Q2 2020 Gci Liberty Inc, Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call

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.

This conference is being recorded August trends I would now like to turn the conference <unk>, Chief Financial Officer, and senior Vice President of Investor Relations. Please go ahead.

Thank you before we begin we'd like to remind everyone is calling for a certain forward looking statements will be the play Securities Litigation Reform Act of 1995.

Actual events or results to differ materially due to a number of risks and uncertainties, including those making the most recent form 10-K in 10-Q filed with the FCC. These forward looking statements speak only after the date of this call and you see I Liberty Liberty broadband and Liberty Tripadvisor expressly disclaims any obligation or undertaking disseminate any updates or revisions to any.

Forward looking statements contained herein sure plus any changes you see I Liberty Liberty broadband or Liberty Tripadvisor is expectations. The football I guess, you or any change in advanced features and circumstances almost any such statements are based on today's call. We will discuss certain non-GAAP financial measures would you see I liberty, including adjusted OIBDA and it just wasn't margin information.

Regarding the comparable GAAP metrics, along with a part of definitions and reconciliations, including preliminary you know the schedules. Once you can be found in today's press release issued today, which is available on D.C. I know these looks like now I'd like to turn the call over Liberty, President and CEO, Greg but.

Thank you coronary and good morning Jewel.

Let's begin the call.

Do you see I, Liberty's, Chief Accounting officer in principle financial Officer bluntly.

Gee I see a boat.

And during the Q will be available to answer questions related.

I don't think Oh Geez, your Liberty, but also liberty blogs trip advisor.

Well last Thursday, we announced Liberty broadband.

People combined in the stock to stop merger.

This combination will close the first half of 2021.

Potential cold it might gene related delays.

She would 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 Liberty.

Gee I had another strong quarter, just like the challenging backdrop.

All the network in terms from well.

As a team I stay committed to providing excellent service and support the Alaskan community.

In the second quarter total revenue grew 5% both business and consumer revenue.

Adjusted OIBDA grew 18%.

Pete will discuss these results in a bit more detail in a moment.

We continued with the Anchorage Fiveg upgrade.

Which 66 Fiveg sites churns on already just five tend more to go this year.

We also announced on July 31st So we have sold the television broadcasting business.

That's great televisions good transaction for GCR.

Oh, the business results were relatively immaterial contributors to financials.

I will allow GCR just focused on its core calling activity business going forward.

The company's and solid liquidity position with 88 million, a cash and 271 billion up on 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 the discount has why.

I wanted to detractors.

Her had another outstanding quarter.

Focus on supporting communities during this difficult times delivering services enable remote working.

Morning, Telehealth 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.

Our consolidated revenue was up 3.1% despite some challenges in the advertising market at the enterprise business.

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Got it grew 7.3%.

Free cash flow was up nearly 70% to $1.9 billion.

Part of finished the quarter with good liquidity.

2.1 billion cash and 4.7 billion of availability under its revolving credit facility.

I also wish EUR $3 billion of high yield debt in July at very attractive rates.

Charter repurchased 2.3 million shares.

During the quarter for $1.2 billion, an average price of 499 per share.

Charter suppose grow chronic seventies services this year for new and existing customers is a testament to the teams operating strategy quality products and significant 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 their covers diversification program and the flexible cost structure.

Coleman insurance businesses, both revenue and profit compared to last year led by a strong mortgage business to consumer Stan segment was understandably challenge.

Adjusted EBITDA exceeded prior guidance and it's a reflection of the teams discipline in managing expenses through this time.

Trip student treat completed various financing schemes in July to bolster cash and liquidity.

And today have nearly children cash on hand, and continue to generate positive free cash flow.

Lastly at Liberty Tripadvisor.

Well, it's clearly a challenging time to the travel business. The team is undertaking 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 in the table lows and estimate the july's performance improved for.

Ah trip.

Advise and strengthens its liquidity position by bending its revolving credit facility, replacing the net leverage ratio would be minimum liquidity covenant through 2021 in September and they also completed its successful high yield bond offering.

That I'm going to turn over to Brian to discuss do you see I live rigs financial results in a little more detail.

Thank you, Greg and good morning, everyone at quarter end, GTR Liberty have consolidated cash and cash equivalent to 552 million.

Which includes 88 million of cash held directly at TCR.

Values the public equity Securities that you see I Liberty Epic 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 3.2 billion, which is relatively unchanged from last quarter. This includes a 1.3 billion margin loan outstanding against liver its liberty broadband shares which is fully drawn.

The charter exchangeable debentures in it and 1.4 billion of debt, including finance leases and tower obligations that are held directly at GCR.

She has leveraged at quarter end as defined in its credit agreement was 4.2 times compared to the maximum allowable leverage of 6.5 times.

Yeah, I has 271 million undrawn borrowing capacity as of quarter end, which puts jain of strong liquidity position.

