Q2 2024 Liberty TripAdvisor Holdings Inc Earnings Call

August 8, 2024

Operator: Welcome to the Liberty Broadband 2024 Q2 Earnings Call. During the presentation, all participants will be in a listen-only mode.

Greg Maffei: Thank you, Claire. Good morning to all our listeners. Today speaking on the call, we will have Liberty Broadband's Chief Accounting and Principal Financial Officer, Brian Wendling. Ron Duncan, CEO of GCI, and Pete Pound, CFO of GCI, will also be available to answer questions, and during Q&A, we will answer questions if there are any related to Liberty Tripadvisor. So, beginning first with Liberty Broadband, in July, we issued $860 million in a 308 charter exchangeable.

Operator: Welcome to the Liberty Broadband 2024 Q2 earnings call. During the presentation, all participants will be in a listen-only mode.

Operator: Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press star 1 on your telephone keypad.

Operator: Afterward, we will conduct a question-and-answer session. At that time, if you have a question, please press Star 1 on your telephone keypad. As a reminder, this conference is being recorded today, August 8, 2024. I would now like to turn the call over to Claire Adams, Senior Manager, Investor Relations. Please do so.

Greg Maffei: We used the proceeds from that offering to repay $540 million under our Charter Margin Loan and repurchase $300 million of our existing 3-1-8 exchange. We've also extended the margin loan maturity to 2027, and our 2020 six debt maturities are now spread through 2020. As a result of these actions, we expect.

Operator: As a reminder, this conference is being recorded today, August 8, 2024.

Claire Adams: I would now like to turn the call over to Claire Adams, Senior Manager and Investor Relations. Please go ahead.

Claire Adams: 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. Now, I'd like to introduce Greg Maffei, Liberties President and CEO.

Greg Maffei: We resumed our sales at Liberty Broadband into charters back in June. With the proceeds, we will continue to take a prudent approach to retiring debt, and that is our current focus. We will also evaluate those LBRD buybacks as cash bills from charter share repurchases, looking at the underlying company. They had well-received strong results in the quarter against a competitive backdrop and the expiration of the ACP program. They reported a net subscriber loss of 149,000 broadband subscribers, but the majority of those were due to ACP. The broadband trend did improve throughout the quarter with the lowest net loss in years.

Claire Adams: Good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements in the meeting of the Private Securities Litigation Reform Act of 1995. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K and 10-K held by Liberty Broadband and Liberty Tripadvisor with the SEC.

Greg Maffei: Charter reported solid inhibited growth of 2.6% versus the prior year and 100 basis point margin improvement. Management did a great job of expense management working with the growing Realization impacts of that in the second quarter. They continue to manage the cost structure without sacrifice. Mobile achieved its profitability for the first time, an important milestone that reinforces the value of the mobile offer. Charter reported 557 mobile blinds in addition.

Claire Adams: Before looking statements speak only out of the date of this call, in Liberty Broadband and Liberty Tripadvisor expressly to explain any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in Liberty Broadband or Liberty Tripadvisor's expectations with regard there to or any change in events, conditions or circumstances, on which any such statement is based. On today's call, we'll discuss certain non-GAAP financial measures for Liberty Broadband, including adjustments.

Claire Adams: Information regarding the comparable GAAP metrics, along with required definitions and reconciliation, including preliminary note and scheduled one and two, 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.

Greg Mase: Now I'd like to introduce Greg Mase, Liberty's president and CEO. Thank you, Claire. Good morning to all our listeners.

Greg Mase: Today, speaking of the call we will have, Liberty Broadband's Chief Accounting and Principal Financial Officer Brian Wendling, Ron Duncan, CEO of GCI, and P-Pound, CEO of all of GCI, will also be available to answer questions. And during Q&A, we will answer questions if there are any related to Liberty Tripadvisor.

Greg Mase: So beginning first with Liberty Broadband, in July, we issued 860 million of a three and eight Charter exchangeables. We used the proceeds from that offering to pay 540 million under our charter margin loan and repurchased 300 million of our existing three and an eight exchangeables. We've also extended the margin loan maturity to 2027. And our 2020 set six debt maturities are now spread through 2028. As a result of these actions, we expect substantial savings.

Greg Maffei: The Anytime Upgrade Program is driving ARPU as customers increasingly choose the Unlimited Plus Plan. The phone buyout program for multi-line households to move more easily to Spectrum Mobile is also being very effective. We expect continued EBITDA growth in the back half of the year. We will see the AC impact mostly in the third quarter and some in the fourth, but believe Charter is managing that transition effectively. The cost initiatives continue to support the highest margins to date, and we do expect to see political spending ramped up for the year. We also expect to see continued strong mobile performance. Chartered reduced leverage during the quarter to 4.32 times.

Greg Maffei: and our 2020 six debt maturities are now spread through 2020. We resumed our sales at Liberty Broadband into charters back in June. With the proceeds, we will continue to take a prudent approach to retiring debt, and that is our current focus.

Greg Mase: We resumed our sales at Liberty Broadband into Charters buyback in June. With the proceeds, we will continue to take a prudent approach about retiring debt, and that is our current focus. We will also evaluate those LBRD buybacks as cash bills from charter share repurchases. Charters are looking at the underlying company. They had well-received, strong results in the quarter against a competitive backdrop and the exploration of the ACP program.

