Q4 2021 Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call

Please standby.

Ladies and gentlemen, thank you for standing by and welcome to the Liberty broadband 2021 Q4 earnings call. During the presentation, all participants will be in a listen only mode.

Afterwards, 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, this conference is being recorded February 25th I would now like to turn the conference over to Courtney Chun Chief portfolio Officer. Please go ahead.

Thank you Joe and good morning, before we begin we'd like to remind everyone that this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 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 10-Q filed by Liberty broadband and Liberty Tripadvisor.

And with the SEC.

Forward looking statements speak only as of the date of this call and Liberty broadband and Liberty Tripadvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein to reflect any change in liberty broadband or liberty tripadvisor expectations with regard there too.

Any change in events conditions or circumstances on which any such statement is based on today's call. We will discuss certain non-GAAP financial measures for Liberty bought that including adjusted OIBDA information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary note and schedules one and two can be found in the earnings press release issued today.

Meanwhile earnings releases from prior periods, which are available on Liberty broadband website now I'd like to turn the call over to Greg who pays the green President and CEO . Thank you Paul.

Good morning today speaking on the call. We will also have Liberty broadband Chief Accounting Officer, and principal financial Officer, Brian Wendling.

Ron Duncan.

GCI that Pete pounds, CFO GCI will also be available to answer questions.

Also during Q&A, we will be available to answer questions related to Liberty Tripadvisor. So first starting with Liberty broadband.

Continued to settlement charges buyback and from November 1st in 2021 through the <unk>.

First in January of 2022, and we received $1 $3 billion of proceeds from charter.

Over the same time period.

We repurchased $1 4 billion.

<unk> shares.

At an average per share price of $157 and 95.

Which is a look through price on the underlying charter of about $520.

I would note that Liberty has sufficient cushion under the 26% fully diluted ownership cap that in January .

We had no such heavily at no time selling them to charters buyback for that one month of January .

Looking at charter.

Charter generated another quarter of strong revenue growth and cash flow growth as well.

Revenue was up four 7% EBITDA was up seven 7% over the prior year.

In 2021 charter generated $8 $7 billion of free cash flow, which was up 23% over 2020.

Despite an all time low churn and low move environment charter had solid broadband growth.

There were 120000 additional net additions such as broadband additions in the fourth quarter across residential and SMB, bringing the full year total net adds to one 2 million.

Charter had a huge quarter for mobile, adding 380000 new lines.

380000, new lines in the fourth quarter alone the best quarter to date for the product.

Charter mobile net adds were 13% of all industry postpaid phone net adds in the fourth quarter, a great year in our territory.

We added one 2 million new mobile lines in 2021 and.

And charterers mobile go to market and pricing structure is resonating in the mobile marketplace and we are optimistic about the ongoing opportunity.

This year charter will also begin to leverage the CBR spectrum assets that we bought last year with initial deployment of small cell radios.

This hybrid <unk> opportunity as a capital efficient means of improving the cost structure of our mobile business, which obviously pairs very well with our exciting broadband business.

Let me turn to Tripadvisor and note that the travel recovery continued through 2021, though trends were slowed by omicron in December but those headwinds are now receding.

We expect leisure travel will turn to 2019 levels by later this year and 2022 will benefit from the return of international travel and much advanced trip planning.

Tripadvisor brand value is as strong as ever.

And trip reached over 1 billion reviews and opinions on the platform.

In the quarter.

Trip is balancing its efforts on growth and appropriate investment across its portfolio to position the business well for long term success.

And one of the areas in which we're investing experiences <unk> dining has the strongest recovery in the portfolio.

<unk> revenue reached 90% of the 2019 levels in the fourth quarter.

And we continue to invest in this segment, both on product supply technology and expanding its geographic reach.

We are also evaluating ways to crystallize the value of our E&E segment, specifically by a tour.

We did file for a sub IPO of that asset.

On the other hand, plus didn't get the intended traction that we saw in 2021.

And our focus now is re scaling that investment opportunity.

The current sizes that we see.

We believe in the potential of a subscription business, but we will recognize that growth more gradually.

I would note we are also progressing well on the CEO search with several exciting candidates.

And with that let me turn it over to Brian to discuss the financials in more detail.

Greg at quarter end Liberty broadband has consolidated cash and cash equivalents of $191 million, which includes $34 million of cash at GCI.

The value of our charter investment as of yesterday's close was 31 billion.

At quarter end Liberty broadband had total principal amount of debt of $3 8 billion.

During the quarter, we repaid $200 million under our charter margin loan, which we had drawn in Q3 and part two.

Fund share repurchases at broadband given the timing differences in when we received proceeds.

From the charter share sales.

Note the above amounts exclude the indemnification obligation and preferred stock.

Looking at GCI 2021 was a great year for the company GCI generated solid free cash flow and continued to delever.

For the full year GCI as net debt declined $314 million due to solid OIBDA growth reductions in the RAC related receivables moderate capex in refinancing in October , which will save approximately $8 million of interest expense per year.

Leverages defined in its credit agreement was three times.

At the end of the year, which is down a full turn from last year and GCI has $397 million of undrawn capacity under its revolver.

For the full year revenue grew 2% adjusted OIBDA grew 3% to $354 million.

Companys highest ever adjusted OIBDA number driven primarily by data demand.

