Q2 2022 Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call

Thank you for standing by will begin momentarily again, thank you for standing by.

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Please standby we're about to begin.

Ladies and gentlemen, thank you for standing by and welcome to the Liberty broadband 2022 at Q2 earnings call during.

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 then one on your telephone.

A reminder, this conference is being recorded August 5th I would now like to turn the comments over to Courtney Chun Chief portfolio Officer. Please go ahead.

Thank you 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 filed by Liberty broadband and Liberty Tripadvisor with the SEC. These.

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 statement contained herein to reflect any change in liberty broadband and Liberty Tripadvisor its expectations with regard there too or 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 broadband.

Including adjusted wiped out 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 as well as earnings releases from prior periods, which are available on Liberty broadband website now I'd like to turn the call over to Greg Maffei Liberty's President.

Yeah.

Thank you Courtney and good morning today speaking on the call. We will also have Liberty's broadband Chief accounting Officer, and principal financial Officer, Brian Wendling.

Ron Duncan CEO of GCI, and Pete pounds, CFO of GCI will be available to answer questions.

Also during Q&A, we will be able to answer questions related to Liberty Tripadvisor.

So looking first at Liberty broadband from May one till the 30 <unk> of July we repurchased $9 million L. B R D shares for $1 billion.

This includes $2 seven <unk> eight shares at an average cost per share of 114, Oh wait we were capitalizing on the spread between the age of the case.

These liberty broadband buybacks have been additive to our NAV.

3% per share over this period compared to charter at 1% per share.

And we bought at a look through price on charter.

These repurchases of about $373 a share on charter.

Over the same period, we received $1 1 billion of cash proceeds from charter share sales back to charter.

Looking at charter itself. It was a strong quarter of financial results with revenue up 6% and adjusted EBITDA.

10%.

Organic broadband square a relatively disappointing 38% if you exclude the 59000 customers disconnected from the affordable kind of productivity program that was 38000 about 38% excuse me.

The market environment does remain more challenged than we've had in recent memory with low move activity.

And increased investment in promotion and fixed wireless by certain players.

Spectrum mobile continues to expand at a rapid clip with 344000, new wireless lines mobile revenue is now up 40% year over year and represented over 5%.

Total charter revenue.

I wanted to reiterate mobile has a real revenue and profit opportunity and we remain in the very early stages.

As far as charter itself, we liberty feel very comfortable with strategic position in tactical edge and the vast majority of our markets. We are still optimistic on the broadband outlook, including new world builds which will extend the growth opportunity and we believe mobile is a competitive advantage as well as the revenue opportunity and will help further.

Solidify our value proposition versus competitors.

Turning to Tripadvisor.

We had our earnings call. This morning for trip, which welcoming Matt Goldberg the new CEO started in the first of July .

Consolidated results have reached the 2019 levels by the end of the quarter and.

In the European recovery rate has caught up with the U S, especially in the hotel auction.

We're seeing the strongest recovering buyer tour in the fork, which are both exceeding the 2019 revenue levels.

<unk> EBITDA reached breakeven in the second quarter, we believe the attractive.

Unit economics of the business are very appealing we believe in the ability to build a large repeat revenue basis off relatively low marketing costs. We are focused on new customer acquisition and retention strategies as well as brand marketing for <unk>.

The Fork also exceeded its 2019 booking levels European dining restrictions have eased and Guyana as it returned to restaurants.

Consistent with the above results.

Tripadvisor announced new reporting segments, which better reflect the growth profile and maturing stages of our respective three businesses. We believe this will have that would invest allow investors to better track the progress of our performance across our growth areas.

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

Thank you Greg at quarter end Liberty broadband had consolidated cash and cash equivalents of $301 million, which includes approximately <unk> <unk>.

$80 million of cash held directly at GCI.

The value of our charter investment based on our shares held as of August one in charter share price at yesterday's close was $23 billion.

On May 2nd we sold our subsidiary Sky Hope for aggregate consideration of $194 million, which includes $23 million of cash is held in escrow.

At quarter end Liberty broadband had a total principal amount of debt of $3 9 billion, we repaid $200 million on our charter margin loan during the quarter and our available capacity is $900 million.

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

Now looking at <unk> results <unk> had a good second quarter company generated solid free cash flow cash for the quarter was down $31 million with strong cash from operations offset by a $70 million dividend to liberty broadband and capex during the quarter.

Subsequent to quarter end GCI paid an additional $40 million to broadband using cash on hand.

Leverages defined in its credit agreement was two nine times at quarter end.

And GCI has $397 million of Undrawn capacity under our revolver.

