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 the presentation. All participants will be in listen only mode. Afterward, we will conduct a question answer session.
If you have a question. Please press star one on your telephone.
This conference is being recorded August.
I'd now like turn the conference over to Courtney, John Chief portfolio Officer, and senior Vice President of Investor Relations. Please go ahead.
Thank you Holly began we'd like to remind everyone. On this call include certain forward looking statements will be the private Securities Litigation Reform Act with 1995 actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent form 10-K, and he filed with the FCC. These forward looking statements speak only after the data.
This call and you see our Liberty Liberty broadband and Liberty Tripadvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein reflect any changing BTI liberty Liberty broadband or Liberty tripadvisor expectations of the bike density or any change in events conditions and circumstances I'm looking.
It would be on todays call, who will discuss certain non-GAAP financial measures the GP I liberty, including adjusted all done adjusted OIBDA margin information regarding the comparable GAAP metrics, along with acquiring definitions and reconciliation, including preliminary notably schedules lazy can be found in earnings press release issued today.
You see I Nobody's looks like now I'd like turn the call over the Liberty President and CEO, Greg anything.
Thank you coordinate and good morning jewel.
Speaking on the call.
Do you see our liberties, Chief Accounting Officer, and principal financial Officer Blind one like.
Gee I see a vote Pete pounds.
And during the Q they will be available to answer questions related to not only did you see our liberty, but also liberty broadband trip advisor.
Oh last words, there wouldn't be broadband and teaching at Liberty will combine into stock the stock merger.
We expect this combination will close in the first half or 2021 subject to potential covert 19 related delays.
If you 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 I live in.
Oh, Gee I had another strong quarter, despite the challenging backdrop.
The net will continue to perform 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%.
Pete will discuss these results in a bit more detail in a moment.
We continued with the Anchorage Fiveg upgrade.
66, Fiveg sites turned on already addressed by tend more to go this year.
We also.
Yes on July 31st So we have sold the television broadcasting business.
As you see I'd Gray television's good transaction for GCR.
Oh goodness results were relatively immaterial contributors to financials I must say 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 up on borrowing 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.
Well I did attractive.
Charter had another outstanding quarter remains focused on supporting can maybe during this difficult time delivering services enable remote working just as 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.
Our consolidated revenue was up 3.1%, despite some challenges and advertising market every 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 cashing 4.7 billion of availability under its revolving credit facility.
Also wish EUR $3 billion of high yield debt in July at very attractive rates.
Try to repurchased 2.3 million shares.
During the quarter for $1.2 billion at an average price of 499 per share.
Charters ability to grow contracts of these services this year for new and existing customers is a testament to the teams operating strategy quality products and significant past 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 that flexible cost structure.
Home insurance businesses, both revenue and profit compared to last year led by a strong mortgage business to consumer Stan 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 completed various financing schemes in July to bolster cash and liquidity.
And today have nearly 200 million of cash on hand, and continue to generate positive free cash flow.
Lastly at Liberty trip advisor.
Well, it's clearly a challenging time to 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.
Trip saw better financial results from the table lows.
Estimate the july's performance improved for.
Trip.
Advisors 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 Juicy I Liberty financial results in a little more detail.
Thank you, Greg and good morning, everyone at quarter end VCR Liberty had consolidated cash and cash equivalents to 552 million, which includes 88 million of cash held directly if you see on.
The value of the public equity securities. The Jeep Liberty EPS of Fridays close was 10.5 billion, which includes our $3.2 billion interest in charter $6.2 billion interest in Liberty broadband and 1.1 billion dollar interest in Lendingtree.
At quarter end BTI 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 Liberty, It's Liberty broadband shares which is fully drawn.
The charter exchangeable debentures, and 1.4 billion of debt, including finance leases and power obligations that are held directly that you see on it.
Just you guys leverage at quarter end as defined in its credit agreement was 4.2 times compared to maximum allowable leverage of 6.5 times.
Yeah, I has 271 million undrawn borrowing capacity as a quarter end, which puts trees guy and a strong liquidity position.
Does the above amounts exclude the indemnification obligations and preferred stock.