In the fourth quarter revenue declined slightly to 3% and adjusted OIBDA declined 10%. This was driven by the absence of political advertising this year as well as the accounting effects of the extension of a large wireless roaming contract.

<unk> entered into in the fourth quarter.

The revised terms of the contract or a headwind to revenue in Q4, it will be a headwind in 2022, but importantly, the agreement is NPV positive over the multiyear extension that provides for continued backhaul services for Gci's network, even once the new contract expires several years out from now.

Operationally <unk> added over 10000 consumer cable modem subscribers.

Consumer wireless customers.

The network was approved by the growth in the <unk> wireless network increased satellite capacity and progress on the fiber build to Dutch Harbor.

With that I'll turn the call back over to Greg.

Thank you Brian .

To our listening audience. We appreciate your continued interest in both Liberty broadband and Liberty Tripadvisor.

And look forward to 2022, we view.

With that operator, I'd like to open the line for questions.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off so all your signal to reach our equipment again that is star one to ask the question.

The first question comes from Michael Rollins with Citi.

Thanks, Good morning.

I was curious to get your thoughts on chartering, specifically when you decided to participate into.

Charter's buyback to stay at or below that 26% ownership level.

Seemed like Youre balancing several factors, including the discount to NAV.

You estimated.

Broadband was trading at as charter shares have come.

Ian value have your considerations about selling into that charter buyback changed and would you rather hold on to more of your charter shares.

Okay.

Thank you for the question Michael.

No I don't think that calculus has really changed because of the discount has remained relatively constant so our opportunity to pay a relatively modest tax rate and.

And by the discounted charter shares by buying some liberty broadband has.

Only made the whole opportunity more attractive the relationship between broadband and charter has remained relatively constant and yet the underlying is therefore, even more attractively priced so we're enthused about charters buyback and yet more enthused about our own buyback.

Thanks.

Our next question comes from James Ratcliffe with Evercore ISI.

Great. Thanks, two if I could first of all Greg just mentioned the tax impact.

Going forward, what sort of tax drag should we be thinking about for your sales of the charter stock.

And secondly.

Could you talk a little bit about the revised roaming deal.

At GCI.

What sort of impact you're expecting that to have going forward. Thanks.

So I'll touch on the first and then let Ron or Pete address the second.

For 2022, I think we're looking at a 5% drag.

7% drag going up to lumping like nine overtime. So we will we will see at some point, we're going to run out of basis. So this is getting that relationship's going to change, but we're okay for this year.

Rod do you want to go do you want to chat about.

Your roaming.

Sure we had an arrangement with a large roaming customer under which they were coming up on an optional.

Termination.

And we negotiated a multiyear extension as Brian mentioned at an NPV net present value substantial positive and a good deal for the long term on the company.

And what you're really seeing is the accounting effects of the way that contract is treated the contract is required to take the revenues over the expected life of the contract and amortize them equally over the number of years in the contract.

Cash under the contract doesn't actually change in the immediate future, but what youre seeing is primarily an accounting effect from an extension of the contract further out with lower revenues revenues in the future period, which drags down the accounting effect upfront recognized revenues.

Brian if I got that wrong, you might want to jump in there before it goes too far.

You got it well said.

Great. Thank you.

And our last question comes from Ben Swinburne with Morgan Stanley .

Thanks, Good morning.

Greg the other thing that's changed over the last several quarters has been all pieces share price I'm sure. You've noticed I was just curious as you think about cable consolidation.

Which we used to talk about more.

But maybe that's time to talk about again, if you think there might be an opportunity there between charter northeast do you think the regulatory environment has gotten much tougher so that becomes.

Anything of size gets harder.

And then just wanted to follow up on your on your basis point after your answer.

Okay.

No.

I think my friends at charter, who or some time.

L. A was going to be the method for all success going forward and cable are feeling pretty good about the charter way.

And.

The question is about our thesis.

The opportunity.

Versus charters has pretty much ceased.

So that's been positive.

I think charter is got a great plan of its own you rightly point out some of the regulatory issues I think some of the territories that <unk> has.

Our attractive, particularly unsettling territories, but they don't appear to be sellers of that there have been all those rumors that they might sell those and go private on the balance who knows.

Yes.

I think charter and would be.

Certainly look at any asset that we're attempting to be sold obviously that that.

That company is effectively controls so they'll make their decisions about what they're going to do.

But I think charter is pretty happy with the growth plan. It has and you rightly point out the regulatory challenges so.

Yes, so it sounds like you think New York would be tough for me there is a state or federal or both point of view.

Don't you think so living there.

Yes, I do.

And then just.

I hadn't thought about the tax basis point you just made so just is there any way you could help us think about what is it as simple as looking back at your original basis in charter shares sort of once you've sold enough stock to cover that.

<unk> treatment changes and so things have to change with the charter relationship or.

Really more complicated than that but I would say you could help us to think about the math there.

Roughly.

And then that's a roughly correct calculation I think thats a good way to think about it.

Okay.

Thank you.

Thank you.

Thank you to all of our listeners and questioners.

For today again, we hope to see you next quarter, if not sooner and thank you for your continued interest in both Liberty Tripadvisor in Liberty broadband and with that operator, I think we're done.

Thank you once again that does conclude today's conference. We thank you for your participation you may now disconnect.