Greg Maffei: We will also evaluate those LBRD buybacks as cash bills from charter share repurchases, looking at the underlying company. They had well-received strong results in the quarter against a competitive backdrop and the expiration of the ACP program. They reported a net subscriber loss of 149,000 broadband subs, but the majority of those were due to ACP. Charter reported 557 mobile blind customers in addition. The cost initiatives continue to support the highest margins to date, and we do expect to see political spending ramped up over the year.

Greg Mase: They reported a net subscriber loss of 149,000 broadband subs. But the majority of those were due to ACP, and the broadband trend did improve throughout the quarter, with the lowest net loss in June. Charter reported solid evidence growth of 2.6% versus the prior year, and a hundred basis point margin improved. Management did a great job of expense management, working with the growing realization impacts of that in the second quarter. They continue to manage the cost structure without sacrificing growth.

Greg Mase: Mobile achieved its profitability for the first time, an important milestone that reinforces the value of the mobile offering. Charter reported 557 mobile blinded additions. The Anytime Upgrade program is driving our poop as customers increasingly chose Unlimited Plus plan. The phone bio program for multi-line households to move more easily to Spectrum Mobile is also being very effective.

Greg Mase: We expect continued innovative growth to the back half of the year. We will see the AC impact mostly in the third quarter and some in the fourth, but believe Charter is managing that transaction effectively. The cost and issues continue to support the highest margin to date, and we do expect to see political spending ramp to the year. We also expect to see continued strong mobile performance. Charter reduced leverage during the quarter to 4.32 times, and Charter expects to continue to move closer to the middle of the target of the four to four and a half times leverage range throughout the year.

Greg Maffei: We also expect to see continued strong mobile performance. Chartered reduced leverage during the quarter to 4.32 times. Charter expects to continue to move closer to the middle of the target of the 4 to 4.5 times leverage range throughout the year. Turning now to Liberty Trip, we will not be able to comment further until or unless definitive documents are executed or discussions take place, looking at TripAdvisor itself.

Greg Maffei: Charter expects to continue to move closer to the middle of the target of the 4 to 4.5 times leverage range throughout the year. Turning now to Liberty Trip. We continue to evaluate strategic alternatives with TripAdvisor's Special Committee. We will not be able to comment further until or unless definitive documents are executed or discussions take place looking at TripAdvisor itself. During the quarter, it felt continued pressure on Hotel Meta and Grand Trip Advisor from both SCO and SCM structural challenges with weaker demand and increased competition. However...

Greg Mase: Turning down to Liberty Trip, we continue to evaluate strategic alternatives with TripAdvisor Special Committee, and we will not be able to comment further until or unless the definitive documents are executed or discussions terminate. Looking at TripAdvisor itself, during the quarter it felt continued pressure on hotel medit, in brand TripAdvisor from both SCO and SCM's structural challenges with weaker demand and increased competition. However, positive early votes from strategy work launched last year are beginning to take hold. We have seen a growing share of app users and direct channel activity where there is more monetization opportunity available.

Greg Maffei: Early positive revolts from strategy work launched last year are beginning to take hold. We've seen a growing share of app users and direct channel activity where there's more monetization opportunities available. Members using TRIPS Planning Tool have a 15 times higher ARPU than the platform-wide average. This strategy is designed to drive a makeshift over time from legacy offerings to focus on member value, a differentiated app experience, and engaging product design. For example, AI-powered review summaries and hotel booking directly into the app and user upgrades are much more effective and better monetization opportunities for us.

Greg Mase: Members using Trip's planning tool have a 15 times higher output than the platform-wide average. Strategy is designed to make shift over time from legacy offerings to focus on member value, a differentiated app experience, and engaging product features. For example, AI-powered review summaries and hotel booking directly into the app, and user upgrades are much more effective and better monetization opportunities for us.

Greg Mase: Looking at the other businesses within Trip, but via tour, both increase their competition, contribution rather to the profit mix. Via tour saw a doubling of active bookers who log into the app, which led to higher conversion, better repeat rates, and GBV growth.

Greg Maffei: Looking at the other businesses within TRIP, Viator and The Fork both increased their contribution to the profit mix. Viator saw a doubling of active bookers who logged into the app, which led to higher conversion, better repeat rates, and GBV growth.

Brian Wendling: So, with that, I will turn it over to Brian to discuss it. Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $73 million, which includes $47 million of cash at GCI. The value of our charter investment based on our share's health is of August 1. In charter share price as of yesterday's close was $16.2 billion, and at quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion including the debt at GCI. Note that this excludes the preferred stock. Looking quickly at GCI, revenue is up a million over the prior year, driven by continued strength and data sales, particularly to our rural health care and school customers, partially offset by declines in wireless and other revenue.

Greg Maffei: So with that, I'll turn it over to you.

Brian Wendling: Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $73 million, which included $47 million of cash at GCI. The value of our charter investment based on our shares held as of August 1st and the charter share price as of yesterday's close was $16.2 billion, and at quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion, including the debt at GCI. Note that this excludes the preferred stock.