The above amounts exclude the indemnification obligations and preferred stock.

With that I'll turn it over to Pete to talk more about you see on operating results.

Thanks, Brian.

Starting with a Kobe 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 that conductivity needs of our customers.

We continue to work with educational facility 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 dedication as we work to support the Alaskan community through this difficult time.

Moving onto the five band five GE upgrade.

We are making continued progress on our five Dan Fiveg deployment in Anchorage and are now over 85% complete.

Alaska residents are noticing our improved not work 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 costs 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 dots side.

Okay.

On the consumer side revenue was up 5% data driving the growth.

During the quarter, we gain 6500 pain cable modem customers.

The promotional customers that signed up in the first quarter as well as earlier in the second quarter 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 GPR business.

Revenue was up about 6% the growth was largely due to growth in government health and education revenues.

As Greg mentioned.

Build our broadcast television business on July 31st.

Due to this transaction video revenue will be slightly reduced in GBCI 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 from Anchorage is going well I.

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 GCR Liberty.

Sessions will run from 11 to 12 eastern on both days.

More details we provided on our website for please mark your calendars.

As always we appreciate your continued interest in GE said Liberty Liberty broadband and Liberty trip advisor.

And with that operator lets open 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 to signal, we'll pause for a moment to assemble the queue.

And our first question comes from fact silver with B. Riley.

Okay, great. Thanks for asking the question on the first one is just around a lemon trees, Dave obviously going to be a smaller piece of the pro forma entity versus.

How big of a piece of wise. It go 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 has a good position I think when we got that stake from I see at the bottom in 2009.

It was worth $17 million today, its with well over a billion.

Doug credit to Doug loved and his team.

There are a good space and they've done well in it.

So we'll lay it obviously the primary focus of Liberty broadband.

Cable connectivity businesses.

While this charter steak and you see.

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 now it's obviously the increase of the buyback authorization of broadband office had I think that the buyback window when it for now closed as one proxies go on file how should we think about how aggressive you are willing to get on buybacks at both club and broadband.

During this window and for what I, you know is there enough visibility and the Alaskan business at this point, where you'd be comfortable with with ramping up the buyback, which has been muted for the last couple of quarters.

Well I'll.

We can start buying up once that proxies.

Out the.

You know will will.

Watch this I think we've gotten.

Renewed and increase competence and the Alaskan business not at least maybe the regulatory issue look a lot better, but obviously like many connectivity businesses the strength of the business has been.

The Hansen renewed so all all of those give us much more confidence in the GC high asset that having been said.

In the combined company Liberty broadband Jeep Liberty.

The value of the charter state really dominates the well over $30 billion the value of GBCI, So really primarily be about.

The strength of charter and the fact that we could buy that a discount.

As we have locked in some of these arrangements I think look we have gained confidence not willing to teach out 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 to Bentley Cross of TD Securities.

Greg you just touched on having a little bit better visibility on on the regulatory phone.

Just wondering if there's anything around the corner of that you see on the regulatory front or it's kind of what we see as what we get to the time being at least.

Well I should say every time I should probably articulate and said that we've had some better results all regulatory front.

Better visibility would be something I would say would be less.

Less apt description I think we are.

The G. I assume it's going to kind of good job managing about let them comment further is that 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.

World subsidies and there are other forces, which are more enthused about them and those are not always a line you my guess and we try and work through it I don't know.

Ron.

Somebody off like Guy.

I think it's still uncertain times logs and.

Open that resolutions and to try to make sure that looks as though.

Cyclical.

And we'll go next to Matthew Harrigan benchmark.

Well. Thank you all to put variance in the real log price increases for high speed monologue <unk>.

I'll throw this all right.

Right I mean, all pieces going a real outlier.

Logarithmic growth in Oh cool good on usage at home.

Work from home.

Loveless, Oregon, plus the price.

Over time and usage based pricing probably been discredited quickly.

Yeah, I missed some correlation between speed you consumption, but we'll see if we got 8-K not everyone looking like Dani Saurymper living room, but at least objective, we do feel a lot better about the path.

He put broadband pricing over the next five years given.

Everything that is happening because we'll be able to kick you out some across most of the speed. Thank you.

Thank you Matthew.

I think a couple of things the.

Public crisis and of course to work from home.

As shown the value of connectivity services and stored in the strength and appeal to cable plant.

Our strategy has been to upgrade its plant.

Work to manage of remotely and that's actually been acute benefit their ability to do a installs far better than many because competitors as part of the reason not only do the demand, but I think the.

More able capabilities and charter has to two upgrades is why we were able to do in a remote installs is why we had in 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 you know, it's probably not a great time to be raising prices. So I think that.

Strategy is working the growing faster than anybody else 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 they'll 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 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.

From home and the like it's probably not a wide time be thinking about price increases. It gets a lifetime you try to serve your customers while in charters on that so I think that's I think that's probably what I find that title on board.

