Q2 2020 Gci Liberty Inc, Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to did you see on Liberty, You're talking 20 Q2 earnings call. During your presentation. All participants will be in listen only mode. Afterward, we will conduct a question answer session at that time. If you have a question. Please press star one on your telephone.
I Wonder if this conference is being recorded August 10th I would now like turn the conference over to Courtney Chang Chief portfolio Officer, and senior Vice President of Investor Relations. Please go ahead.
Thank you before we begin to you guys from rural everyone that this call include forward looking statements will be the private Securities Litigation Reform Act and 19005 actual results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent form 10-K intends to file with the FCC. These forward looking statements speak only after the data.
This call is you see I, nobody Liberty broadband and Liberty Tripadvisor expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein to reflect any change in DC I know that even liberty broadband or Liberty took advisors expectation to provide genkey or any change in events conditions or circumstances.
Such statements.
On today's call, we will discuss non-GAAP financial measures for DC, I Liberty, including adjusted OIBDA and adjusted OIBDA margin information regarding the comparable GAAP metrics, along with Macquarie definitions and reconciliations, including preliminary note. We scheduled one she can be found earnings press release issued today, which is available on T.I. happens website now I'd like to turn the call.
All over the Liberty, President and CEO, Greg Hussein.
Thank you coronary and good morning Jewel.
Speaking on the call, we'll have to see I, Liberty's, Chief Accounting Officer, and principal financial Officer bluntly.
Gee I see a vote Pete pounds.
And during the today will be available to answer questions related to not only.
He said at Liberty, but also Liberty broadband trip advisor.
Well last Thursday, we announced Liberty broadband and she's here at Liberty will combine in the stock the stock merger.
We expect this combination will close in the first half of 2021 subject to potential colder 19 related delays.
I would like more information the combination I do encourage you to look at the slides, we posted on our website and listen to the replay of the call.
Now onto the second quarter results, starting with GE I Liberty.
Oh, Gee I had another strong quarter, despite the challenging backdrop.
The network continues from well.
The team has stayed committed to providing excellent service and support to Alaskan community.
In the second quarter total revenue grew 5% with both business and consumer revenue up.
Adjusted OIBDA grew 18%.
Pete will discuss these results in a bit more detail in a moment.
We continued with the Anchorage Fiveg upgrade.
With 66 Fiveg sites turns on already just by tend more to go this year.
We also.
Now it's on July 31st So we have sold the television broadcasting business.
Do you see I'd Gray television's good transaction for GC I.
The business results were relatively immaterial contributors to financials and the sale will allow GCR to focus our core conductivity business going forward.
The company's and solid liquidity position was 88 million, a cash and 271 million of Undrawn capacity under the senior credit facilities.
Turning to Liberty broadband at the corporate level, we increased our buyback authorization by $1 billion, bringing the total authorization to $1.2 billion. We do note that the discount has wide.
Finding attractive.
Charter had another outstanding quarter.
It's focused on supporting communities. During this difficult times leverage services enable remote working distance learning Tele health services and family Communications.
In June residential data usage was up 20% from the fourth quarter.
But it remains well below Max capacity in the network continues to perform well.
The second quarter subscriber metrics and operational metrics were very strong.
Charter added 850000 residential and SMB Internet customers 325000, mobile lines and 100000 video customers in the second quarter.
Charters grown internet customers by over 2.1 million over the last 12 months.
Consolidated revenue was up 3.1% despite some challenges in the advertising market as the enterprise business.
Adjusted.
EBITDA grew 7.3% and free cash flow was up nearly 70% to $1.9 billion.
Got it finished the quarter with good liquidity.
2.1 billion of cash and 4.7 billion that availability under its revolving credit facility.
We also issued $3 billion of high yield debt in July at very attractive rates.
Try to repurchase 2.3 million shares.
During the quarter for $1.2 billion at an average price of 499 per share.
Charters ability to grow Connectivities services this year for new and existing customers as a testament to the teams operating strategy quality products.
Significant past investments over the past several years.
Turning to Lendingtree.
Are they also executed well in the second quarter, despite a challenging backdrop.
The results demonstrate the benefits of their this diversification program and that flexible cost structure.
The home and insurance businesses.
Revenue and profit compared to last year led by a strong mortgage business.
Consumer spend segment is understandably challenged.