Brian Wendling: Looking quickly at GCI, revenue is up a million over the prior year, driven by continued strength in data sales, particularly to our rural health care and school customers, partially offset by declines in wireless and other revenue. However, adjusted OIBDA decreased $6 million due to higher operating costs as well as increased SG&A expense from labor-related costs and increased professional service. Over the last year, adjusted for the reclassification from GCI Business, DCI consumers saw a decline of 1,000 revenue-generating wireless subs, and cable modem subscribers declined by 2,500, mostly driven by the expiration of the ACP program.

Brian Wendling: Adjusted oivated decreased 6 million due to higher operating costs, as well as increased SGA expense from labor-related costs and increased professional services. Over the last year, adjusted for the reclassification from GCI business, GCI consumers saw the decline of 1,000 revenue-generating wireless subs. Cable modem subscribers declined by 2,500, mostly driven by the expiration of the ACP program. During the quarter, GCI distributed a 150 million delivery broadband, funded with cash on hand and drawing under its revolver. These proceeds were used to pay down the Charter Margin loan and were therefore net net new troll delivery broadband. The quarter end GCI's leverage was at 3.2 times, with sufficient cushion in relation to the 6.5 times maximum net leverage covenant threshold, stipulated in the credit facility.

Greg Maffei: Over the last year, adjusted for the reclassification from GCI Business, DCI consumers saw a decline of 1,000 revenue-generating wireless subs, and cable modem subscribers declined by 2,500, mostly driven by the expiration of the ACP program. During the quarter, GCI distributed $150 million to Liberty Broadband, funded with cash on hand and drawing under its revolver. These proceeds were used to pay down the Charter Margin Loan and were therefore net-net neutral to Liberty Broadband.

Brian Wendling: During the quarter, GCI distributed $150 million to Liberty Broadband, funded with cash on hand and drawing under its revolver. These proceeds were used to pay down the Charter Margin Loan and were therefore net-net neutral to Liberty Broadband. At quarter end, GCI's leverage was at 3.2 times with sufficient cushion in relation to the 6.5 times maximum net leverage covenant threshold stipulated in the credit facility. We had $347 million of undrawn capacity under the GCI revolver, net of letters of credit. With that, I'll turn the call back over to Greg.

Greg Maffei: At quarter end, GCI's leverage was at 3.2 times with sufficient cushion in relation to the 6.5 times maximum net leverage covenant threshold stipulated in the credit facility. We had $347 million of undrawn capacity under the GCI revolver, net of letters of credit.

Brian Wendling: We had 347 million of undrawn capacity under the GCI revolver, net of letters of credit.

Greg Mase: With that, I'll turn the call back over to Greg. Thanks, fine. Our annual investment today will be Thursday to number 14 in New York.

Greg Maffei: Our Annual Investor Day will be Thursday, November 14th in New York. Please note that we have moved to a new location. See you at the Jazz at Lincoln Center. Save the date. Additional details will be forthcoming soon. We hope to see many of you there. And with that, Operator, I'll open the line for questions.

Greg Mase: No, we move to a new location. See you at the Jazz at Lincoln Center. Save the date. Additional details will be for coming soon. We hope to see many of you there.

Operator: See you at Jazz at Lincoln Center. Save the date.

Operator: Additional details will be forthcoming soon. We hope to see many of you there. And with that, Operator, I'll open the line for questions.

Operator: And with that operator, I'll open the line for questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. May press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you. We will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Our first questions come from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your questions.

Bart and Croquet: Our first questions come from the line of Bart and Croquet with Rosenblatt Securities. Please proceed with your questions.

Questioner: Okay, thank you for taking my questions. There were a couple of things I was kind of interested in, to see if we could address them here. One is, I'm curious about the wireless business at GCI and then perhaps a longer term thought for Charter. So, my question is this, to what degree is GCI really focused on subsidizing the kind of device purchases? Just update us on that as we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16.

Barton Crockett: Okay, thank you for taking my questions. There were a couple of things I was kind of interested in, to see if we could address them here. One is, I'm curious about the wireless business at GCI and then perhaps a longer term thought for Charter. So, my question is this, to what degree is GCI really focused on subsidizing the kind of device purchases? Just update us on that as we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16.

Bart and Croquet: Okay, thank you for taking my questions. There were a couple of things I was kind of interested in. We can address them here.

Bart and Croquet: One is I'm curious about the wireless business at GCI and then perhaps a longer term thought for Charter. So my question is this is to what degree is GCI, you know, really focused on subsidizing kind of device purchases. Just update us on that as we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16. And you know, and also if you have any thoughts about what you expect there in terms of the size of that cycle for GCI and then, you know, for Charter and I guess over to Greg.

Questioner: And, you know, and also, if you have any thoughts about what you expect there in terms of the size of that cycle for GCI and then, you know, for Charter, and I guess over to Greg, just more broadly, I mean, obviously, Charter's not doing the device subsidies, you know, at the level that the major wireless carriers are today. But, you know, one could imagine over time, as Charter and the cable peers get bigger and wireless, that they will want to, you know, compete in more kind of toe to toe on that basis.

Barton Crockett: And, you know, and also, if you have any thoughts about what you expect there in terms of the size of that cycle for GCI and then, you know, for Charter, and I guess over to Greg, just more broadly, I mean, obviously, Charter's not doing the device subsidies, you know, at the level that the major wireless carriers are today. But, you know, one could imagine over time, as Charter and the cable peers get bigger and wireless, that they will want to, you know, compete in more kind of toe to toe on that basis.

