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 the presentation. All participants will be in listen only mode. Afterward, we will conduct a question and answer session at that time. If you have a question. Please press star one on your telephone as a reminder, at this conference is being recorded August 10th.
I would now like to 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 we'd like to remind everyone that this call include certain forward looking statements will be the private Securities Litigation Reform Act of 19000 fly 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 that.
This call is you see our Liberty Liberty broadband and Liberty Tripadvisor expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein reflect any change in DC I know that even liberty broadband or liberty tripadvisor expectations with regard to or any change in events conditions as circumstances.
Any such statements.
Todays 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 required definitions and reconciliations including preliminary no. Instead of money. He can be found in earnings press release issued today, which is available on T.I. dozens website now I'd like to turn the call over.
For the Liberty, President and CEO, Greg Hussein.
Thank you coronary and good morning Jewel.
They speak on the call, we'll have to see I, Liberty's Chief accounting officer in principle financial Officer bluntly.
Do you see I see it broke Pete pounds.
And during the Q day will be available to answer questions related to not only do share Liberty, but also liberty broadband look a 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 covert 19 related delays.
Like more information that combination I do encourage you to look at the slides 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 the Alaskan community.
In the second quarter total revenue grew 5% with both business and consumer revenue up.
Adjusted OIBDA grew 18%.
He will discuss these results in a bit more detail in a moment.
We continued with the Anchorage Fiveg upgrade.
66, Fiveg sites turns on already just by tend more to go this year.
We also.
So on July 31st So we have sold the television broadcasting business.
FTC I'd Gray television's good transaction for GC I.
Business results were relatively immaterial contributors to financials and the sale will allow GCR to focus on its core conductivity business going forward.
The company's and solid liquidity position with 88 million, a cash and 271 million up on DRAM 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 know it's a discount has wise.
Finding attractive.
Charter had another outstanding quarter remains focused on supporting communities. During this difficult times, the Liberty 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%.
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.
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 connectivity services this year for new and existing customers is a testament to the teams operating strategy quality products.
And significant pass investments over the past several years.
Turning to Lendingtree.
They also executed well in the second quarter, despite a challenging backdrop.
The results demonstrate the benefits of there because diversification program and that flexible cost structure.
The home and insurance businesses, both revenue and profit compared to last year led by a strong mortgage business.
Consumer spending segment was 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 complete various financing schemes in July to bolster cash and liquidity.
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 the july's performance improved for.
A trip.
Advisor strengthens its liquidity position by amending its revolving credit facility, replacing the net leverage ratio with a minimum liquidity covenant through 2021 in September and they also completed a successful high yield bond offering.
With that I'm going to turn it over to Brian to discuss GCA Liberty's financial results in a little more detail.
Thank you, Greg and good morning, everyone at quarter end, VCR Liberty, a consolidated cash and cash equivalent to 552 million.
Which includes 88 million of cash held directly if you see on.
The value of the public equity securities. The TCR Liberty has a 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 dollar interest in Lendingtree.
At quarter end PPI Liberty had a total principal amount of debt of 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, and 1.4 billion of debt, including finance leases and tower obligations that are held directly at you see on it.
Do you see leverage at quarter end as defined in its credit agreement was 4.2 times compared to maximum allowable leverage of 6.5 times.
I have 271 million undrawn borrowing capacity as of quarter end, which puts us in a strong liquidity position.
The above amounts exclude the indemnification obligations and preferred stock.
With that I'll turn it over to piece to talk more about Cpis operating results.
Thanks, Brian.
Starting with a co they'd 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 costs.
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 Fiveg 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.
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 it GCR business revenue was up about 6%.
Growth was largely due to growth in government health and education revenues.
As Greg mentioned, we sold our broadcast television business on July 31st.
Due to this transaction video revenue will be slightly reduced in GCA 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 band Fiveg wireless in Anchorage is going well.
Additionally, we're continuing to spend on projects to keep up with our increased data demand.
I'll now hand, the call back over to Greg.
Great.
Thank you, Brian and Pete.
Given the ongoing pandemic.
We've decided that Liberty's investor day, this year will be virtual.
And we'll be split over two days.
On Thursday November 19th we recovered 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 GE said, Liberty's Liberty broadband and Liberty trip advisor and with that operator lets open for questions.