Adjusted EBITDA exceeded prior guidance and it's a reflection of the teams discipline in managing expenses through this time.
Trip to treat completed various financing schemes in July to bolster cash and liquidity.
And today have nearly 200 billion cash on hand, and continue to generate positive free cash flow.
Lastly at Liberty trip advisor.
Well, it's clearly a challenging time for the travel business. The team has undertaken prudent actions to increase efficiency and preserve liquidity monthly user traffic is showing early signs of recovery with notable improvements in restaurant traffic, particularly in Europe.
Sure so better financial results from the taper lows.
Estimate that july's performance improved for.
Trip.
Advisors strengthens its liquidity position by amending its revolving credit facility, replacing the net leverage ratio within minimum liquidity covenant through 2021 in September and they also completed a successful high yield bond offering.
That I'm going to turn it over to Brian to discuss GC I Liberty its financial results in a little more detail.
Thank you, Greg and good morning, everyone at quarter end, VTI Liberty or consolidated cash and cash equivalent for 552 million, which includes 88 million of cash held directly if you see on.
The value of the public equity securities or do you see I Liberty at the Fridays close was 10.5 billion, which includes our 3.2 billion dollar interest in charter $6.2 billion interest in Liberty broadband and $1.1 billion interest in Lendingtree.
At quarter end PPI Liberty had a total principal amount of debt 3.2 billion, which is relatively unchanged from last quarter. This includes a 1.3 billion margin loan outstanding against delivered its liberty broadband shares which is fully drawn.
The charter exchangeable debentures in it and 1.4 billion of debt, including finance leases and power obligations that are held directly at Tcf.
Just you guys leveraged at quarter end as defined in his credit agreement was 4.2 times compared to maximum allowable leverage of 6.5 times.
See I have 271 million undrawn borrowing capacity as of quarter end, which puts you've done a strong liquidity position.
I would be above amounts exclude the indemnification obligations and preferred stock.
With that I'll turn it over to Pete to talk more about Cpis operating results.
Thanks, Brian.
Starting with a coded 19 update.
We've been monitoring the code at 19 situation closely.
Thus far we have not experienced any uptick in bad debt expense, while at the same time, we benefited from increasing demands for our data network and that's being lower health care cost.
This has resulted in positive financial outcomes, thus far as we remain committed to ensuring we meet all of the conductivity needs of our customers.
We continue to work with educational facilities to ensure that Alaska students have access to the conductivity they need as schools will be opening shortly many of them virtually.
I'd like to thank the employees for their hard work and dedication as we work to support the Alaskan community through this difficult time.
Moving onto the five band five de upgrade.
We are making continued progress on our five band Fiveg deployment in Anchorage and are now over 85% complete.
Alaska residents are noticing our improved network and as our numbers show more of them are moving to our Fiveg network. We're on track to complete the Anchorage upgrade later this year.
Now I'll walk through our second quarter results.
Revenue and adjusted OIBDA, both increased by $12 million.
Significant customer demand for data.
And cost containment initiatives lower health care cost and continued move away from our lower margin products like video and time and material has enabled us to match our strong revenue growth dollar for dollar on the adjusted for the thoughts side.
Okay.
On the consumer side revenue was up 5% with data driving the growth.
During the quarter, we gain 6500 paying cable modem customers.
The promotional customers that signed up in the first quarter as well as earlier in the second quarter have overwhelmingly elected to continue with paying customers.
Consumer wireless is another bright spot.
Thanks in large part to a rapidly improving anchorage Fiveg network, we saw 4400, new revenue generating wireless lines in the second quarter versus the first quarter of this year.
Even with wireless subscriber counts slightly lower than last year revenue increased 6% due to customers selecting higher value plans.
Over at GPR business.
Revenue was up about 6% the growth was largely due to growth in government health and education revenues.
As Greg mentioned, we sold our broadcast television business on July 30 Onest.
Due to this transaction video revenue will be slightly reduced in GCI business going forward. However, the broadcast business was immaterial to adjusted OIBDA.
We're pleased with the transaction as it will allow us to continue to focus on our core Alaskan conductivity business.
Finally capex.
We spent $62 million thus far in 2020.
Our primary capital project for the year five Dan Fiveg wireless in Anchorage is going well.
Additionally, we are continuing to spend on projects to keep up with our increased data demand.
I'll now hand, the call back over to Greg.
Okay.
Great.
Thank you, Brian and Pete.
