Q4 2023 Liberty TripAdvisor Holdings Inc Earnings Call Q&A
Welcome to the Liberty broadband 2023 year end 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 keypad. As a reminder, this conference is being recorded today February 16th 2024.
I would now like to turn the call over to Shane Glenn Chin Senior Vice President of Investor Relations. 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 forms 10-K, followed by Liberty broadband and Liberty Tripadvisor with the.
So you see these.
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 statements contained herein to reflect any change in liberty broadband or the new tripadvisor its expectations with regard there to or any change in events conditions or circumstances.
It says on which any such statement is based on.
On today's call will discuss certain non-GAAP financial measures for Liberty broadband, 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 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 and CEO.
Thank you Shane and good morning.
Today speaking on the call. We will have also liberty broadband <unk>, Chief Accounting Officer, and principal financial Officer, Brian Wendling.
Ron Duncan C O G C. I am Pete pounds of C. C. GCI will also be available to answer your questions.
During Q&A, we will also be available to answer questions related to Liberty trip advisor, so I'm going to begin with Liberty broadband.
We resumed repurchases of our Liberty broadband shares using proceeds from the charter share repurchases sales in October.
From the first of November.
It's the first of November to the end of January we repurchased $385 million of proceeds received $85 million of proceeds from charter sales.
And spent $255 million L. B R D repurchases.
Similar to last year under our 25, 26% fully diluted our ship cap.
The early 'twenty 2020 for grants a charter made slowed down their purchases or our requirements to be repurchased and therefore, we do not expect to sell into the charter back buyback in the next few months.
Once we exceed the cap of 26% we plan to pursue the L. B R D buyback.
Looking at charter itself.
We certainly acknowledge there were near term headwinds.
In the quarter, which impacted broadband unit growth.
The fourth quarter was also it was.
Felt the delayed impact from the Disney dispute at the end of the third quarter.
Theres been a consistent trend in 2023 of increased competition from fixed wireless, but we do believe.
The competitive noise will lessen over time.
Fixed wireless assets will have.
Our capacity issues over the long term and the operators have been clear on their limitations and we do believe.
Bandwidth demands will continue to increase among consumers, which will favor higher speeds.
We are long term shareholders.
We are confident the strategic investments that charter was making will generate excellent returns and accelerate growth.
Over the next few periods.
Charter assets will provide the highest speeds and the converged off of a converged offering at the most competitive prices for consumers.
Spectrum, one is continuing to drive mobile growth and reducing churn.
Charter was able to at $2 5 million mobile line net adds.
In 2023.
Nearly 50% growth over the prior year.
And we saw no uptick in churn from the initial cohorts, who are rolling off the promotional periods in the fourth quarter.
As you would expect the Internet plus mobile customers are stickier than internet only customers.
Now the positive news the rural expansion is beating penetration our ROI targets.
The network evolution of charter remains on course with fast low cost upgrades at about $100 per passing.
We don't believe competitors can replicate that upgrade path over their full footprint.
As management has outlined.
The long term capex outlook, excluding bead.
Expect it to materially stepped down from.
From 2027 to normalized levels.
Let me touch on Liberty trip.
We filed an amendment to our 13D.
Okay.
We were authorized by the board to engage in acquisition discussions.
And we will not comment further on those discussions unless definitive documents are executed or discussions or terminated.
Looking at Tripadvisor itself.
Tripadvisor had a strong 2023 operating <unk>.
Results, particularly in the back half.
Q4 revenue was up 10% over the prior year.
Q4, EBITDA and margin expansion exceeded exceeded expectations.
There was outperformance at the recently renamed brand to Tripadvisor.
<unk> via towards breakeven profitability was reached.
Earlier than anticipated.
And they were marketing efficiencies at brand Tripadvisor and Viator.
It allowed us to have better than expected performance and we continue to move on cost saving actions, which are improving margins.
We've seen great successful diversification of the revenue at Tripadvisor with the biotech Fork.
Nearly being 50% of 2023 revenue.
In comparison, they were less than 10% in 2015.
And it's experiences are now half almost half the level of play on Tripadvisor.
We've also seen increased repeat rates among customers for example at bio tour.
Q4, gross booking value from repeat customers exceeded new travelers for the first time.
Management is focused on long term strategic opportunities.
And Jen AI, driven product enhancements like trip tools to drive engagement and growth.
We are optimistic about those results and with that I'll turn it over to Brian to discuss the financials.
Thank you Greg at quarter end Liberty broadband had consolidated cash and cash equivalents of $158 million, which includes 79 million of cash at GCI. The.
The value of our charter investment based on our shares held as of February 1st.