Thanks, Greg.

Our next question comes from John Melo of Truest.

Good morning was wondering if you comment on what the pro forma capital structure will pull back to the combination we bought back.

I think we not put forward that in the slides and I heard you can go look at those lives and he will be a stronger capital structure and measured in several ways Gee I Liberty has a free cash flow and Liberty broadband has a much larger asset based.

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 glasses.

Thank you and are there any ah.

Are there any planned actions regarding the key Fiano shibani.

One we have the actions we will be sure to let you know.

Thank you know nothing until today.

Our next question comes from David Thomas I don't want to capital.

Mr. Thomas Your line is open please forgive me if I'm Sir.

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 rates and 26% Capsids 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.

Likely 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 guy 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 that due to transaction and accelerate that timeframe.

Putting broadband the potential for selling position without the confirmation from chartered they're gonna lift the cap why not wait until we have a the certainty on the cap rates before going ahead of the yield 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 habit their issues to be worked Superman have similar view to us and having your largest strategic shareholder coursed itself not attractive and in fact, many the public holdings would not Friday to try to have 25% of all the capital being utilized and buyback go to Liberty.

Your question about our we accelerating the timeline because we are merging these two is open to discussion about whether that 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 means.

And lastly, as I think I've 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.

Because of the dividend policy 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 from me Liberty broadband a shareholder net asset value perspective.

And our next question comes from Michael Bunyaner feel less capital.

Good morning, gentlemen.

And I have a couple would you just a share your.

Lessons learned from being installation of five treat.

More importantly, the customer uptake on the ARPU effect on the total per customer what per account.

Ron I'll, let you repeat taking kind of chefs.

Right.

I think our principal loss and today. It is the speed to doing used to sell we've seen a very substantial.

Formats increase that workers, we booked to the fiveg implementation, particularly on the floor juice.

Gee videos, you met with 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 legend postpaid wireless lines you gave for the first time and quite awhile and we believe.

Good demand in the marketplace for your increase speed and capacity is significant show. We're very pleased with that we think we're also looking ahead of the composition of the market.

That implementation and that's helpful.

And as we follow up also from business point of view.

And this is probably for you Greg when you think about lessons learned from either in the implementation of this band or the uptake.

What what can be evaluated in terms of additional installations not for do you see I bet for charter elsewhere in the U.S., what what are the lessons that we could do use for the market place elsewhere.

Thank you for the question I'm not sure Ah Ah, we can say gets positively we know what the lessons are for all cable or charter, but I think what it's shown is that the.

Platform that table has is an excellent platform for Fiveg and offers opportunity for increased bandwidth mobile bandwidth for.

Customers. It is interesting to see where those three and 25000 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 in many ways, it's really very impressive to see that increase in lines when combined that with the baidu capabilities that we will be receiving pharma R&D you know relationship with horizon and you combine that with the potential we got to do all 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 ARPU effect on the no on the total basis in terms of incremental.

You know I am reluctant to say that because.

Generally been 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, but you've seen that most of that did not result in increased ARPU and items somewhat reluctant to imagine we're going to.

A major increases in Fiveg, but we'll see.

And clearly good the the value of the network and be a broadband network specifically, yes as a backbone for Fiveg is now obviously is that correct.

[laughter] I love to what you say to smell obvious, but I hope you're right well Q2, two young but I I don't know, but no obvious, but 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.

For personal most important congratulations in terms of merger between the two company.

[laughter] did I read correctly that the team from GCA I will stay in continue to manage the business and there's not going to be any change.

Yes.

Did that correctly.

Thank you all and thank you for their hard work and.

Continued success.

And we'll go next to James Ratcliffe I've Evercore ISI.

Hi, I'm wondering if I could.

Okay.

It took care of Seattle natively above $17 based pricing, but for sure. How do you think about paying movie.

Third.

Coupon going forward in terms of cash pay versus pick and their potential sources of liquidity he wants to pay on 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 pick the most likely alternative.

Okay. Thank you.

And we'll go next to Bentley Cross with TD Securities.

Oh, thanks to the fault, Greg just because you open the door you mentioned you see a discount at 21% number one is that pro forma and number two what are you assuming there are GCA stake is worse in those calculations.

Yeah that is pro forma and we have a range of values sell I'm not going to lock down on the GC I got you.

Yeah, we left from the marketplace do that but no we are that it's somewhere in that.

In the 20 or 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 into why.

The 0.5 gate ratio the paying for class, a and B shares of GCA Liberty when that you Gary Liberty class a shares will be losing their voting right transaction goes through at 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 and the independent Committee at Liberty broadband they believed that was the therapy.

The.

Case, which the.

Shareholder see of have higher liquidity.

Given the strength and size of the de vote I think they both were viewed to be not.

I'm guessing that out years meaningful but really this was driven by two independent can be they made the decision.

And I believe I 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 inching 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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