I will turn it over to piece to talk more about TCR is operating result.
Thanks, Brian.
Starting with a co they've 19 update.
We've been monitoring the code at 19 situation closely.
Thus far we have not experienced any uptick in bad debt expense.
At the same time, we benefited from increasing demands for our data network and have been lower health care costs.
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 band Fiveg deployment in Anchorage and are now over 85% complete.
Alaska residents are noticing our improved network and as our number 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 result.
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 pain cable modem customers.
The promotional customers that signed up in the first quarter as well as earlier in the second quarter Hep 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 GTR 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 g. FCI 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 ban Fiveg wireless in Anchorage is going well.
Additionally, we're continuing to spend on projects to keep up with our increased data demand.
Ill now hand, the call back over to Greg.
Great.
Thank you Brian that 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.
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 GCA Liberty Liberty broadband and Liberty trip advisor.
And with that operator like 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 the 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. The first one is just around the lendingtree stake, 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 hazard a good position I think when we got that stake from I see at the bottom in 2009.
It was were $17 million today, it's worth well over a billion.
Credit the drug loved and the team.
There are a good space and they've done well in it.
So we'll weigh it obviously the primary focus of Liberty broadband.
Cable conductivity businesses.
Well, that's charter sake, and you see 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 announced obviously the increase of the buyback authorization of broadband also said I think that the buyback window for now close 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 clip is there enough visibility and the Alaskan business at this point, where you'd be comfortable with ramping up the buyback, which has been muted for the last couple of quarters.
Well I'll.
We can start buying that once that proxies.
Out the.
You know well we'll.
Watch this I think we've gotten.
Renewed and increased confidence in 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.
Enhance and 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.
Really dominates the well over $30 billion the value of GC high 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 only in the GE said 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.
But we will take advantage of it.
Got it that's helpful. Thanks, Greg.
We'll go next apparently cross of TD Securities.
Greg you just touched on having a little bit better visibility on on the regulatory from.
Just wondering if there's anything around the corner.
But you see on the regulatory front or if kind of what we see as 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 it would be something I would say would be less.
Let's ask description.
I think we are.
The G. I assume it's going to kind of good job managing and I'll, 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 enthuse about some of the.
Rural subsidies and her other forces, which are more enthused 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.
I think it's still uncertain time like in the open that resolution news and determine showed that looks as though.
Thanks, Rick.
And we'll go next to Matthew Harrigan benchmark.
Well. Thank you all with people variance in the realized pricing increases for high speed monologue, keyw offices, and the Charles Charles as long as well.
Right no fewer than a real outlier when you look at the logarithmic growth in payment of Coolconnect on usage at home, including work from home what do you think the Lazard and post the price.
Overtime, and then you can trade crises, probably been discredit quickly add idea.
Just one correlation to speed consumption, but you will see if we get 8-K, not everyone wants it might feel domicile and they're living room, but at least objective, we do 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 in Qs and the product of the speed. 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 showed the strength and appeal the cable plant.
Charter strategy has been to upgrade its plant.
Work to manage that remotely and that's actually been acute benefit that their ability to do a installs far better than many competitors as part of the reason not only due to 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.
It was 823000 residential ads.
All of that has said that you're going to run 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 you know, it's probably not a great time to be raising prices. So I think that.
Strategy working are growing faster than anybody else there according to higher multiple than anybody else in cable everything 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 they're trying to provide more bandwidth to more people at attractive prices and you've seen now there are 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.
It's a from home and the like it's probably not a lifetime be thinking about price increases and it gets a lifetime you try to serve your customers well in charter is done that very well. So I think thats I think thats, Tom to you and I I travel on board.
Thanks quick.
Our next question comes from John Melo of true.
Good morning was wondering if you could comment on what the pro forma capital structure look like after the combination would be bought back.
I think we not put forward that in the slides and I would encourage and go look at those lives.
He will be a stronger capital structure.
In measured in several ways GC I Liberty has a free cash flow and Liberty broadband has a much larger asset base with less debt as a percent of the assets or is it against equity. So bye bye bye, sometimes you're just going to strengthen on both sides, but I encourage you to look at the slides we posted last.