Bart and Croquet: Just more broadly, I mean, obviously charters not doing the device subsidies, you know, at the level that the major wireless carriers are today. But, you know, one could imagine over time as the charter and the cable peers get bigger and wireless that they all want to, you know, compete in more kind of toe to toe on that basis.

Questioner: And I was just wondering, you know, Greg, if you agree that that's going to be the general direction, and if so, any thoughts about how the road there might progress slowly or quickly, any steps that could kind of transition you over there?

Barton Crockett: And I was just wondering, you know, Greg, if you agree that that's going to be the general direction, and if so, any thoughts about how the road there might progress slowly or quickly, any steps that could kind of transition you over there?

Bart and Croquet: And I was just wondering, you know, Greg, if you agree that that's going to be the general direction, and if so, you know, any thoughts about how the road there might progress slowly, quickly, any steps that could kind of transition you transition you over there. Thanks, Barton Godd.

Ron Duncan: Thanks, Barton. Ron, do you want to take the GCI wireless part of that?

Ron Duncan: Ron, do you want to take the GCI wireless part of that? Sure, I can do that, and obviously Barton is, you know, GCI is a mobile network operator, not an MBNO like Charter, so we have a different cost structure. We've got a much higher gross margin in the top percentage because we own the network. We're not paying somebody else for it. We've also got a much higher market share at this point than Charter does. We're probably 40% of the Alaska mobile market overall, and it's one of our two core businesses, along with consumer businesses, along with consumer data.

Ron Duncan: Sure, I can do that. And obviously, Barton, as you know, GCI is a mobile network operator, not an MVNO-like charter, so we have a different cost structure. We've got a much higher gross margin and EBITDA percentage because we own the network. We're not paying somebody else for it. And we've also got a much higher market share at this point than Charter does, probably 40% of the Alaska mobile market overall. And it's one of our two core businesses for consumer businesses, along with consumer data. As such, we pretty much have to match or at least be competitive with the majors.

Ron: gross margin and EBITDA percentage because we own the network. We're not paying somebody else for it. And we've also got a much higher market share at this point than Charter does. Thanks, Ron.

Ron Duncan: As such, we pretty much have to match or at least be competitive with the majors, and our principal competitors AT&T, Verizon is not a material player in the market up there. So we pretty much have to match AT&T device subsidies in order to avoid losing subs to them when there's a refresh cycle. In the last couple of years, we've extended the device subsidies from two-year contracts to three-year contracts. That's given us a little lower turnover and a little more stability. We're evaluating right now, but we think that if there's an accelerated device cycle this fall as a result of AI features, particularly in the Apple phones, it may be an opportunity to grab some more share.

Ron Duncan: And our principal competitor is AT&T. Verizon is not a material player in the market up there. So we pretty much have to match AT&T device subsidies in order to avoid losing subscribers to them when there's a refresh cycle. In the last couple of years, we've extended the device subsidies from two-year contracts to three-year contracts. That's given us a little lower turnover and a little more stability.

Ron Duncan: We're evaluating right now, but we think that if there's an accelerated device cycle this fall as a result of AI features, particularly in Apple phones, it may be an opportunity to grab some more share. We've got a better network in Anchorage and in most of Alaska than AT&T does. People choose us for that reason, and we're trying to figure out whether enhancing device subsidies a little bit would allow us to gain more share.

Ron Duncan: We've got a better network in Anchorage and most of Alaska than AT&T does. People choose us for that reason, and we've trying to figure out whether enhancing device subsidies a little bit would allow us to gain more share. If we were relatively competitive with AT&T, we'd keep the low margin of the low-cost portion of the customer base, but we wouldn't be able to maintain the 40% statewide market share.

Ron Duncan: If we weren't relatively competitive with AT&T, we'd keep the low margin or the low cost portion of the customer base, but we wouldn't be able to maintain the 40% statewide market share. Greg, back to you. Thanks, Ron.

Greg Mase: Greg, back to you.

Greg Maffei: Thanks Ron. So, as you rightly know, Charter has not had to offer the kind of subsidies for handsets that many other competitors in the mobile space have had to offer. I think that's largely because of the attractive pricing of the Spectrum Plus offering, particularly the year-free line, but even after that, the relative savings of being a Charter subscriber and having Spectrum Plus for your mobile as well are very attractive compared to the alternative.

Greg Mase: Thanks, Ron. So I think, as you rightly know, Charter has not had to offer the kind of subsidies for handsets that many other competitors in the local space have. I think that's largely because of the attractive pricing of the Spectrum Plus offering, particularly, obviously, the year-free line, but even post that. The relative savings of being a Charter subscriber and having Spectrum Plus or your mobile as well is very attractive compared to the alternatives.

Greg Mase: So I don't see Charter; you can't predict how the market will go entirely, but I don't see Charter offering or needing to offer the kind of subsidies that other people have because of the attractiveness that combined offering.

Greg Maffei: So I don't see Charter... can't predict how the market will go entirely, but I don't see Charter offering or needing to offer the kind of subsidies that other people have because of the attractiveness of the combined offer.

Bart and Croquet: Okay, thank you. Thank you.

Operator: Thank you. Our next questions come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Ben Swinburne: Thank you. Our next questions come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Ben Swenberg: Our next question has come from the line of Ben Swenberg with Morgan Stanley. Please proceed with your questions.