Given the ongoing pandemic, we've decided that Moody's investor day, this year will be virtual.
And we'll be split over two days.
On Thursday November 19th we recover Liberty media at Liberty trip advisor.
And on Friday November Twentyth.
Cover cure rate.
Liberty broadband and GCA Liberty.
Sessions will run from 11 to 12 eastern on both days.
More details we provided on our website. Please mark your calendars.
As always we appreciate your continued interest in GCA Liberty of Liberty broadband and Liberty trip advisor and with that operator like open floor for questions.
Thank you if you have a question at this time. Please press star one on your telephone keypad again, not a star one the signal, we'll pause for a moment to assemble the queue.
And our first question comes from sack silver with B. Riley.
Okay, great. Thanks for asking the question. The first one is just around Lendingtree stake, obviously going to be a smaller piece and the pro forma entity versus.
How big of a piece of why that grew about just wondering how strategic you think that tree investment as at this point and what your intentions could be for that stake.
I think tree has done an amazing job.
And hazard.
Good position I think when we got that stake from I see at the bottom in 2009.
It was worth $17 million say, it's worth well over 1 billion.
Credit the Doug Lebda into team.
There and a good space and they've done well in it.
So we'll weigh it obviously the primary focus of Liberty broadband.
ER cable connectivity businesses in the form of its charter steak and GC I.
But we also like how trees perform so we'll we'll watch it.
Okay and then the second one is just on last call you announce obviously the increase of the buyback authorization at broadband office said I think that the buyback window into front. How close is one proxies go on trial, how should we think about how aggressive you are willing to get on buybacks at both Glip and broadband.
During this window and for clip is there enough visibility in the Alaskan business at this point, where you'd be comfortable with ramping up the buyback which has been viewed it for the last couple of quarters.
Well I'll.
We can start buying now once that proxy it.
Out the.
You know well we'll.
Watched it I think we've gotten renewed and increased competition. The Alaskan business nominally maybe the regulatory issues look a lot better, but obviously like many connectivity businesses the strength of the business has been.
Enhance and renewed so all all of those give us much more confidence in the G.I. asset that haven't been said.
In the combined company Liberty broadband GCA Liberty.
The value of the charter state.
Dominates the well over $30 billion the value.
Hi, so really primarily be about.
The strength of charter and the fact that we can buy that a discount.
As we have locked in some of these arrangements I think look we have gained confidence nataline to teach out business, where we're going forward and we'll take advantage I don't know how to measure that.
As aggressive or not we'll we'll see.
But we will take advantage of it.
Got it that's helpful. Thanks, Greg.
Well go next apparently cross at TD Securities.
Could you just touched on having a little bit better visibility on on the regulatory front.
Just wondering if there's anything around the corner.
See on the regulatory front or if kind of what we see is what we get to the time being at least.
Well I should say, we've had I could probably articulate and said that we've had some better results regulatory front.
Better visibility would be something I would say would be less.
Less apt description I think we are.
The TCR team, it's going to kind of good job managing about let them comment further if they'd like.
But it's a very complicated area, it's not one where the visibility is high.
It's one where there are certain forces that are less enthused about some of the.
Rural subsidies in her other forces with the more into about them and those are not always aligned as you My guess and we try and work through it I don't know.
Ron overnight or somebody else like that anything.
I guess, it's still uncertain time like in the open that resolution news and determine still not looks as though.
Thanks Nicole.
And we'll go next to Matthew Harrigan benchmark.
Well. Thank you Oh, we see variants in the realized price decreases for high speed monologue cable operators and the Charles Charles is always run this pricing all piece is going to real outlier, but when you look at the logarithmic growth in all killed it on usage at home theater work from home.
What do you think the Lazard and post supply.
Overtime and as you pointed he's been.
Got it quickly and idea.
Just one correlation between speed you consumption, but you will see if we get 8-K will not everyone looks like deals done feeling when they're living room.
And we suggested what do you feel a lot better about the path for.
Put broadband pricing over the next five years given.
Everything that happened in the economy, and what the Qs and the product of the speed. Thank you.
Thank you Matthew.
I think a couple of things the Ur cobot crisis and of course to work from home.
As shown the value of connectivity services and showing the strength and appeal to cable plant.
Charter strategy has been to upgrade its plant.
