Q3 2020 Gci Liberty Inc, Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call
Gentlemen, thank you for standing by welcomed with a P. C. I Liberty 2022, three earnings call. During the presentation of all participants will be in a listen only smoke. After work. He will conduct a question and answer session. I've got time. If you have a question. Please got star one on your telephone.
The reminder of the conference is being recorded November 9th.
I would like to now turn the conference over to Courtney Chang Chief portfolio Officer. Please go ahead.
Thank you good morning, before we begin we'd like to remind everyone that this call include certain.
Statements within the meaning of a private Securities Litigation Reform Act 1995, actual evidence of results could differ materially due to a number of rest of uncertainty putting those mentioned and.
10-K, and 10-Q filed with your P C H.
These forward looking statements take only up to date of this call.
Liberty broadband and Liberty Tripadvisor expressly just plain any obligation or undertaking she does that make any.
Any update the revisions to any forward looking statements continues.
Sure like to any change in D. C. R Liberty Liberty brought ma'am.
Cause I keep expectations with regard there too or any change in your guys' conditions or circumstances on which means the state and the state of.
Today's call, we will discuss non-GAAP financial measures would you see I liberty, including adjusted OIBDA and adjusted OIBDA marches information regarding the comparable gap not dress along with required definitions and reconciliation, including preliminary note in scheduled you wanted to and can be found in earnings press release issue today, which is available on the GCI Liberty website.
Can you remember to register for original Liberty Investor meeting on Thursday November 19, we will cover Liberty Media Liberty Tripadvisor and Friday November 20th will include curate G. C. I Liberty and Liberty brought that from 11 am to two P. M. Eastern on both days after the presentations on both days Giambrone bread, you say a while ago.
Presenting to you I was the holistic healing session. Please please submit questions by Friday November 13th two Investor Day Liberty Media Dot Com you can find the link to register and all of these details on our Homepages now I'd like to turn to call over to brighten their president.
Thank you according and good morning to all today.
Today speaking them a call will also have GCI liberties, Chiba jamming and principal officer, Brian one leg and U T. I C. F. O P pounds also drink Q&A, we will be available to answer questions related to Liberty broadband Liberty Tripadvisor.
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I'd like to give a few updates on the proposed combination between GCI Liberty and Liberty broadband.
V. H S are waiting period expired on October 9th.
F C. C approved the transaction on October 23rd which will become final on December 2nd Pittsburgh or any applicable challenges.
We're still waiting on regulatory commission of Alaska approval.
We filed our application with them on September 16th but are looking to expedite that as quickly as we can.
The proxy for the transaction when effective on October 30th and.
And our special meeting for the shareholder vote to scheduled for December 15th.
The proxy does mentioned two lawsuits, which will filed against GCI Liberty.
One has been dismissed.
And the second is proceeding with expedited discovery.
We do not expect the proceedings, which would you like the closing of the transaction.
With the date set for the boat and based on regulatory repose, we've already received.
That'll expect a deal to close no later than the first quarter of two 120 21.
Now on the third quarter results, starting would you see I liberties.
Do you see I had another great quarter revenue was up 11%.
Operating income was up 24 million and adjusted OIBDA was up 27%.
Patterns will discuss those results in a little more detail in a moment.
B five G upgraded allegra Anchorage is complete.
And third party tests have shown that is now twice as fast.
The network is twice as fast as our competition.
The company is gonna be very solid liquidity position with 105 million, a cache and 271 million of <unk> drawing capacity under its senior credit facility as of the end of the third quarter.
Turning over Liberty broadband briefly we did repurchase 3.4 million shares of Liberty broadband stock for $488 million at an average place price of $142.
We consider these repurchases very attractive is if you look at the look through price to be underlying charter.
Involved the price of 46.
This was a 23% discount to yesterday's close at 634 and given how the market is moving I suspect, it's a bigger discount yet.
Charter had another fantastic quarter.