Our charter share price as of yesterday's close was $13 5 billion.
At quarter end Liberty broadband had a total principal amount of debt of $3 8 billion note that this excludes the preferred stock.
We are updating our annual tax rate guidance on our charter sales for 2024 to low double digits.
This conservative look conservatively assumes the D. R. D. The dividend received deduction does not apply to charter sales for the book minimum tax under the inflation reduction Act. We are accruing for this higher tax rate in 2024 wall additional guidance from the IRS and Treasury is pending.
I note that any book minimum tax paid for 2024 will carryforward to offset regular income tax in future years to the extent regular income tax exceeds the book minimum tax.
This is more of a timing impact.
Consistent with prior years, we're not providing specific tax guidance beyond the current year.
Looking at G. C. I 2023 was a good year for the company with record revenue and adjusted OIBDA GCI generated solid free cash flow and distributed $65 million dividends to liberty broadband during the year.
For the full year revenue and adjusted OIBDA grew 1% to $931 million and $361 million, respectively, driven by the.
The strong performance in business data revenue offset by declines in other revenue primarily video and voice.
In the fourth quarter revenue was flat and adjusted OIBDA decreased 1%.
While we continue to see strong business data growth. This was offset by declines in other revenue and increased costs primarily in SG&A.
Operationally GCI added 1400, consumer cable modem subscribers and 4800 consumer wireless customers in 2023.
Gci's leverage as defined in its credit agreement was two nine times at year end and GCI has $397 million of Undrawn capacity under its revolver.
Note that subsequent to year end GCI paid down an incremental $40 million under its revolving credit facility.
In 2023, Juicy I spent $216 million on capital expenditures net of proceeds received from federal and state Grant funding.
This is above prior expectations largely due to the timing of receiving certain grant proceeds G.
<unk> net capital expenditures for 2024 are expected to be approximately $200 million related to additional high returning investments in middle and last mile connectivity with continued network expansion and our most important markets in rural Alaska, including Bethel and the au Aleutians fiber projects taking.
Taking a proactive approach in rural connectivity projects is critical to securing necessary government funding.
And with that I'll turn the call back over to Greg.
Thank you Brian.
And to our listening audience. We appreciate your continued interest in Liberty broadband and Liberty Tripadvisor.
And with that operator, I'd like to open the line for questions.
Thank you we will now be conducting a question and answer session. Our first questions come from the line of Michael Rollins with Citi. Please proceed with your questions.
Thanks. Good morning, two questions first what are your expectation as to whether or not ETP program will be discontinued.
Can you share your thoughts on the possible implications for each of the GCI and charter.
And then secondly, just given the comments on being a long term investor in charter.
The current price for charter change Liberty's interest to sell shares into charters buyback when needed to stay under 26% cap. Thanks.
Thank you for the question I'll I'll address ACP.
And and the impact of charter my expectations, and then Ron maybe you'd like to talk about ACP and potential impact to GCI.
And then I'll come back and talk about buyback.
So.
You know, whether ACP will be renewed or not is certainly a guests into the.
The Willie World of Washington.
There is a enormous amount of support for demand.
Many.
Okay.
The congressmen and senators to our knowledge and many of them are in Red States, which actually received the majority of these proceeds.
There is some reason for optimism, but trying to assume that there was a path forward that is clearing crisp in Washington is something that's beyond my capabilities.
D.
Impact a little unknown many of the ACP customers at charter where customers prior to the ACP program are we think the demand for bandwidth.
Requirements that customers have for bandwidth or only a crown.
One of the complaints amongst some.
Uh huh.
People in Washington is that this is a subsidy program, which isn't necessarily because.
Our customers want the bandwidth.
That is a reason why some may not vote against that of course is not.
It is helpful for us in getting securing ACP punting, but it may also be correct that indicates most customers will continue to.
Take our broadband even in the absence of ACP.
It's hard to speculate on how much impact.
Eliminating ACP would have or the cessation of ACP would have but its not a positive on the margin around.
Ron would you want to add anything.
Just briefly we're expecting minimal impact from an HCP discontinuance of GCI in most of the customers on ACP, where broadband customers to begin with.
Yeah.
Budgeted a slight increase in bad debt and anticipate probably a little bit of an uptick in churn I think ACP for us was doing more to reduce the churn ratio among customers, who may struggle from bill to bill, but at the end of the day.
The effects of the ACP shift will be perceptible on the broadband side. We do believe there is an upside opportunity on wireless because nationwide half of ACP goes to wireless providers.
And with our GCI plus offering in the market being.
Hugely less expensive than the less the least expensive AT&T and Verizon wireless offerings. The disappearance of ACP for wireless should create a competitive opportunity for us to grow wireless subs at the expense of AT&T and Verizon as they face their customers off of the base.