Ben Swenberg: Greg, I wanted to get your thoughts just generally on some of the action we're seeing competitively in telecom in the US, particularly Teamable's acquisition of or JVI, I guess I should say, with Lumus and Metronet. And how that impacts your perspective on Charter, both when we think about private and public market multiples, which obviously are pretty far apart right now. And this is just competitively whether you think the level of fiber and converged competition is something that is going to be potentially a headwind for Charter over time. Thanks so much. Yeah. Thanks for the question, Ben.

Greg Maffei: Greg, I wanted to get your thoughts just generally on some of the action we're seeing competitively in telecom in the U.S., particularly T-Mobile's acquisition of, or JV, I guess I should say, with Loomis and Metronet, and how that impacts sort of your perspective on charter, both when we think about kind of private and public market multiples, which are obviously pretty far apart right now, and this just competitively, whether, you Thanks so much.

Ben Swinburne: Thanks for the question, Ben. I think the actions of T-Mobile and, really, many of the mobile players talking about offering increased fiber activity is a validation of the need for fixed lines and that mobile alone is a less attractive proposition, and the combined offering that Charter has, with its broadband network and its MVNO relationship, is very attractive. When you look at these things that they're doing, they're mostly kind of around the edges.

Greg Mase: I think the actions of T-Mobile and really of many of the mobile players talking about offering a five or increased fiber activity is a validation of the need for fixed lines, and the mobile alone is a less attractive proposition. And with its broadband network and its ambient relationship, is very attractive. You, when you look at these things that they're doing, they're mostly kind of around the edges. They're not big time entrance. And in general, we've seen less activity in fiber buildouts, whether it's because you know, easy pickings are done or because some of the players who were more leopard players have slowed down or just competitive in the markets, we've not seen big optics.

Ben Swinburne: and the combined offering that Charter has, with its broadband network and its MVNO relationship, is very attractive. But when you look at these things that they're doing, they're mostly kind of around the edges. They're not big-time entrants, and in general, we've seen less activity in fiber build-outs, whether it's because the easy pickings are done, or because some of the players who were more levered players have slowed down, or just competitive in the markets. We haven't seen big upticks.

Ben Swinburne: They're not big-time entrants, and in general, we've seen less activity in fiber build-outs, whether it's because the easy pickings are done, or because some of the players who were more levered players have slowed down, or just competitive in the markets. We haven't seen big upticks. What we are seeing, though, is interest from those players in having a broadband fixed line. So I think it's a validation of Charter's strategy to be, first and foremost, a fixed line provider and then off that MP&O, which is very attractive, and it's a much more nibble around the edges for people like TMO with the JV that they're doing.

Greg Mase: But we are seeing though is interest from those players of being a broadband, of having a broadband fixed line. So I think it's a validation of charter strategy to be first and foremost a fixed line provider and then off that MBNO, which is very attractive. And it's a much more nibble around the edges for people like Timo with the JB that they're doing. Makes sense.

Ron Duncan: Makes sense. And I just had one follow-up question for Ron. Since he mentioned it, I was going to ask anyway, what's your view on sort of the AI phone cycles? That's another big debate. Do you think this is something consumers are going to be eager to acquire, or are you taking sort of the opposite, that maybe the market's a little ahead of itself on optimism here?

Ron Duncan: And I just had one follow to Ron. He mentioned that I was going to ask anyway. What's your view on sort of the AI phone cycles? That's another big debate. You think this is something consumers are going to be eager to acquire, or are you taking sort of the opposite that maybe the market's a little ahead of itself on optimism here? I think there's probably more optimism than is merited, but we're expecting a bigger than usual upgrade cycle this time around. In part because there really haven't been that many earth-shaking changes to the iOS app in the last several cycles.

Ben Swinburne: I think there's probably more optimism than is merited, but we're expecting a bigger than usual upgrade cycle this time around, in part because there really haven't been that many earth-shaking changes to the iOS app in the last several cycles, so the difference between a 12 and a 15 wasn't all that significant, and we've definitely seen reduced upgrades. As I said, we've seen our average cycle, our average turnover on a customer go from two years to something close to three years. I think there's enough buzz around the AI that regardless of how good it is, there is.

Ron Duncan: I think there's probably more optimism than is merited, but we're expecting a bigger than usual upgrade cycle this time around, in part because there really haven't been that many earth-shaking changes to the iOS app in the last several cycles, so the difference between a 12 and a 15 wasn't all that significant, and we've definitely seen reduced upgrades. As I said, we've seen our average cycle, our average turnover on a customer go from two years to something close to three years.

Ron Duncan: So the difference between 12 and 15 wasn't all that significant. And we've definitely seen reduced upgrades. As I said, we've seen our average cycle, our average turnover, and the customer go from two years to something close to three years. I think there's enough buzz around the AI that, regardless of how good the product really is, more people will try it this time. Whether it's a 50% increase over last time, I don't know. We're trying to assess that and prepare for how much inventory. But I definitely think that even if it's not real, the buzz will create more consumer interest than more people may try.

Ron Duncan: I think there's enough buzz around the AI that regardless of whether it's a 50% increase over last time, I don't know. We're trying to assess that and prepare for how much inventory, but I definitely think that even if it's not real, the buzz will create more consumer interest, and more people may try it.

Ron Duncan: Last time being the 5G upgrade cycle that you're referring to.

