Q2 2022 Liberty Broadband Corp and Liberty Tripadvisor Holdings Inc Earnings Call
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And.
Please stand by, we're about to begin.
Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Broadband 2022 Q2 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, then one on your telephone. As a reminder, this conference is being recorded August 5th.
I would now like to turn the conference 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 the most recent Form 10-K filed by Liberty Broadband and Liberty Trip Advisor with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Broadband and Liberty Trip Advisor expressly disclaim any obligation of undertaking.
To disseminate any updates or revisions to any forward-looking statement contained herein, reflect any change in the rebroad band or Liberty TripAdvisor's expectations, with regard there to already changing 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 OIDTA. Information regarding the comparable gap metrics, along with the required definitions and reconciliations, including preliminary note and schedules 1 and 2, can be found in the earnings press release issued today, as well as earnings releases for prior periods, which are available on Liberty Broadband's website. Now I'd like to turn the call over to Breg Maffei, the Vice President and CEO .
Thank you, Courtney. Good morning.
Today speaking the call we will also have, Librease Broadbands, Chief Accounting Officer of Principal Financial Officer Brian Wendling.
Ron Duncan, CEO of GCI, and Pete Pound, CFO of GCI, will be available to answer questions.
Also, drink Q&A will be able to answer questions related to Liberty TripAdvisor.
So looking for a celebrity broadband from May 1st to the 31st of July , we repurchased $9 million LBRD shares for $1 billion. We repurchased $9 million LBRD shares for $1 billion.
This includes 2.7 LBRDA shares at an average cost per share of $114.08. We were capitalizing on the spread between the A's and the K's.
These Liberty broadband bibex have been additive to our NAV about 3% per share over this period compared to charter 1% per share.
And we bought it a look through price on Charter. And we were purchasing it for about $273 a year 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 inbeta up 10%. The financial results were a strong quarter of financial results The financial results were a strong quarter of financial results The financial results were a strong quarter of financial results
Organic broadband's were a relatively disappointing 38% if you exclude the 59,000 customers disconnected from the affordable connectivity program. That was 38,000, not 38% excuse me. That was 38,000, not 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 344,000 new wireless lines. Mobile revenue is now up 40% year over year and represents over 5% total charter revenue.
I want 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 feels very comfortable with strategic position and technical edge in the vast majority of our markets. We are still optimistic on the broad band outlook, including new world builds, which will extend the growth opportunity. And we believe mobile is a competitive advantage as well as a revenue opportunity and will help further solidify our value, our competition versus competitors.
Turn to trip advisors.
We had our earnings call this morning for Trip, which welcoming Matt Goldberg, the new CEO , who started on the 1st of July .
Consolidate results have reached the 2019 levels by the out of the quarter.
the European recovery rate has caught up with the US especially in the hotel auction.
We're seeing the strongest recovery in Viator and the fork, which are both exceeding the 2019 revenue levels.
Viator Ibida 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 FireTour.
The fork also exceeded its 2019 booking levels, European dining restrictions have eased, and diners are returning to restaurants.
Consistent with the above results,
The Crip Advisor announced new reporting segments which better reflect the growth profile and maturity stages of our respective three businesses. We believe this will allow investors to better track the progress of our performance across our growth areas. And 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 equivalence of 301 million.
which includes approximately 80 million of cash in the L. directly at G.C.I.
The value of our charter investment based on our shares held as of August 1 and charter share a price that yesterday's close was $23 billion.
On May 2nd, we sold our subsidiary Skyhook for aggregate consideration of $194 million, which includes $23 million of cash that's held in escrow.
The quarter-end Liberty broadband had a total principal amount of debt of 3.9 billion.
We repay $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 GCI's results. GCI 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, delivery broadband and cat-backed during the quarter.
Subsequent to quarter-end, GCI paid an additional $40 million to broadband using cash on hand.
Leverage is defined in its credit agreement was 2.9 times at quarter end.
And GCI has 397 million of undrawn capacity under its revolver.