Work to manage of remotely and that's actually been a huge benefit that their ability to do a installs far better than many competitors as part of the reason not only due to the demand, but I think the.
More April capabilities of charter has to two upgrades is why we were able to do in a remote installs is why we had such an amazing quarter with those.
823000 residential ads.
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All of that has said that units you know you're in a central service.
To try to strategy has also been to try and grow faster and have pricing is up capability down the road potentially and I think you noted the political environment is such that.
No, it's probably not a great time to be raising prices, so I think that.
He is working the growing faster than anybody else there recorded a higher multiple than anybody else in cable other than the cable one for those reasons and they deserve it.
And prices a opportunity down the road that they may be able to take and I think the monitor carefully I think most of the things that they're doing are trying to provide more bandwidth to more people at attractive prices and see now they're a rural initiatives on the same way.
And in a political environment, where.
Obviously, many Americans are hurting and there are many attempts to ensure that they have conductivity these particularly for education.
Thats a from home and the like it's probably not a lifetime be thinking about price increases and it gets a lifetime, we try to serve your customers. While in charter is done that very well so I.
That's what I think thats, Tom to identify them I travel on board.
Thanks quick.
Our next question comes from John Melo of Trust.
Good morning was wondering if you could comment on what the pro forma capital structure will look like after the combination would be bought back.
I think we not afford that in the slides and I would encourage you to go look at those lives and he will be a stronger capital structure in measured in several ways. The G.I. Liberty has a free cash flow.
And Liberty broadband had too much larger asset base with less debt as a percent of the assets or as a percent against equity. So bye bye bye something that you're just going to strengthen on both sides, but I encourage you go look at the slides we posted last week.
Thank you and are there any.
Are there any planned actions regarding the T I don't know Shibani.
One we have actions, we will be sure to let you know.
Thank you know nothing until after today.
And our next question comes from David Thomas of Avalon Capital.
Mr. Thomas Your line is open please forgive me if I'm sorry.
Hey, guys. Thank you. Thanks for taking my question, Greg you been opened in prior calls both on Liberty broadband Formula. One that you guys are legacy charter rates and 26% capsid broadband can create a higher ownership level in charter as charter continues to shrink and share count through through the buybacks, However, and correct me if I.
I'm wrong on this but so far it doesn't seem like the board charge consented to that and by doing the merger if I'm reading the documents correctly. It looks like we're accelerating the timeframe under which broadband is going to hit that 26% cap.
And this is my math it looks like five for you're pulling it forward by about a year.
So on charter is kind of run rate buyback pace. So I'm curious just what gives you in the board the confidence to do the transaction and accelerate that timeframe of putting broadband the potential for selling position without the confirmation from chartering a lift the cap why not wait until we have a the certainty on the cap rates before.
Going ahead with the deal thanks very much.
Yeah.
A couple of things.
We have not sought formal approval of that 26% cap and it is still a year out probably before it becomes an issue.
But we have had productive dialogue with these dependence.
And I think as we outlined on the call last week you know they have a maybe didn't have a their issues to be worked through that may not have similar view to us that having your largest strategic shareholder coursed itself is not attractive and in fact, many of the public holdings would not finding attractive have 25% of all the capital being utilized buyback go Liberty.
Your question about our we accelerating the timeline because we are merging these two is open discussion about whether there was already going to be attribution of the G.I. liberty stake to broadband given how the documentary so that's not as clear as you're making it sound rain needs.
And lastly, as I think I outlined on our call last week.
We.
It's a little bit or if the worst scenario is we are forced to sell we're going to pay an 8% or less tax rate.
Because of the dividends received deduction against some basis, we have and we're going to.
The able to utilize that capital to buy back stock at currently a discount which is exceeding 21%.
So.
While it is not our desire or tend to sell charter. If we were forced to sell currently that's not a horrible outcome for me Liberty broadband a shareholder net asset value perspective.
And our next question comes from Michael Bunyaner Pls capital.
Good morning, gentlemen.
I have a couple of which you just a share Europe.
Lessons learned from the installation of strategy.
More importantly, the customer uptake on the ARPU effect on the total per customer or per account.
Brian I'll, let you repeat typically chefs.
All right.
I think our principal lesson to date is the speed continues to show we've seen a very substantial performance increase your network as we booked to the Fiveg implementation, particularly on the four juice.