Ron Duncan: Last time being the 5G upgrade cycles that you're referring to. Yeah. Got it.

Ron Duncan: Yeah, yeah. Got it.

Ben Swinburne: Thanks a lot.

Ben Swenberg: Thanks a lot. Thank you.

Alex Nordhagen: Thank you. Our final questions will come from the line of Alex Nordhagen with Ballyasny Asset Management. Please proceed with your question.

Questioner: Great. Thank you very much for taking my question today. I have a question specifically regarding Liberty Tripadvisor, and that's with respect to the Series A preferred stock. Is the current expectation that this instrument will simply just remain outstanding past the end of March next year and accrue its dividend at the penalty rate of 12% versus the current 8%? Thank you.

Alex Nordhagen: Great. Thank you very much for taking my question today. I have a question specifically regarding Liberty Tripadvisor, and that's with respect to the Series A preferred stock. Is the current expectation that this instrument will simply just remain outstanding past the end of March next year and accrue its dividend at the penalty rate of 12% versus the current 8%? Thank you.

Alex Nordhagen: I have a question specifically regarding the TRIP Advisor. And with respect to the Series A preferred stock, these the current expectation to this instrument will simply just remain outstanding past early in the March next year and accrue its dividend at a penalty rate of 12% versus the current 8. Thank you. I think we're, as we've said, we're in discussions with Tripadvisor and with Surtaris about transactions that might arise. So I can't comment on whether that will be the result. All I can tell you is that there are active discussions between Surtaris, Tripadvisor, and ourselves. Okay.

Greg Maffei: Yeah, I think, uh... We're, as we've said, in discussions with TripAdvisor and with Sertari's about transactions that might arise, so I can't comment on whether that will be the result. All I can tell you is that there are active discussions between Sertari's, TripAdvisor, and ourselves.

Alex Nordhagen: Okay, great. Thank you. And just to follow up, if I may, would you like to share the opinion that some have that the Liberty Tripadvisor kind of holding structure of the trip shares weighs on Tripadvisor stock?

Alex Nordhagen: Great. Thank you. And just to follow up, if I may, would you like to share the opinion of somehow just the Liberty Tripadvisor kind of holding structure of the trip shares ways on Tripadvisor stock? I would, I think at this point, the potential issues around Liberty Tripadvisor are probably a cloud on the Tripadvisor's stock. That's probably a fair statement. Yes. All right. Thanks very much. Appreciate it.

Greg Maffei: I would think at this point the potential issues around Liberty Tripadvisor are probably a cloud on the Tripadvisor stock. That's probably a fair statement.

Operator: Welcome to the Liberty Broadband 2024 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 1 on your telephone keypad. As a reminder, this conference is being recorded today, August 8, 2024.

Fred: All right. Thanks very much, Fred. I appreciate it. Thank you.

Alex Nordhagen: All right. Thanks very much, Fred. I appreciate it. Thank you.

Operator: Thank you. Thank you to our listening audience for your interest in Liberty Broadband and Liberty Tripadvisor. We hope to speak with you next quarter. If not sooner.

Operator: Thank you to our listening audience for your interest in Liberty Broadband and Liberty Tripadvisor. We hope to speak with you next quarter, if not sooner.

Greg Maffei: Thank you to our listening audience for your interest in Liberty Broadband and Liberty Tripadvisor. We hope to speak with you next quarter, if not sooner.

Claire Adams: I would now like to turn the call over to Claire Adams, senior manager and investor relations. Please go ahead. Good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements in the meeting of the Private Security's litigation reform act of 1995. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent form 10K and 10K held by Liberty Broadband and Liberty Tripadvisor with the SEC.

Operator: Thank you. This does include today's teleconference. We appreciate your participation. You may.

Operator: 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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Claire Adams: Information regarding the comparable GAAP metrics, along with required definitions and reconciliation, including preliminary note and scheduled one and two, can be found in the earnings press release issue today, as well as earnings releases for prior periods, which are available on Liberty Broadband's website.

Greg Mase: Now I'd like to introduce Greg Mase, Liberty's President and CEO. Thank you, Claire. Good morning to all our listeners.

Greg Mase: Today, speaking of the call we will have, Liberty Broadband's Chief Accounting and Principal Financial Officer Brian Wendling, Ron Duncan, CEO of GCI and P-Pound, CEO of all of GCI will also be available to answer questions. And during Q&A, we will answer questions if there are any related to Liberty Tripadvisor.

Greg Mase: So beginning first with Liberty Broadband, in July, we issued 860 million of a three and eight charter exchangeables. We used the proceeds from that offering to pay 540 million under our charter margin loan and repurchased 300 million of our existing three and an eight exchangeables. We've also extended the margin loan maturity to 2027. And our 2020 set six debt maturities are now spread through 2028.

Greg Mase: As a result of these actions, we expect substantial savings. We resumed our sales at Liberty Broadband into Charters byback in June. With the proceeds, we will continue to take a prudent approach about retiring debt, and that is our current focus. We will also evaluate those LBRD bybacks as cash bills from charter share repurchases.