Thank you and it are there any.
And there any planned actions regarding the key Fiano 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 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 at 26% capture the broadband can create a higher ownership level in charter as charter continues to shrink and share count towards for 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 due to transaction and accelerate that timeframe.
Putting broadband the potential for selling position without the confirmation from charge going with the Caf why not wait until we have a the certainty on the cap rates before going ahead of the deals 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 will be independence.
And I think I as we outlined on the call last week.
They have a many of them address their issues to be worked through the main have similar view the us and having your largest strategic shareholder course itself is not attractive and in fact, many of the public holders would not fighting 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 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.
As with 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 from me Liberty broadband.
Shareholder net asset value perspective.
And our next question comes from Michael Bunyaner Pls capital.
Good morning, gentlemen.
I have a couple.
Would you just a share your.
Lessons learned from being installation of Fiveg.
More importantly, the customer uptake in the ARPU effect on the total per customer what per account.
Brian I'll, let you repeat typical chefs.
All right.
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I think our principal loss and today. It is the speed continues to show reaching into very substantial performance increase that work as we moved to the Fiveg implementation, particularly on the four g. So that's why G radiation that work supplement the fourg installation and good greatly.
British the speech on the Fourg network and database translated into a very very positive consumer reception. We've started in postpaid wireless like you gain for the first time in quite a while and we believe the demand in the marketplace for did increase speed and capacity is significant.
We're very pleased with that we think we're also to get 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 spend or the uptake.
What what can be evaluated in terms of additional installations not for do you see I bet. So charger elsewhere in the U.S., what what did the lessons that we could use for the market place elsewhere.
Thank you for the question I'm not sure Ah Ah, we can take US positively we know what the lessons are for all table or charter, but I think what had shown is that the platform.
That cable has.
It's 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 of 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 you combine 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've got to do all buildout in the most.
Attractive locations I think it to set us up very well and shows that.
Cable and at least a charter is can be a very effective for smoke.
And any thoughts about the ARPU Sacramento 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 happened with for GE and to some degree Threeg Your LTV.
You know the Fourg equivalent you've you've seen that most of that did not result in increased ARPU.
And on somewhat reluctant to imagine we're going to.
I have major increases in Fiveg, but we'll see.
And clearly good the value of the network and the broadband network, specifically ask them as a backbone for Fiveg is now obvious is that correct.
Hi, I love to what you say that now obviously, but I hope you're right well could you do not to you, but I don't I think I don't know, but now obvious when 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 <unk> merger between the two company.
[laughter] did I read correctly that the team to MPCI will stay in continue to manage the business and there's not going to be any change.
Yes, you read that correctly.
Thank you old and thank you for their hard work and.
Continued success.
And we'll go next to James Ratcliffe of Evercore ISI.
Hi, I wonder.
If I could.
Okay.
He prepares you now.
Okay above 17, Dollarssixty eight pricing in the prefer how do you think about paying he.
Preferred.
Groupon going forward in terms of cash paid or should pick and potential sources of liquidity he wants to pay cash going forward.
Again, 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 is the most likely alternative.
Okay. Thank you.
And we'll go next to Bentley Cross with TD Securities.
Oh, Thanks evolved 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 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 GC I value.
Yeah, we got them the marketplace do that but no we are that it somewhere in that.
In a 20 of just over 20% range.
Okay. Thank you.
Thank you.
And our last question comes from Wesley why head of T T education and life earnings.
Good morning, I was hoping to get some insight into why.
The 0.58 ratio the paying for class, a and B shares of GCA Liberty limit you, Gary Liberty class a shares will be losing their voting rights. It transaction goes through the Liberty broadband.
Thank you for the question.
No I believe since this was done by two independent committees, both the independent committee acute care Liberty and I mean, a benefit to me at Liberty broadband they believe that was the ferrous.
The.
Case, which the.
Shareholder so you 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 viewed as meaningful but really this was driven by two independent committee 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 engine liberty businesses.
We look forward to speak with you again next quarter, if not before and stay healthy enjoy the rest of this 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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