So we see more positive coming out of it from the wireless side and expect very little impact on the wired side.
I'd just add on that but all those statements about wireless and the impact are likely to have the same impact or effect of charter was.
How we're pushing that.
Our spectrum spectrum one program.
On the buyback issue I think it's.
The case that we believe broader long term interesting.
And the question about whether to raise seek to raise the cap or.
We're continuing to read and therefore, not selling shares to charter or continue to buy back at around <unk>.
Our own on the L. P. R. D. I think look you see us spending the majority of proceeds.
From charter L.
It'll be already repurchases you will also see some amount of.
Our debt reduction and that'll be our day use of the capital for that.
And the reality is is because we're buying at a.
Substantial discount to the L. B R D price via the LBO D price to the underlying charter.
We still have the same set of incentives to use our capital for share repurchase and that'll be our D rather than raise the cap today.
Because the discount is so much larger than the tax leakage, so I'm not sure it actually changes our program.
Thanks.
Thank you.
Our next questions come from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.
Okay, all right. Thanks for taking the question.
I guess two things one just kind of big picture for Greg and then another kind of nuts and bolts.
Our numbers.
But the bigger picture question, Greg is I was curious about your thoughts on that.
The new skinny bundles or streaming bundle.
That are emerging from the media companies in terms of.
The legality or the appropriateness in an anti trust perspective so.
You know specifically the skinny sports bundle fun Disney Warner Brothers Fox.
You know do you believe that charter would have rights to offer the same kind of bundle or not.
And do you think theres any kind of antitrust question there.
I'm really I guess, there are some reports that Comcast and Paramount have been discussing.
Perhaps combining screening efforts and their streaming services include a lot of content from the broadcast networks NBC CBS.
There's a prohibition at the FCC on dual network ownership ban some antitrust I think questions about the video market there.
So how do you feel about antitrust and do you think that ends up being an issue that affects that so that's kind of the big picture question.
And then I'll come back later with you with just a small numbers question.
Okay Barton you know I'm I'm only going to pick up.
Good on the Big picture. So thank you for starting with that the.
The skinny bundles I'm not sure how skinny bundle is but and I'm also uncertain about the antitrust implications I've heard.
Knowledgeable observers on both sides of pine and I really don't.
Dug into it enough to have a firm view of my own.
The question about.
Charter I think there is potentially an opportunity for as bundles are created.
We are a distributor of that and had.
As long term positive then that we're making margin without risk and we are.
Continuing to drive.
Demand for.
Broadband as those packages shift so I think in the well. It's we certainly have not seen all of it a charter and they made a full evaluation of what it'll go on the margin that feels positive to me, both as an economic opportunity and it's something which drives broadband.
Okay, Great and then just a numbers question I wanted to make sure I'm clear when you say you want.
Hundred million on Capex. This year is that comparable to the 2016 or is that just on the expansion and the actual comparable number would be something different.
That and then your commentary on the tax rate for the.
Uh huh.
Charter shares.
I mean can you give us just like a number I'm not sure I quite follow what you know actually there's some pretax right now.
Yeah on the Italian Rana Ron Yeah got it great. Thank you saturate. It we're just giving you a low double digits at this point Barton.
And then on the Capex, yes, it's a comparable it's comparable number the 200 to 216.
Okay. Thank you.
Thank you our next questions come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your questions.
Thank you good morning, Greg I forgot I think these are big picture. So I think for you [laughter] you don't don't scare me were those details come out Brett exactly.
I'll ask you. The question I asked John back in November on Charter, which is you know why is four and a half times still the right leverage level I think I know what your answer is but obviously the market is.
Now as has spoken at least for now on where they know what they're thinking on charter stock. So would be curious if you if there's a scenario where you think lower leverage it's actually optimal.
And then you know looking back on the Disney dispute.
And you mentioned it in your prepared remarks that that's that's weighed on subs.
Do you think that the objectives and the and sort of what was extracted from that agreement by charter has been worse some of the disruption in the business and again you know broadband net adds have an outsized impact on charter stock versus their video business I'm just wondering how you reflect on that.
I'll start with the obviously with the leverage or the <unk>.
Question.
You know is certainly we have some shareholders asking a question on we're weighing.
The relative merits, but we have.
At the broader management team has shown the board I think multiple scenarios about what lower leverage or higher leverage might mean and for the moment, we're pretty confident that ride in the course.
Given the.
Diversity of maturities the length of maturities the likely movement in interest rates.
That even though under most scenarios.
We're better off holding the four five times leverage.
It's certainly a question that is open.