Outstanding financial results consolidated EBITDA grew over 13% they generated $1.8 billion, a free castle up nearly 40 per cent. They added 537000 residential and small business internet customers versus 386000 last year.
Over the past 12 months, a charter has added 2.3 million internet customers.
Growth in mobile lines has continued to accelerate as well.
Add in 87000 more in this quarter than the same period last year.
Impressively and against most of the industry. They added another 670000 video subs.
Year to date, we are up and video stuff.
During the quarter charter repurchased 6.1 billion chairs for $3.6 billion at an average price of $592 per share.
Charter has shown an amazing ability to operate well under the circumstances and it's really a testament to the hard work of the team and the vestments they've made in various parts of the businesses over the last few years, which will allow them to operate quite effectively remotely.
Lending.
Lendingtree hosted the earnest called this morning, and make sure you check out the replay.
Lastly, tripadvisor will host its earnings call Tomorrow morning.
Please tune into that for an update on their results as well with that I'll turn it over to Brian.
Discuss the GCI Liberty financials X rayed.
A quarter and you see I've already had consolidated cash and canceled that one's for $553 million, which includes 105 nine a cat shelter the GCI opco level.
The values in public equity security that GCI Liberty at yesterday's clothes was 10.9 billion, which includes are three 4 billion interested charter 6.4 billion interest in Liberty broadband.
At 1.1 billion dollar interest in lightning trip.
At quarter end GCI Liberty have total principal amount of debt at 3.2 billion, which is relatively unchanged from last quarter.
This includes a 1.3 billion dollar mortgage loan outstanding against this Liberty broadband chairs, which is located on the charter exchangeable debentures, and 1.4 billion, a bad including financed nieces with our obligations that you see.
G C as leverage a quarter and it's fine and it's credit agreement 617 times.
The maximum allowable leverage six five times.
You see I had $271 million Enzon undrawn borrowing capacity is Cora.
Nope that you'd have a mouse exclude the identification obligation to curate and the outstanding preferred stock.
After the order and you see I I'll I'll see a subsidiary GCI Liberty <unk> 600 million senior notes through 2028.
Proceeds from the step Reg long cash on hand, and borrowing senior credit facility. We're used to redeem all outstanding principal of a Texas Ain't cheap enough to 2024 and 2025.
G. I L. C. Also amended is existing senior credit facility in October sending the maturity 2025, and Christmas hold on capacity to 950 million.
You'll likely note the corporate and other expenses were elevated during a quarter largely due to expenses related to the proposed CCI Liberty already broadband combination.
And lastly, you will note tend to be released later today that we sold our interest in your vitamins, but during the court.
I'll turn it over the pizza box out to U T I's operating results.
Thanks, Brian.
Starting with COVID-19, so thus far we have not experienced any uptick in Baghdad expense.
At the same time, we benefited from increased demand for our corporate data network and lower health care costs. This has resulted in positive financial outcome cause we remain committed to ensuring we meet all the connectivity needs of our customers.
We continue to work with educational facilities to ensure that Alaskan students have the access to the connectivity that they need.
With the start of the school year, we work with school districts across the state to <unk>.
Burn connectivity to approximately 4000.
Low income students with students, who otherwise would not have had access to school online.
Moving on to the five band five G upgrade.
Or five G deployment in Anchorage is now effectively done we commission to drive test on the network in September and the results are fantastic.
Our network was twice as fast as our primary competitor a T N T and had substantially fewer dropped calls.
Rural Health care to update.
On October 20 2020.
F C C approved our cost base rural rates for the funding years ended June 30th 2019 and June 30th 2023.
We expect to collect the entire amount in accounts receivable related to these two funding years.
Proximately 175 million.
Within three to six months.
This is a significant milestone that will not materially affect the income statement, but will bring further liquidity to the balance sheet.
On October 14th we announced that we want a 25 million dollar federal grant to bring fiber connectivity to the towns of Alaska, Kinko standpoint, Pakistan, Chignik Bay and Larsen Bay.