Reven was flat and adjusted to orbit. It was up one million in the second quarter due to a better mix of higher margin revenue.
As we noted at year end, revenue and adjusted OIBA are seeing the effects of a new roaming agreement effective in the fourth quarter of 2021, which is positive long term but does create some negative comparisons in 2022 to prior periods.
Additionally, our video business continues to shrink, which significantly impacts revenue, but does not mean fully impact margin or free cash loan.
Just decline in our video business and the impact of the new roaming agreement where offset by growth and our consumer broadband and wireless offering.
as well as our business data revenue.
Over the last year, GCI's added 5,000 revenue generating wireless subs and over 9,000 revenue generating cable modem customers.
including 900 broadband sub-ads 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 Alaska.
GCI is expecting to launch two-gig residential internet speeds and unalasked by the end of the year. Last week the company announced the SUPS-C fiber for the AU-Eolutions Fiber Project. THE SEP-CFiber Project
completed its 12,000 mile journey from Germany and has arrived in Alaska.
The 800 plus miles of fiber will bring these 2 gig speeds to some of the most remote communities in the country.
With that, I'll 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.
We hope to see many of you there.
We also appreciate your continued interest in Liberty Broadband and Liberty Trip Advisor. And with that offer, I'd like to open the floor for questions.
Of course, thank you. And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Please press star 2 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 Rocklip with Evercore ISI. Please go ahead.
Thanks, Heather.
Two related ones for Greg and one for Ron, if I could. Greg, recently there's been an increase in the discussion of 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 you're seeing in terms of the interest in cable assets amongst two-digit financial investors, and also your sense of what the antitrust environment looks like right now for cable consolidation. It looks like right now for cable consolidation.
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 GCI?
So thank you James, I'll go first.
You know, I think charter's perspective has been consistent.
There are a series of assets at the right price that we could
The effective consolidators and add value in terms of our ability to be more efficient and customer touch are able to bring scale synergies.
our ability to run them on a nationwide basis on a more consistent attractive level. I don't think 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 is very clear and I think you really have to look at what scale you're talking about on a deal. This may contain some eigenvalues according to the CAL system.
You know It's something we believe we could defend
of any of the stuff that's out there. But obviously there's been a lot of changes of what's going on between DOJ, FCC, and FCC. So we'll see. It's hard to predict with certainty, but I'm comfortable.
optimistic we could do a transaction of any of the ones discussed. That's been publicly rumored.
Ron?
Thank you. The short answer to is fixed wireless relevant to us in Alaska is no for two principle reasons. T-Mobile, who is probably the most aggressive fixed wireless provider in the lower 48, doesn't operate its own facilities in Alaska. They roam on our network in Alaska, so there's no direct retail competition from T-Mobile and 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-band for important long-haul satellite connectivity in the states, so the FCC excluded C-band in Alaska from the auction. And C-band is the principal frequency which Verizon is using for fixed wireless access. They are doing some in millimeter wave, but Alaska doesn't have any locations that are nearly dense enough to make millimeter wave. For more information, visit www.fema.gov
fixed wireless access significant competitors. So we haven't seen anything on that front and don't expect to.
Great, thank you both.
And we'll go ahead and move on to our next question now from Burncrocket with Rosemelt Security. Hopefully you go ahead.
Hi, thanks for taking the question.
Greg, I wanted to just ask about...
kind of the evergreen question, but...
What your current thinking is about the merit from your perspective and how you might kind of characterize the charter perspective of a potential combination of Liberty broadband and charter.
It seems like we've settled into a pattern where...
You're pretty happy sitting pat. You know they're buying some stock back. You're buying some stock back
Seems like a pretty kind of steady equilibrium.
you know, but the bigger possibility still remains and could be interesting I just wonder what you think about that now is or new is to think that that would be desirable or not at this point. It would be desirable or not at this point. It would be desirable or not at this point.