Greg Mase: Charters are looking at the underlying company. They had well-received strong results in the quarter against a competitive backdrop and the exploration of the ACP program. They reported a net subscriber loss of 149,000 broadband subs. But the majority of those were due to ACP, and the broadband trend did improve throughout the quarter with the lowest net loss in June. Charter reported solid evidence growth of 2.6% versus the prior year, and a hundred basis point margin improved. Management did a great job of expense management working with the growing realization impacts of that in the second quarter. They continue to manage the cost structure without sacrificing growth.

Greg Mase: Mobile achieved its profitability for the first time, an important milestone that reinforces the value of the mobile offering. Charter reported 557 mobile blinded additions. The Anytime Upgrade program is driving our poop as customers increasingly chose unlimited plus plan. The phone bio program for multi-line households to move more easily to spectrum mobile is also being very effective.

Greg Mase: We expect continued innovative growth to the back half of the year. We will see the AC impact mostly in the third quarter and some in the fourth but believe Charter is managing that transaction effectively. The cost and issues continue to support the highest margin to date and we do expect to see political spending ramp to the year. We also expect to see continued strong mobile performance. Charter reduced leverage during the quarter to 4.32 times and Charter expects to continue to move closer to the middle of the target of the four to four and a half times leverage range throughout the year.

Greg Mase: Turning down to Liberty Trip, we continue to evaluate strategic alternatives with TripAdvisor Special Committee and we will not be able to comment further until or unless the definitive documents are executed or discussions terminate. Looking at TripAdvisor itself, during the quarter it felt continued pressure on hotel medit, in brand TripAdvisor from both SCO and SCM's structural challenges with weaker demand and increased competition. However, positive early votes from strategy work launched last year are beginning to take hold.

Greg Mase: We have seen a growing share of app users and direct channel activity where there is more monetization opportunity available. Members using Trip's planning tool have a 15 times higher output than the platform wide average. Strategy is designed to make shift over time from legacy offerings to focus on member value, a differentiated app experience, and engaging product features. For example, AI-powered review summaries and hotel booking directly into the app and user upgrades are much more effective and better monetization opportunities for us.

Greg Mase: Looking at the other businesses within Trip, but via tour in the fork both increase their competition, contribution rather to the profit mix, via tour saw a doubling of active bookers who log into the app, which led to higher conversion, better repeat rates, and GBV growth.

Brian Wendling: So with that, I will turn it over to Brian to discuss it. Thank you Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalent of $73 million, which includes $47 million of cash at GCI. The value of our charter investment based on our share's health is of August 1 in charter share price as of yesterday's close was $16.2 billion, and at quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion including the debt at GCI.

Brian Wendling: Note that this excludes the preferred stock. Looking quickly at GCI, revenue is up a million over the prior year driven by continued strength and data sales, particularly to our rural health care and school customers, partially offset by declines in wireless and other revenue. Adjusted oivated decreased 6 million due to higher operating costs as well as increased SGA expense from labor-related costs and increased professional services. Over the last year adjusted for the reclassification from GCI business, GCI consumers saw the decline of a 1,000 revenue generating wireless subs, cable modem subscribers declined by 2,500, mostly driven by the expiration of the ACP program.

Brian Wendling: During the quarter, GCI distributed a 150 million delivery broadband, funded with cash on hand and drawing under its revolver. These proceeds were used to pay down the Charter Margin loan and were therefore net net new troll delivery broadband. The quarter end GCI's leverage was at 3.2 times with sufficient cushion in relation to the 6.5 times maximum net leverage covenant threshold, stipulated in the credit facility.

Brian Wendling: We had 347 million of undrawn capacity under the GCI revolver net of letters of credit.

Greg Mase: With that, I'll turn the call back over to Greg. Thanks, fine.

Greg Mase: Our annual investment today will be Thursday to number 14 in New York. No, we move to a new location. See you at the Jazz and Lincoln Center. Save the date. Additional details will be for coming soon. We hope to see many of you there.

Operator: And with that operator, I'll open the line for questions. Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. May press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Bart and Croquet: Our first questions come from the line of Bart and Croquet with Rosenblatt securities. Please proceed with your questions. Okay, thank you for taking my questions. There were a couple of things I was kind of interested in. We can address them here.

Ron Duncan: One is I'm curious about the wireless business at GCI and then perhaps a longer term thought for charter. So my question is this is to what degree is GCI, you know, really focused on subsidizing kind of device purchases. Just update us on that as we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16. And you know, and also if you have any thoughts about what you expect there in terms of the size of that cycle for GCI and then, you know, for charter and I guess over to Greg.

Ron Duncan: Just more broadly, I mean, obviously charters not doing the device subsidies, you know, at the level that the major wireless carriers are today. But, you know, one could imagine over time as the charter and the cable peers get bigger and wireless that they all want to, you know, compete in more kind of toe to toe on that basis. And I was just wondering, you know, Greg, if you agree that that's going to be the general direction and if so, you know, any thoughts about how the road there might progress slowly quickly, any steps that could kind of transition you transition you over there. Thanks, Barton Godd.

Ron Duncan: Ron, do you want to take the GCI wireless part of that? Sure, I can do that and obviously Barton is you know GCI is a mobile network operator, not an MBNO like Charter, so we have a different cost structure. We've got a much higher gross margin in the top percentage because we own the network. We're not paying somebody else for it. We've also got a much higher market share at this point than Charter does.