Thank you for your question at this time, Please press star one on your telephone keypad again, not a star one to 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 is stake obviously going to smaller piece of the pro forma entity versus.
How big of a piece of White glove, 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 as it.
Good position I think when we got that stake from I see at the bottom in 2009.
It was worth $17 million say, its with well over a billion.
Credit to Doug loved and his team.
They had a good space and they've done well in it.
So we're way it obviously the primary focus of Liberty broadband.
ER cable connectivity businesses.
The forward its charter sake 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 week's call you announce obviously the increase of the buyback authorization of broadband also said I think that the buyback window arena for now closes when proxies go on file how should we think about how aggressive you are willing to get on buybacks at those club and broadband.
During this window and for clip is there enough visibility in the Alaskan business at this point, where you'd be comfortable at which ramping up the buyback which has been needed 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 not at least maybe the regulatory issues look a lot better, but obviously like many connectivity businesses the strength of the business has been.
Hansen renewed so all all of those give us much more confidence in the G.I. asset that having been said.
In the combined company Liberty broadband GC I Liberty.
The value of the charter state.
Dominates the well over $30 billion the value of GBCI, 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 not only in the GE said business, where we're going forward and we'll take advantage of it 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 Dependently cross from TD Securities.
Great you just touched on having a little bit better visibility on on the regulatory front.
Just wondering if there's anything around the corner.
So you 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 should 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 T.I. team is 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 and there are other forces with the more enthused about them and those are not always aligned as you might guess and we try and work through it I don't know Ron overnight or somebody up like that anything.
I think it's still uncertain time like and the ultimate resolution luge and determine so not much to though.
Hi, click on.
And we'll go next to Matthew Harrigan a benchmark.
Well. Thank you Oh, you put variants in the realized price decreases for high speed monologue Keating losses, and it's all charges or whether this pricing all pieces going it real outlier look at the log making growth in Oh killed it on usage at home theater work from home.
What do people Lazard it puts a place so overtime you know you break point he's been discredited quickly add idea.
So in correlation between speed you consumption that you will see if we get 8-K will not everyone looking like deals done so I'm living room, but at least the guys give what do you feel a lot better about the path for.
Put broadband pricing over the next five years, given that everything that is happening economy and will kick the Qs and the product and Steve. Thank you.
Thank you Matthew.
I think a couple of things the.
Covered crisis and of course to work from home.
As shown the value of connectivity services and showing the strength and appeal of the 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 able 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.
All of that has said that you're going to central service.
The charter 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.
It's probably not a great time to be raising prices, so I think that.
He is working the growing fast and anybody out there quarter to higher multiple than anybody else in cable other than 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.
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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, that's up from home and the like it's probably not a lifetime be be thinking about price increases and it gets a lifetime you try to serve your customer as well and charters done that well so I think that's.
I think thats, Tom see when I kind of title on board.
Thanks, Chris.
Our next question comes from John Melo of Truest.
Good morning was wondering if you could comment on what the pro forma capital structure on that point after the combination of you'd be bought back.
I think we not afford that in the slides and I would encourage you to go look at those slides and he will be a stronger capital structure and measured in several ways. The G.I. Liberty has a free cash flow and Liberty broadband adds it much larger asset base with.
Less debt as a percent of the assets or is it was against equity. So bye bye bye. Some measures is going to strengthen on both sides, but I encourage you go look at the slides we posted last week.
Thank you and it are there any.
Are there any planned actions regarding the TCR shibani.
One we have actions, we will be sure to let you know.
Thank you learn nothing to announce today.
And our next question comes from David Thomas If at all on capital.
Mr. Thomas Your line is open please forgive me if I'm sorry.
Hey, guys. Thank you thanks for taking my question.
Greg even opened in prior calls both on Liberty broadband Formula One that you guys are legacy charter raise a 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'm wrong on this but so far it doesn't seem like the board charts 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.
Based 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 chart there going with the cap why not wait until we have a the certainty on the cap rate.
We're going to add to the deal thanks very much.
Yeah.
A couple of things.
You know 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 the independence.
And I think I as we outlined on the call last week, you know they have a many of them how to their issues to be work to remain at a similar view to us that having your largest strategic shareholder coursed itself is not attractive and in fact, many the public holdings would not fighting to try to have 25% of all the capital being utilized and buyback go Liberty.
