liberty TripAdvisor with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband and Liberty TripAdvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein, to reflect any change in Liberty Broadband or Liberty TripAdvisor’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today’s call, we will discuss certain non-GAAP financial measures for Liberty Broadband, including adjusted OIBDA. Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary note and Schedules 1 and 2 can be found in the earnings press release issued today, as well as earnings releases for prior periods, which are available on Liberty Broadband’s website. Now, I’d like to turn the call over to Greg Maffei, Liberty’s President and CEO.

Greg Maffei: Thank you Shane and good afternoon to all. Today speaking on the call, we will also have Liberty Broadband’s Chief Accounting and Principal Financial Officer, Brian Wendling, Ron Duncan, CEO of GCI, and Pete Pounds, CFO of GCI, will also be available to answer questions. I’d note also during the Q&A, we will be happy to answer questions related to Liberty TripAdvisor, but note, Liberty TripAdvisor has not yet reported its Q1 results, so we will be unable to comment on the current quarter. So beginning with Liberty Broadband, in the first quarter, we issued $1.3 billion of a 3.125% charter exchangeable, and we used the proceeds and some cash we had on hand to repurchase $1.4 billion of charter’s exchangeable debt that was due this year.

Note that also since we are under the 26% fully diluted ownership cap early this year, driven by charter’s annual compensation grants, we have not bought any stock back since January, any of the charter stock back. We have not sold any into the buyback since January. We expect to resume sales into charter’s buyback pursuant to our stockholder agreement, though we do anticipate lighter buybacks this year at charter due to investments by the company. With the near-term liabilities addressed, our plan is also to resume LBRDA and K buybacks using the majority of our after-tax proceeds from those charter sales. And looking at charter itself, we had solid operating results. We added 76,000 new Internet subs in the quarter, good growth given the current broadband environment, and that was a sequential improvement through Q1.

Mobile continues to be an area of continued strength. Spectrum One, is resonating in the market. I’d note beginning in the fourth quarter, these free lines associated with Spectrum One will be converted to paid, and we expect them to drive margin improvement and a tailwind to EBITDA growth. So we added 686,000 mobile lines in that first quarter, nearly double what we did last year. Cable share of mobile ads, total mobile ads, continues to increase, and it’s estimated to be 55% in the first quarter and 35% in the fourth quarter. We overall reported good financial results. Revenue was up 3.4% and EBITDA was up 2.6% during a period of heightened investment. Broadband revenue was up 5%, benefiting from both ARPU and customer growth. Broadband ARPU alone was up 4%.

We are pleased with some of the progress that is underway at Charter on key initiative investments that Chris and his team have made, including on the network upgrade, the rural build, and mobile convergence. And with that, I’d like to turn it over to Brian to discuss the financial results in more detail.

Brian Wendling: Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $169 million, which includes $59 million in cash held directly at GCI. The value of our Charter investment based on our shares held on May 1st and Charter share price at the day’s close was $16.8 billion. At quarter end, Liberty Broadband had a total principal amount of debt of $3.8 billion. Note this excludes preferred stock and remaining indemnification obligations. As Greg mentioned, we did not have proceeds from Charter share sales in the period from February 1st through April 30th. We do expect to resume our share sales to Charter as required in our stockholder agreement to maintain our fully diluted ownership percentage of 26%.

For the full year of 2023, our annual tax guidance on Charter share sales remains in the 7% to 13% range. Looking at GCI, GCI had a good first quarter. Solid performance has allowed the company to send $40 million in dividends up to Liberty Broadband during the quarter, and we’d expect additional dividends to be paid this year. Leverages defined in its credit agreement was 2.87% or 2.87 times as a quarter end, and GCI had $397 million of undrawn capacity under its revolver. Revenue and Adjusted OIBDA were up $13 and $3 million respectively. The revenue growth was led by additional data sales, primarily to our RHC and school customers. This was partially offset by continued declines in our video business, which significantly impacts revenue but does not meaningfully impact pre-cash flow.

Adjusted OIBDA grew less than revenue, primarily as a result of inflationary pressures primarily in labor and lapping a couple of one-time benefits recognized last year in bad debt and property taxes. Over the last year, GCI has added nearly 6,500 revenue-generating wireless subscribers and nearly 4,500 table modem customers. And with that, I’ll turn the call back over to Greg.

Greg Maffei: Thanks, Brian. To the listening audience, we appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor. And with that, operator, I’d like to open the line for questions.

Operator: Thank you. [Operator Instructions] Our first question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.

Operator: Our next question comes from James Radicle from Evercore ISI. Please go ahead.

Operator: Our next question comes from Matthew Harrington with Benchmark Company. Please go ahead.

Greg Maffei: All right, operators. Thank you. I believe that’s the last of our questions. Thank you again to our listening audience. We hope to speak with you next quarter, if not sooner.

Operator: That concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.