Q2 2019 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the Jeep Liberty 2019, 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 one on your telephone.

As a reminder, this conference is being recorded August .

I would now like to turn the conference over to Courtney Chun cheese portfolio Officer, and senior Vice President 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.

Including those mentioned in our most recent forms 10-K, and 10-Q filed with the FTC.

These statements speak only as of the date of this call and you guys Liberty Liberty broadband.

We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein.

Reflect any change in Liberty.

<unk> expectations with regard there too or any change in events conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial.

Including adjusted OIBDA and adjusted OIBDA margin.

Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary notes and schedules why didn't you can be found in the earnings press release issued today, which is available on our website now I'd like to turn the call over president and CEO .

Thank you Courtney good afternoon to all of you.

Today speaking on the call. We will also have G.I. liberty's newly appointed principal financial Officer, Brian .

Well, I'll say Gee I CFO Pete pounds.

During the Q1 eight members of that team will also be available to answer questions related to Liberty broadband. So let me start with GE I Liberty and look at the G. I Q2 results.

We continue to operate in a challenging.

Difficult economic and regulatory environment.

Team has made.

Ah somebody out there there's a.

Getting a feedback here. So if you can mute whoever is.

Got that feedback has been great.

He has made strategic changes aren't focused on driving value to the core Alaska business and they continue to grow consumer data revenue and improved wireless and video projects products. You know, it's an exciting partnership with Ericsson to bring fight you Anchorage by the end of 2020.

Turning now to Lendingtree looking at second quarter results and had strong revenue growth, but experienced margin pressure in the mortgage and personal loans businesses.

There are some encouraging signs in the mortgage business and they were trying to mortgage growth on a sequential basis.

They are responding to challenges by shifting investments forward to take advantage of favorable revenue trained rent trends and gain market share.

And they're exchanging near term pressures on margins improved competitive positioning in the long term.

And finally over at Liberty broadband Chartlink and charter second quarter.

Continues to perform well and realize the benefits of a well executed integration of time Warner and bright house.

Customer relationships grew by over 1 million.

And they ended the quarter with half a million spectrum mobile lines.

And at most analyst forecasts.

EBITDA growth and declining capital intensity led to a 50% growth in cable free cash flow and they were purchased a billion dollars of stock in the quarter.

So with that let me turn it over to Brian willing to discuss the financials. Thanks, Greg at quarter end, you see I Liberty had consolidated cash and cash equivalents and 423 million.

Which includes 76 million of cash at <unk>.

The value of the public equity Securities Ajita I Liberty as of todays close was 7.4 billion, which includes our 2 billion dollar interest in charter $4.3 billion interest in Liberty broadband and $1 billion interest in lending tree.

At quarter end GC <unk> Liberty had total principal amount of debt of 3 billion, which includes a $900 million margin alone on the broadband shares the charter exchangeable debentures and 1.6 billion of debt.

Putting finance leases and tower obligations at GCA.

Do you see <unk> leverage as defined in its credit agreement was 6.2 times compared to a maximum allowable leverage of 6.5 times.

Additionally, during the quarter GCI issued $325 million of 6.625 unsecured bonds.

Due in 2024.

The proceeds from this offering were used to call GCR 6.75 unsecured bonds due 2021 in July .

You'll note that the proceeds were put into a trust in Q2. So the 2021 bonds are reflected as extinguished at quarter end.

As noted in the 10-Q GCI exceeded the incurrence based maximum leverage threshold and the terms of its senior notes and therefore doesn't have access to additional funding under the revolver, but we are confident we have enough cash on hand to operate the business are in compliance with our maintenance covenants with that I'll turn it over to Pete pounds.

Right.

First looking at our H.C. matters, we continue to pursue open appeals with the FCC, but we don't have any color at this time on the timing or resolution of those appeals.

I'd like to note that the FCC made a decision on August 1st to change how our H.C. support will be calculated starting in the 2021 funding year.

It is too early at this time to determine what the effect of this will be we'll be assessing the possible impacts over time as the methodology and the underlying data are developed.

On the state economy.

The Alaskan government has had and continues to have significant challenges getting to a state budget. This year.

The impasse out the capital has had a cooling effect on the economy, although the oil and tourism industries continued to perform well.

New product launches.

Since April we have launched significant new updates to our data wireless and video products, which has improved both customer value and revenues.

You may recall that we were unable to make significant changes for quite some time before our billing system conversion last August .

And for a period after the launch.

These new product updates have been well received so far and we're excited about other launches we have in the pipeline for later this year.

In June .

We also signed a significant contract with Ericsson to bring five band Fiveg service to Anchorage over the next year.

This should significantly improve both the coverage and speeds of our wireless network.

Focus on Alaska facilities.

During the quarter, we shut down our Seattle based business that provided telecom expertise to customers in the lower 48 states.

This allows us to focus on what we do best providing the best Telecom network in the state of Alaska.

This shutdown coupled with the very difficult reduction in force in April .

This has allowed us to meaningfully reduce our operating expenses.

Operating results.

Revenue was down by approximately 3% during the quarter with declines in rural health care and wireless being somewhat offset by increases in consumer data revenues.

Adjusted OIBDA was down approximately 5% for the quarter.

Excluding the $3 million year over year decline from the our HC customer that is currently under appeal adjusted OIBDA would have been flat.

As noted in the press release during the quarter, we made some changes to improve our access to additional satellite capacity, our access to backup satellite capacity and reduce our monthly cash expenditures.

However, in the process of making these positive changes to our network and free cash flow the accounting treatment change several of the underlying satellite leases from finance leases to operating leases.

The net result is that indebtedness from finance leases declined by approximately $23 million.

And our adjusted OIBDA is expected to decline on an annual basis spreads approximately $6 million.

The changes came into effect partway through the second quarter, resulting in the impact to the second quarter adjusted OIBDA of approximately $1 million.

Consumer.

Revenues were down by 2% with declines in voice video and wireless being partially offset by increases in data.

As customers migrated the faster more valuable plants.

Business.

Business revenues were down 5% due to declines in our HC revenue.

There were also revenue declines due to wholesale customers moving backhaul circuits off of our network and from the shutdown of our lower 48 business that I mentioned previously.

Capital expenditures.

For the year, we have invested $63 million and capital expenditures.

Expenditures were primarily for wireless network improvements fiber and hybrid fiber co ax improvements, we expect to spend approximately $140 million in capex in 2019.

I'll now turn the call back over to Greg.

Thanks, Pete and Brian .

As a reminder, all of you we will be holding our annual Investor meeting on November 21st in New York The link to Register Ross on the home page of our website.

We appreciate your continued interest in Liberty and with that I'd like to open it up for questions operator.

Thank you, Sir ladies and gentlemen, please press star one on your telephone keypad. If you have a question today, we'll take a question from Zack Silver B. Riley.

And it appears that Sac has disconnected at this time once again everyone.

It is star one if you have a question.

And everyone there appears to be no questions.

All right operator, thank you very much and thank you to our listening audience, we hope to speak to you next quarter if not sooner.

Once again that does conclude today's conference. Thank you all for your participation today you may now disconnect.