In total this project will cost $58 million, including 33 million of our own money.
And it is expected to be substantially complete by the end of 2022.
This will greatly improve the connectivity in these locations from the current satellite technology, all the way to five or to the premise and on Alaska.
And highlights our commitment to continue to be the premier telecom provider in Alaska.
Now I'll walk through our third quarter results.
Revenue was up by 23 million or 11% and adjusted OIBDA increased by 20 million or 27%.
Significant customer demand for data.
Cost containment initiatives lower health care costs, and it continued move away from our lower margin products like video in time of materials has enabled us to grow adjusted OIBDA dollars nearly as rapidly as revenues.
On the consumer side revenue was up 8% with data driving the growth we gained 3300 cable modem customer sequentially.
Consumer wireless was also up 200 subscribers versus the second quarter, despite our normal prepaid subscriber seasonality.
With the sale of our broadcast business. This summer we've moved cable advertising sales revenue to consume or video.
Absent this movement consumer video revenues would've been down for the quarter.
Over at G. C I business revenue was up 13%.
The growth with largely due to the growth in government health and education revenue.
This was partially offset by the movement of cable advertising sales revenue to consumer.
The year over year growth of 3800 cable modem is where you can see the low cost cable modems that we're providing the school districts for their low income households.
Finally capex.
We spent 102 million thus far in 2020 or.
Primary capital project for the year five band five G wireless in Anchorage is effectively complete.
Additionally, we're continuing to spend on projects to keep up with our increased data demand.
We expect our total capex for this year to be similar to last year.
I will now hand, the call back over to Greg.
Thank you, Brian and thank the peak.
We hope you will all join us for our virtual Liberty Investor meetings November 19th and 20th.
We do appreciate your continued interest in GCI, Liberty, Liberty broadband and Liberty Tripadvisor and with that operator.
Like to open the line for questions.
[noise], if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure your new function is turned off to allow your signal can reach our equipment.
Again that is star one to ask a question.
And we'll go ahead and take our first question now from dreams that Clifford Evercore eyesight.
Good morning, Thanks for taking the question alright, great, giving you position.
The cable industry can you give us your thoughts on what pieces. It turns out it looks to me for his hip slick government Democratic administration could mean for cable, particularly in the area. So what kind of lemonade from regulation.
Thank you for the question James.
Well I.
I I suspect anything that looks somewhat like the current regime is probably pretty good for cable cable has done a my judgment an excellent job.
Of supplying broadband connectivity during the pandemic and admirably increased capacity, an increased number of lines and handled to be growth in upstream or downstream traffic very well, so continuing that trend and letting cable do what it can.
Do well I think it's a positive.
That hasn't been said I'd note that during the prior administration, which various times had Democrat.
Troll of all three branches of so the two branches in the legislature and the.
The executive branch charter was able to operate very well equally under a child to regulation. So I remain optimistic yeah I'm in a crunch.
You know realistically there is not that much M&A for for charter to do they're only a couple of large scale cable companies, which are not.
No Comcast or charter.
<unk>.
And I think most of those would probably be still substantially small enough that I wouldn't anticipate that there would be enormous antitrust issues given the regional nature of the business, but that.
That remains to be seen.
Thank you.
We'll take our next question from Zack's over with B Riley.
Okay, great checking the question. The first one is just any update on the discussions with charter about increasing the cats on the equity ownership, there and if not.
Are there any other mechanism available where you guys wouldn't have to take a catch it on selling charter sure she'd get back under the cat.
So.
We are in discussions with the with.
With the company and directors about modifications the caps and I think those would probably be productive.
But I want to emphasize that.
<unk> tax rate.
If we were.
Forced to Douglas chairs.
Because of the nature of the of how we hold the stock effectively be treated as a dividend treatment and our tax rate would be 8% ish and given the 20 plus percent discount.