Ron Duncan: We're probably 40% of the Alaska mobile market overall and it's one of our two core businesses along with consumer businesses along with consumer data. As such, we pretty much have to match or at least be competitive with the majors and our principal competitors AT&T Verizon is not a material player in the market up there. So we pretty much have to match AT&T device subsidies in order to avoid losing subs to them when there's a refresh cycle.

Ron Duncan: In the last couple of years, we've extended the device subsidies from two year contracts to three year contracts. That's given us a little lower turnover and a little more stability. We're evaluating right now, but we think that if there's an accelerated device cycle this fall as a result of AI features, particularly in the Apple phones, it may be an opportunity to grab some more share. We've got a better network in Anchorage and most of Alaska than AT&T does.

Ron Duncan: People choose us for that reason and we've trying to figure out whether enhancing device subsidies a little bit would allow us to gain more share. If we were relatively competitive with AT&T, we'd keep the low margin of the low cost portion of the customer base, but we wouldn't be able to maintain the 40% statewide market share.

Greg Mase: Greg, back to you. Thanks, Ron. So I think as you rightly know, Charter has not had to offer the kind of subsidies for hand sets that many other competitors in the local space have. I think that's largely because of the attractive pricing of the Spectrum Plus offering, particularly obviously the year-free line, but even post that. The relative savings of being a Charter subscriber and having Spectrum Plus or your mobile as well is very attractive compared to the alternatives.

Greg Mase: So I don't see Charter, you can't predict how the market will go entirely, but I don't see Charter offering or needing to offer the kind of subsidies that other people have because of the attractiveness that combined offering.

Bart and Croquet: Okay, thank you.

Operator: Thank you.

Ben Swenberg: Our next question has come from the line of Ben Swenberg with Morgan Stanley. Please proceed with your questions.

Greg Mase: Greg, I wanted to get your thoughts just generally on some of the action we're seeing competitively in telecom in the US, particularly teamables acquisition of or JVI, I guess I should say, with Lumus and Metronet. And how that impacts your perspective on Charter, both when we think about private and public market multiples, which obviously are pretty far apart right now. And this is just competitively whether you think the level of fiber and converged competition is something that is going to be potentially a headwind for Charter over time.

Greg Mase: Thanks so much. Yeah. Thanks for the question, Ben. I think the actions of T-Mobile and really of many of the mobile players talking about offering a five or increased fiber activity is a validation of the need for fixed lines and the mobile alone is a less attractive proposition. And with its broadband network and its ambient relationship is very attractive. You when you look at these things that they're doing, they're mostly kind of around the edges.

Greg Mase: They're not big time entrance. And in general, we've seen less activity in fiber buildouts, whether it's because you know, easy pickings are done or because some of the players who were more leopard players have slowed down or just competitive in the markets, we've not seen big optics. But we are seeing though is interest from those players of being a broadband, of having a broadband fixed line. So I think it's a validation of charter strategy to be first and foremost a fixed line provider and then off that MBNO, which is very attractive. And it's a much more nibble around the edges for people like Timo with the JB that they're doing. Makes sense.

Ron Duncan: And I just had one follow to Ron. He mentioned that I was going to ask anyway, what's your view on sort of the AI phone cycles? That's another big debate.

Ron Duncan: You think this is something consumers are going to be eager to to acquire or are you taking sort of the opposite that maybe the markets a little ahead of itself on optimism here? I think there's probably more optimism than is merited but we're expecting a bigger than usual upgrade cycle this time around. In part because there really haven't been that many earth shaking changes to the iOS app in the last several cycles.

Ron Duncan: So the difference between 12 and 15 wasn't all that significant. And we've definitely seen reduced upgrades. As I said, we've seen our average cycle, our average turnover and the customer go from two years to something close to three years. I think there's enough buzz around the AI that regardless of how good the product really is, more people will try it this time. Whether it's a 50% increase over last time, I don't know. We're trying to assess that and prepare for how much inventory. But I definitely think that even if it's not real, the buzz will create more consumer interest than more people may try.

Ron Duncan: Last time being the 5G upgrade cycles that you're referring to. Yeah. Got it.

Ben Swenberg: Thanks a lot. Thank you.

Alex Nordhagen: Our final questions will come from the line of Alex Nordhagen with Valley Asni Asset Management. Please proceed with your questions. Great. Thanks very much for taking my question today. I have a question specifically regarding the TRIP Advisor. And with respect to the Series A preferred stock, these the current expectation to this instrument will simply just remain outstanding past early in the March next year and accrue its dividend at a penalty rate of 12% versus the current 8.

Alex Nordhagen: Thank you. I think we're, as we've said, we're in discussions with Tripadvisor and with Surtaris about transactions that might arise. So I can't comment on whether that will be the result. All I can tell you is is that there are active discussions between Surtaris Tripadvisor and ourselves. Okay. Great. Thank you. And just to follow up if I may, would you like to share the opinion of somehow just the Liberty Tripadvisor kind of holding structure of the trip shares ways on Tripadvisor stock? I would, I think at this point, the potential issues around Liberty Tripadvisor are probably a cloud on the Tripadvisor's stock. That's probably a fair statement. Yes. All right. Thanks very much. Appreciate it. Thank you.

Greg Mase: Thank you to our listening audience for your interest in Liberty Broadband and Liberty Tripadvisor. We hope to speak with you next quarter. If not sooner. Thank you. This does include today's teleconference. We appreciate your participation. You may

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