Revenue was flat and adjusted OIBDA was up $1 million in the second quarter due to a better mix of higher margin revenue as.

As we noted at year end revenue and adjusted OIBDA are seeing the effects of a new roaming agreement effective in the fourth quarter of 2021, which has positive long term, but it does create some negative comparisons in 2022 to prior periods.

Our video business continues to shrink, which significantly impacts revenue, but does not meaningfully impact the margin or free cash flow.

This decline in our video business and the impact of the new roaming agreement were offset by growth in our consumer broadband and wireless offerings.

As well as our business data revenue.

Over the last year GCI has added 5000 revenue generating wireless subs and over 9000 revenue generating cable modem customers, including 900 broadband sub adds in the second quarter of this year.

We believe many of these gains are directly attributable to our deployment of two gig speeds in communities across the Alaska.

GCI is expecting launch two gig residential internet speeds and on Alaska by the end of the year last week, the company announced that the subsea fiber for the evolutions fiber project completed its 12000 mile journey from Germany and has arrived and on Alaska. The 800 plus miles of fiber will bring these two gig speeds to some of the most remote communities in the country.

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With that I will turn the call back over to Greg.

Thank you Brian .

I want to remind some of you who may not know our annual Investor day will be Thursday November 17th in New York.

Please save the date additional details we provided soon.

Hope to see many of you there.

We also appreciate your continued interest in Liberty broadband and Liberty Tripadvisor and with that operator, I'd like to open the floor for questions.

Of course, thank you and if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our Clinton.

Please press star two if your question has been answered and you want to remove yourself from the queue.

Again as a reminder, it is star one if you would like to ask a question.

And we'll go ahead and take our first question from James Ratcliffe with Evercore ISI. Please go ahead.

Thanks Heather.

Two related ones for Greg and one for Ron if I could Greg.

The significant increase in discussion with potential cable M&A and at the same time, there also seems to be greater uncertainty about the M&A regulatory environment in general.

Can you give us a read on what Youre seeing in terms of the interest in cable assets amongst strategic and financial investors and also your sense of what the antitrust environment looks like right now for cable consolidation.

And Ron.

Seeing a lot of attention on fixed wireless in the lower 48 at the moment is it relevant as a competitor or opportunity for Dci.

So thank you James I'll go first.

I think charters perspective has been consistent.

There are a series of assets at the right price that we could.

The effective consolidator resolve and add value in terms of are going to be more efficient and customer touch.

Bring scale synergies.

Our ability to run them on a nationwide basis on a more consistent attractive level.

That's changed I think some of the.

Prices have obviously come down which would make that a more interesting opportunity potentially if we were a cash buyer.

The regulatory environment for unclear and I think you will you have to look at what scale Youre talking about.

On a deal.

It's something we believe we can defend.

Have any of the stuff that's out there, but obviously the.

There's been a lot of changes of what's going on between Doj FCC and FCC. So we'll see I, it's hard to predict with certainty, but I'm comfortable.

Optimistic we could do a transaction with anyone that's got it.

Publicly rumor.

Ron.

Thank you.

The short answer too is fixed wireless relevant to us in Alaska is no for two principal reasons T mobile who is probably the most aggressive cooks wells for water in the lower 48 doesn't operate its own facilities in Alaska the room.

That worked in Alaska, So theres no direct retail competition from T mobile.

Verizon.

The other principal competitor does not have C band spectrum in Alaska. The C band auction did not cover Alaska, because we still use C bed for important long haul satellite connectivity in the states of the FCC excluded C band at Alaska from the auction and C band is the principal frequency, which Vera.

Origin is using for fixed wireless access they are doing some of the millimeter wave, but Alaska doesn't have any locations that are nearly dense enough to make millimeter wave fixed wireless access significant competitors. So we haven't seen anything on that front and don't expect to.

Great. Thank you both.

Yeah.

And we will go ahead and move on to our next question from Barton Crockett with Rosenblatt Securities. Please go ahead.

Okay.

Hi, Thanks for taking the question.

Greg I wanted to.

Just to ask about.

Kind of the evergreen question, but.

What your current thinking is about the merits from your perspective, and how you might kind of characterize the charter perspective.

The potential combination of Liberty broadband and charter.

It seems like we've settled into a pattern where.

Youre pretty happy sitting Pat you know, they're buying some stock back you're buying some stock back.

It seems like a pretty kind of steady equilibrium.

But the the bigger possibility still remains and it could be interesting and I'm. Just wondering what you think about that now is there any reason to think that that would be desirable or not at this point.

Okay.