I think you're right that the equilibrium is attractive for us. We continue to increase our NAV for shared a faster rate than charter because of the taking advantage of that discount even though it taxes. because of the taking advantage of that discount even though it taxes.
You know, we also like our role and our involvement on the governance side and our oversight and understanding of the business better by being there. So I think it's a positive. Will it be a forever condition? Don't know. Not something we are...
not something we're contemplating today to change, but we always remain.
flexible on that. I think you were on the earlier call, you know, 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, DirectTV. So, you know, never say never.
Okay.
And then if I could just ask another question. I'm also curious about your perspective about what was once a hot button issue for the industry, and that is,
the potential for industrial kind of reorganization of.
telecom companies and cable companies.
potential mergers of large companies in that space and you know, talk that it would involve charter and some scenarios.
We don't hear about that so much these days and...
You know, I note that the telecom wireless companies and cable companies are more competitive with each other.
Is that day done as something that might even be contemplated?
or it's kind of left a barn and not really to come back or what do you think about that is?
and evolution over time.
Yeah, I think the progress we're making in wireless on our own is very attractive. Could there be...
some logic down the road to combine. One of the issues of those have been if you look at the convergence of
broadband and wireless. The difficulty for us is a relative unattractiveness to offer.
wireless in territories where we don't have broadband, which would be the case if we were merged or we bought a national wireless player.
So we like our hand in broadband, we like our hand in wireless extending our broadband capabilities.
Not to say there isn't somewhere that might change down the road and there have been people imagining combinations where cable bought assets together. Maybe that solves the problem, but we feel very good about our prospects.
both in broadband and in wireless, you know, really they're a converged combination on our footprint that's attractive for us.
Okay, great. Thank you.
Thank you.
And we'll go ahead and take our last question from Michael Rollins with Citi. Please go ahead. We'll go ahead and take our last question.
Thanks, and good morning, two topics with first. Um, regulating a comment in your opening comments that you're comfortable in the vast majority of charter's markets, you know, when you thought about the strategic and technical position, just curious what would be the characteristics of markets or the state of systems in which you wouldn't be comfortable. And then switching gears to ACP, Ron, make sure you get sure more about the ACP experience.
if it 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 in your toolbox that you haven't had before as you try to help customers during what could be, just a tougher period for some. Thanks.
Yeah, I'll go first. I think the-
Maybe I was not articulate enough or you misheard me. What I think is that, you know, do I like our position better where we have less fiber competition? Yeah. Yeah, no problem. Yeah. Yeah.
That's the places where I'm most happy and feel our strategic and technical edge is better. Obviously we gain 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.
All right, on the ACP, the ACP has been... I'm sorry, were you done, Greg?
Yes, so what? Thank you, Uncle.
Okay, just checking. I'm gonna cut you off. The ACP has been a very, very powerful.
very powerful tool for GCI. And I think is one of our success in transferring customers from the emergency broadband protection program, the prior subsidy program to ACP, 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 have...
growth this last quarter in spite of traditionally would have been a down quarter. I would note that Alaska as a whole is denoted as tribal lands so we qualify for the $75 subsidy instead of the $30 subsidy on ACP. It has been a very very important tool for us and we've aggressively marketed it into the marketplace including converting our lifeline wireless customers over to the ACP program so it's a benefit for
program on the consumer side for the last six months.
Thanks, and just one other follow up. Does the proposed tax legislation for either Liberty Broadband or GCI have any specific implications that investors should be mindful of?
I don't believe so, but do we have Albert or Tim there who want to add anything?
So they're not in the room, but not to the world. Not to the world or where. Yeah.
Yeah.
Thanks very much.
I think that was our last question.
Thank you very much for your continued interest in Libby Broadband and Libby TripAdvisor. We hope to speak with you next quarter. If not sooner, again, hope to see many of you in November at our investor day. Thank you very much for your continued interest in Libby for your continued interest in Libby.
Thank you very much and have a great rest of your summer.
And with that, that does conclude today's call. Thank you for your participation. You may now disconnect.
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