Your question about Oh, 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 its outbrain needs.
And lastly, as I think I outlined on our call last week.
We.
It's a little bit of if the worst scenario is we are forced to sell we're going to pay an 8% or less tax rate.
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 tail left capital.
Good morning, gentlemen.
I have a couple of would you just a share Europe.
Lessons learned from the installation of Fiveg.
More importantly, the customer uptake in the ARPU effect on the total per customer what per account.
Ron I'll, let you repeat take because that's all.
All right.
I think our principal loss and today. It is the speed continues to show we've seen a very substantial performance increase in the network as we move to the Fiveg implementation, particularly on the four juice.
Oh Gee radiation network supplement the Fourg installation in good greatly increase the speech on the Fourg network and database translated into a very very positive consumer reception. We've started that in postpaid wireless lines again for the first time in quite awhile and we believe.
But the demand in the marketplace for the increase speed and capacity is significant show. We're very pleased with that we think we're also little bit ahead of the competition in the market with that implementation and that's helpful.
And as a follow up also from business point of view.
And this is probably for you Greg when you think about lessons learned either in the implementation of this began to work the uptake.
What 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 produce where the market place elsewhere.
Thank you for the question I'm not sure Ah Ah, we can say that positively we know what the left in Darfur, all cable or try to it but I think what it's shown is that the.
Hi form that cable has.
Yeah, it's an excellent platform for Fiveg and offers.
Maturity for increased bandwidth mobile bandwidth for.
Customers it it didn't seem 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 of any nationwide carrier and relaxing the charters on your regional carrier in many ways, it's really very impressive to see that increase in lines. When you combine that with the side you capabilities that we will be receiving pharma R&D you know relationship with horizon and you combine that with the potential we've got to do our own buildout in them.
Most attractive locations I think it just sets us up very well and shows that cable and at least a charter as can be a very effective for Simone.
And any thoughts about be out the effect on and on the total basis in terms of incremental.
You know I am reluctant to say that because generally kind of the view that this mostly because of competition gets dissipated away. If you look what happens with for GE and to some degree Threeg Your LTV.
You know the Fourg equivalent you brought to you've seen that most of that did not result in increased ARPU and I'm somewhat reluctant to imagine we're going to.
I have major increases in Fiveg, but we'll see.
And clearly did the value of the network and the broadband network, specifically ask them as a backbone for Fiveg is now obviously is that correct.
[laughter] I love, the where you say now obviously, but I hope you're right well you cannot to you, but I I don't know, but now obviously I think I think it hopefully it's being proven and I agree with your thesis.
That's the thank you and one last one.
HM foot personal most important congratulations in terms of pre merger between the two company.
[laughter] did I read correctly that the team from PC I will say and continue to manage the business and there's not going to be any change.
Yes, you read that correctly.
Thank you Bill and thank you for their hard work.
Huh.
Continued success.
And we'll go next to James Ratcliffe Evercore ISI.
Hi, I want to know trip, if I could vicki.
The precariously now committed they bought the $17 simply based pricing in the preferred how do you think about paying he.
Preferred.
Upon going forward in terms of cash pay versus peers and.
Potential sources of liquidity he wanted to pay 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 say tickets are most likely alternative.
Okay. Thank you.
And we'll go next to Bentley Cross with TD Securities.
Oh, Thanks, with all Greg 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 juicy I speak it works 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 GC high value.
Yeah, we got them the marketplace do that but we are that it's somewhere in that you know in a 20 of just over 20% range.
Okay. Thank you.
Thank you.
And our last question comes from Wesley White head of P.T. education and life earnings.
Good morning, I was hoping to get some insight into why.
Is that 0.5 gate ratio the same for class a and B shares that you see I Liberty when the to Gary Liberty class a shares will be losing their voting right. It is actually goes through at Liberty broadband.
Thank you for the question.
I believe since this was done by two independent committees, both the independent Committee FTC I Liberty I mean panic and can you at Liberty broadband they believe that was the Sarah.
The.
Case, which the.
Shareholders, who have higher liquidity given the strength in size of the de vote I think they both were viewed to be not I'm guessing that out years meaningful but it really yes were 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 engine liberty businesses.
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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