I think youre right that equilibrium is attractive for us.

We continue to increase our NAV per share at a faster rate than charter because of that taking advantage of that discount even net of taxes.

Okay.

We also like our role and our involvement on the governance side in our oversight and understanding the business better by being there. So I think it's a positive.

Will it be a forever condition don't know are not something we are.

Not something where we're contemplating today to change.

But we always remain.

Flexible on that.

On the earlier call, we have taken a lot of actions historically.

To take advantage of.

When we thought it was the right time, whether it be expedia, the GCI transaction Directv So never say never.

Okay.

And then if I could just ask another question.

Mostly curious about your perspective about what was once a hot button issue for the industry and that is.

The potential for <unk>.

Industrial kind of reorganization of.

Telecom companies and cable companies potential.

Actual mergers of large companies in that space, you know talk about what it is off charter in some scenarios.

We don't hear about that so much these days and you.

I note that the telecom wireless companies and cable companies are more competitive with each other.

Is that date on something that might have it be contemplated is that.

Of course kind of left the barn, not really to come back or what do you think about that is.

An evolution over time.

Yes.

I think.

The progress we're making in wireless on our own is very attractive could there be.

Some logic.

The road to combine one of the issues those have been if you look at the convergence of.

Broadband and wireless.

The difficulty for us of a relative unattractiveness to offer.

Wireless in territories, where we don't have broadband which would be the case. If we were emerged we bought a national broadband national wireless player.

So we like our hand in broadband, we like our hand in wireless extending our broadband capabilities.

Not to say there was some way that might change down the road and there have been people imagine in combinations, where cable bought assets together.

Maybe that solves the problem, but we feel very good about our prospects.

Both in broadband and <unk>.

Wireless.

Really there are converged combination on our footprint that's attractive for us.

Okay, great. Thank you.

And we'll go ahead and take our last question from Michael Rollins with Citi. Please go ahead.

Thanks, and good morning, two topics the first.

Greg you made a comment in your opening comments that you're comfortable in the vast majority of harvest markets. When you talk about the strategic and technical position just curious what would be the characteristics of markets, where the state a system in which you wouldn't be comfortable and then.

Switching gears to ACP, Ron I'm curious, if you could share more about the experience.

Getting easier for customers to qualify.

And how does this tool.

Instruct you in terms of the risk of recession, and maybe this program being able to have something.

And your.

Toolbox that you haven't had before is to try to help the customers during what can be just a tougher period for some.

Yeah I'll go first I think the.

Maybe I was not articulate enough or you missed misheard me, what I think is that.

Do I like our position better where we have.

Less fiber competition yeah.

The places where I'm, most happy and feel are strategic and tactical edge is better obviously gained more share against.

DSL and other technologies like that I think we compete well against fiber, but obviously I prefer competing against non fiber competitors.

Yeah.

Alright.

C P. The ACP has been I'm, sorry, we've done Greg yes.

Thank you Rob go ahead.

Okay, just checking don't want to cut you off.

It's been a very very powerful.

Very powerful tool for GCI.

Yeah.

He was one of our success in transferring customers from the emergency broadband protection program. The prior subsidy program to HCP.

Is one of the reasons that we continue to grow broadband subs in spite of the slowdown in the rest of the industry we did.

Good growth this last quarter in spite of traditionally would have been a down quarter.

Note that Alaska as a whole is denoted as tribal lands, we qualify for the $75 subsidy instead of the 30 or so.

$30 subsidy on ACP. It has been a very very important tool for us that we've aggressively marketed it into the marketplace, including converting our lifeline wireline customer or a lifeline wireless customers over to the ACP program. So it's a benefit for us on both wireless and broadband side I think it probably.

As a material offset any recessionary effects, because there's a very broad swath of customers that are covered by or eligible for HCP and they're typically the ones that would churn the most.

Difficult economic environments. So we see it as a particular strength.

It's been a key component of our marketing program.

Program on the consumer side for the last six months.

Thanks, and just one other follow up is the proposed.

Legislation for either Liberty broadband or GCI had any specific implications that investors should be mindful of.

I don't believe so but do we have Alberta, Tim there to who want to add anything.

So theyre not theyre not in the room, but not that not that we're aware of.

Yeah.

Thanks very much.

I think that was our last question.

Sure.

Thank you very much for your continued interest in Liberty broadband and Liberty Tripadvisor.

We hope to speak with you next quarter, if not sooner and again hope to see many of you in November at our Investor Day.

Thank you very much and have a great rest of your summer.

Yeah.

And with that that does conclude today's call. Thank you for your participation you may now disconnect.

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