SNCF are we.
We are responsive to our shareholders in general.
Thank the.
I can say for the 26% holder and I think probably not speaking for them, but correctly, we're laying their views for the 12% holder at Johnston class I think we're in agreement with management's proposal that four and a half the right number.
But we certainly look at it and you know to the degree that there was massive pushback from shareholders you would.
Want to pay attention I don't think we've received that yet I think we've received questions on the margin.
And I think what's happened to the stock price is not a function. It may be exacerbated by the leverage but it's a function, though reception of broadband growth and how we're doing competitively in the marketplace rather than back leverage yeah.
Uh huh.
Disney.
Look I I, it's a long term that it's a long term play.
Other than just what do we feel that impact in a quarter or you know what.
Rolling bleeding into a second quarter on out of have a stable.
The video business, where we are more aligned and partnered with.
People like Disney and I think you could make the same argument as we get to the sports bundle that having that that.
Those are where the cars are.
Having ourselves aligned with them, having a role where we can be a distributor of that.
And having a role in these over the top.
Offerings is the right strategy for long term and I think Benjamin still stands by about by that view and I think we're on the same page.
Got it thank you.
Thank you our next questions come from the line of Alex Nord hanging with Bally asked me. Please proceed with your questions.
Hi, Thank you for taking my questions I had two.
Really around the cap stack, but on the first one with the 2050 ones off coupon upside coupons that are callable.
Callable from March 25, what.
What is the kind of base case plan to deal with those assuming that there isn't any sort of transaction I would think you'd you'd need to have a plan in place given the low cash balance Liberty trip right now and then the second question I had was.
In theory, if with respect to any acquisition discussions sitars was involved with that need to be disclosed to the market or not thanks.
Ben are you there or do you want to touch on the the our plans I think we're a value and we're not gonna go reveal all but what would you want to add.
Yeah, I think we monitor it regularly Alex.
Think about what the different strategies are for addressing either you know a repayment of those securities or an extension of maturity.
Not going to go into detail at this time.
And so on on.
I think I've said I wouldn't comment on any further but I'll just say you know I think the disclosure we made.
About being approached.
Is the.
The only disclosure will make until we comment further on whether or not it was.
Tourists or anybody else, who made the offer is really oh beyond what we went through a deal today and what we are obligated we think under the 13D disclosure rules.
Okay.
Thanks, Greg and if I may just ask a follow up then would be.
The prevalence of being being callable from next month six weeks away do you have any intention to call it.
I think I'd refer to Ben's comments earlier, we were evaluating all of these things were looking all of our alternatives, but until such time as we make that move we are not going to if we do we would not a we're not going to disclose our attention.
Alright. Thank you very much I appreciate it sorry, sorry to be unsatisfying, but at least for me I know you tried.
Thank you our last question will come from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.
Okay. Thanks, sorry, sorry.
I wanted to come back.
Frank just hopefully this clarifies just big picture.
Just for you.
Curious.
Statement that fixed wireless is competitive now that won't be.
Over the longer term.
Can you do you have any kind of sense in your mind, how long it is before fixed wireless ceases to become.
Competitive and becomes more kind of a source of went back for cable.
I say that just you know thinking that there's a lot of.
Consumers out there theyre feeling pretty stretched and you know I think would be pretty sticky for a low price service, but there's technical constraints. So what do you think is the timing here.
God pardon I think I would the way you. Initially stated the premise that fixed wireless is a competitive I would say that differently I would say that there are certainly customers for home fixed wireless is the answer they believe they need.
I think that customer set will be reduced overtime as broadband demands grow.
And potentially as SWA becomes less interesting as that network as more users and performance is less attractive or less and.
That's performance.
I'm not saying, it's a binary.
I'm thinking it's a relative thing the relative attractiveness on the relative need for increased bandwidth.
Relative attractiveness of that network and the relative needs among consumers for more bandwidth I think those shifted in our favor over time.
And then the question of when capacity is constrained I mean T mobile has been pretty clear about what how many they're willing to go out with and you can judge how quickly. It is Verizon has been less clear.
I would argue horizons with less clear, but a lot of their plants in this space.
But.
If you look at what reasonable expectations on what the run rate as you can make your own judgment about when that starts to slow down we've already seen it slow a little and we've already seen T. Mo in the on the margin begin to increase prices.
Which seems to suggest that there.
That limitation, but they're recognizing that there's not an unlimited amount of coke past equally FWS.
Okay. Thanks.
Thank you.
I believe that is our last question today.
Thank you all for joining.
Thank you all for your interest in Liberty broadband and Liberty Tripadvisor.
And with that operator, we will end today's call.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
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