I don't view, while we are not interested really selling our charter shares I also for sale.
Which for which we were still 12 send the money in terms of the trade off if we did further repurchases would not be the worst result, so while I am optimistic we will reach some resolution with the companies it'll be positive.
Also note that if we are unable to reach a resolution it is not the worst outcome.
Okay that makes sense and then one more if I could just around fixed wireless you've been Verizon continues to be optimistic on five G home into T. Though I go on a pretty aggressive plan with its home internet offering and just curious dragging whether you have.
Standing change of heart around fix violence as a competitive drive to cable.
Nope.
[laughter] I mean, I don't think it is.
More competition you know he's more competition a positive you know I think the table as she on it's very able to operate very well.
During this time cable send a great job for finding connectivity.
Cable is going to extend its footprint into new regions, partly fueled by art off so I'd be cables on an excellent job of growing its footprint in serving its customers and serving potential future customers. You know bill will be asked me to see what happened so I fixed wireless.
You know.
As far as I can tell and I don't know what's inside the head of the Verizon management, but it appears to be that they're backing off from some of the 28 and 38 gig.
They're they're emphasizing and most people seem to think that the T. Most efforts in the mid band it more effective so.
<unk> to be seen but I don't I don't view it in the near term no as a cause it a massive competitive threat to our business.
Got it thank you very much.
Our next question comes from Bentley Crossword Peeping security.
We have the question operator or did we lose somebody.
Mr. Christina how can I open mind.
A quick question for the G. C. I folks wondering if Alaska communications privatisation my change in dynamics in the market or if you have any thoughts on it in general.
Hello. This is Rob I'll guess I'll take that one.
We would expect so I'm incretion with competitive nature of the market, but we'll have a long wait time, it'll probably be several years before they're able to take them a while to clothes and then we'll have to make substantial investments.
Would expect we choose some more fiber in their networks, but we're pretty confident.
Quality of our product offerings and the superiority of the hyper February poll Explants ended at work that we have designers that combined with our <unk>.
Bundled product choices.
We both are in a position where it will go to a huge impact on us. Although we are playing for some increased <unk> activity.
Activity in the market once is closed and you have to admit to your destination.
Thanks for the Gander.
Our next question comes from Matthew Hurricane with benchmark.
Okay.
<unk> <unk>, Paul slicing, a pretty libertarian.
Diet at various points is really talk to that have the cable industry would have an almost unfair advantage with a small sorts. It all to you and it's really wasteful just in the U S economic perspective from everyone else to do these duplicative.
Bill you could as as you pointed out Verizon definitely had a move toward the <unk>.
<unk>.
It should be do you think that.
Increasing awareness on the part of some of the mobile companies that they'd like to work for the obviously, specifically Verizon if you'd like to work something out with cable on on small so side and are you drawing any he unfortunately influences from your experience up in Alaska, which is obviously and the and the lead car for me.
<unk>. Thank you.
Thank you I I I I missed the first part you said.
Who said we had mentor advantage.
G I B S. P. C. <unk> Yep Yep I, just didn't I didn't hear that I didn't hear a sheet, okay well I.
Six nights would be F. C. C Commissioner thinks that we have the right technology.
I believe charters bowl is to serve its customer as well and you know for.
For the benefit nation, having more ways that people can connect is not a terrible thing I think we have an excellent service and an excellent network with a lot of capabilities and I've set up were looking to extend that network, how five G interact and how sigh G. Yeah operates on top of it I think we could be a good partner as you note.
We already are Verizon partner through the M B no relationship and you've seen.
Ah slipped to extend some of our network capabilities buys purchases of spectrum.
C D R S spectrum so.
No I think it works they work can work pretty well together hand in glove <unk> I don't know if you'd add and you think about based on our side you experienced in Alaska.
Oh wait so long that five G was going to be as much. It back all game as it was wireless networks game and I think part of the reason that we're doing well with our five G up here and you got the jump on other folks is that B I just sleep with gives us a much better backhaul network. So we're confident in cable's ability to <unk>.