Gee radiation network supplement before GE installation and grid greatly increase the speech on the Fourg network and database translated into a very very positive consumer reception, we've started adding postpaid wireless slightly again for the first time in quite a while.
And we believe that demand in the marketplace for the increase speed and capacity is significant show. We're very pleased with that we think we're also to get ahead of the competition in the market with that implementation that's helpful.
And as a follow up also from business point of view [noise].
And this is probably for you Greg when you think about lessons learned either in the implementation of this Pandora the uptake.
But what can be evaluated in terms of additional installations not for you see I bet for charter elsewhere in the U.S., what what are the lessons that we could use for the market place elsewhere.
Thank you for the question I'm not sure Ah Ah we can play that positively we know what <unk> dark for all cable or cardiopredict than what it shown is that the platform.
That cable has.
As an excellent platform for Fiveg and offers opportunity for increased bandwidth mobile bandwidth for customers. It is interesting to see with a 325000 lines that charter added during the quarter that puts it right at the top of all of the mobile.
Ads and any nationwide carrier and realizing the charters on your regional carrier made ways, it's really very impressive to see that increase in lines. When you combine that with the fiveg capabilities that we will be receiving pharma R&D you know relationship with horizon and you combine that with a potential we've got to do our own buildout in them.
Most attractive location I think it just set us up very well in shows that cable and at least a charter as can be a very effective for smoke.
And any thoughts about the ARPU effect on <unk> on the total basis in terms of incremental.
You know I am reluctant to say that because generally going to the view that this mostly because of competition gets dissipated away. If you look what happened with for GE and to some degree Threeg Your LTV.
You know the Fourg equivalent you got to you've seen that most of that did not result in increased ARPU and I'm. Just you know somewhat reluctant to imagine we're guy who.
A major increases and try to but we'll see.
And clearly good lead the value of the network and the broadband network, specifically absent some backbone for Fiveg is now obvious is that correct.
[laughter] I love to what you say that now obviously, but I hope you're right walk for you to not to you, but I don't I don't know, but no obvious when I think I think it hopefully it's been proven when I agree with your thesis.
That's the thank you and one last one.
HM for personal most important congratulations in terms of <unk> merger between the two company [laughter] did I read correctly that the team from PCIA will stay in continue to manage the business and there is not going to be any change.
Yes, you read that correctly.
Thank you and thank you for the hard work and Uh Huh.
Continued success.
And we'll go next to James Ratcliffe of Evercore ISI.
Hi, I'm wondering if I could.
He.
He prepares you know tremendously.
$17 based pricing in the prefer how do you think about pay TV.
Third.
Coupon going forward in terms of cash pay versus pick and alright got potential sources of liquidity. He wanted to paid in cash going forward.
Thank you I think there are potential sources, but I suspect.
Given you know that's a non cash flowing a holding company, where most likely to pick it.
And but we'll see what other choices, we have along the way, but I would take pictures are most likely alternative.
Okay. Thank you.
And we'll go next to Bentley Cross with TD Securities.
Oh, Thanks for the fall just because you open the door you mentioned, usually a discount at 21% number one is that pro forma and number two what are you assuming your GCA stake is worse in those calculations.
Yeah that is pro forma and we have a range of values, so I'm not going to lock down on the GCR value.
Yeah, we got them the marketplace do that but no we are that it's somewhere in that.
In the 20 of just over 20% range.
Okay. Thank you.
Thank you.
And our last question comes from Wesley White head of T T education and life earnings.
Good morning, I was hoping to get some insight as to why.
Is the 0.5 gate ratio the paying for class, a and B shares of GCA Liberty in the two scary Liberty class a shares to be losing their voting right. It is actually go through with Liberty broadband.
Thank you for the question.
No I believe since this was done by two independent committees, both the independent Committee actually say Liberty I mean that occurred to me at Liberty broadband. They believed that was the Sarah.
The.
Case, which the.
Shareholders, who have higher liquidity, given the strength in size or could be vote I think they both were viewed to be not.
I'm guessing that out years meaningful but it really this was driven by two independent committee they made the decision.
And I believe they thought it was fair to both sides.
Thank you.
Thank you operator that is I believe is our last question and I want to thank all of our listeners for their continued into the Liberty businesses are we look forward to speak with you again next quarter, if not before and stay healthy enjoy the rest of the summer as best you can.
Thank you.
And again this does conclude today's call. We appreciate everyone's participation today and you may now disconnect.
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