Drive five G wireless and in the long run either have a superior compare the platform or have Arkansas, others come to us because only the cable industry can really do drive to kind of last hundred foot backhaul, what you need for the five Joost wall. So.
Fix quick fix Ross.
Thank you.
Our last question comes from then Phillips with some like capital.
Hi, Good day quick question I'm kind of new to the story. So I just wanted to get some color around the 575 million convertible note to the 2.75% converts to 2050, just one more color on what that transaction is in.
What that all means for the cat structure. Thank you.
Well like 10 or and talk about the convertible notes.
I think with this record tomorrow notes Uhm could call dates in 2023, so I should be taking a look at it.
The ability to reason answers opportunistically between now and that date continue to watch the charter share price and.
The best Windows.
We're happy to take it offline if you need more details on that.
Yeah, I'd appreciate that one <unk>.
Thank you I think there's one more question is that correct operator.
Yeah, So let's make our last question from Michael Diana with T I last capital.
Thank you for including good morning.
And congratulation on X one yourself.
I have a <unk> <unk>.
Uhm network Uhm.
Uhm.
I believe this past quarter over 80% of.
The vigils essentially self installed which clearly is changing.
The economics servicing.
An average customer could you just walk us through.
What does that mean in terms of the economics of managing the network on an ongoing basis, because I would think that this would be a significant savings on a per unit basis.
Yeah. That's a great question I think if you look back two years ago, we were something like 38% sub 40% self install and during the most recent quarter. We were as you noted over 80.
That's probably a couple of things one that is a great Testament to the work that the charter team has done.
On improving stuff installed capacity and making that process simpler for customers and better and I was making it simpler for them and then to get more easily I also think it's probably but somewhat driven by be pandemic. The reality is that people don't necessarily want.
To see cable installers coming to their home so like many things in the pandemic things born of necessity have become more convenient and more driven and more digital and more self reliant.
That is also probably been somewhat the case impacted by the fact that some of our competition really almost shut down and will not doing many installed they didn't have a truckload and nor did they have the same self install capacities or ease of use that charter did so all of that contribute to an acceleration in the growth of self install.
That has really reduced our cost of installed.
I'm not sure. It's had will have as much an impact on the ongoing costs once they're installed because I'm not sure the network management Israeli that substantially different but I think it's both been a.
A reduction in costs and the ability for us to gain market share during the time of Covid.
<unk>.
If I may just.
To follow up.
In terms of market penetration.
Uhm, Yeah, we we were running uhm and charter just about 50% of the home Smith.
What do you think ultimately because of the quality of the service as well as <unk> installed and now having <unk> call centers Uhm.
Essentially in the U S.
What what kind of penetration over time could.
Could be reach and or what do you think would be.
Reasonable goal I don't know three to five years from now.
I'm not sure that charter management has set that goal or we have that forecast I know I have heard Tom Rutledge believe that ultimately he could get to two thirds penetration, but I didn't he didn't have a time frame for that.
But I appreciate the bee hag, the big hairy audacious goal that is cause that's obviously a lot of market share game, but I do think that cable has an advantage and if you've seen the the fact that will have added nearly probably during this year. During the last 12 months added something like almost not eight to nine person.
<unk> growth and it's customer account and and during the last 12 months.
I'm not sure that's gonna continue to accelerate at the same rate, but that shows the potential that is there to grow cause you know that's your points, probably gone up two or 3% during the last 12 18 months how.
How <unk> how long it's gonna take it out you know how how 'bout slows as we hopefully extra the pandemic I don't know, but I still bullish our ability to increase sure I can talk to us as well.
Thank you very very much and commercialize.
Thank you so with that operator, I think we're done. Thank you again all for your continued interest in the Liberty family and we look forward to speaking with you either next quarter if not sooner.
This concludes today's call. Thank you for your participation you may now disconnect.
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