Liberty Broadband Corp (LBRDK) 2024 Q3 法說會逐字稿

Welcome to the Liberty Broadband 2024 Q3 earnings call. (Operator Instructions) As a reminder, this conference will be recorded today, November 7, 2024.

I would now like to turn the call over to Shane Clancy, SVP, Investor Relations. Please go ahead.

Thank you and 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. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in most recent forms 10-K and 10-Q filed by Liberty Broadband and Liberty TripAdvisor with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband and Liberty TripAdvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Liberty Broadband or Liberty TripAdvisor's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures to Liberty Broadband, including adjusted OIBDA. Information regarding the comparable GAAP metrics, along with 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 from prior periods, which are available on Liberty's website.

Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Good morning and thank you, Shane. 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 Pounds, CFO of GCI will also be available to answer questions. Also during Q&A, we will be available to answer questions related to Liberty TripAdvisor.

So beginning with Liberty Broadband, you may recall we filed a 13D with the SEC on September 23. It noted that Liberty Broadband and Charter were discussing a proposed all-stock transaction. The combination would rationalize the dual corporate structure, provide enhanced trading liquidity, provide clarity to both sets of shareholders with regard to the certainty of future transaction, and continue our strong partnership with Charter in the interim. Additional updates on any potential transaction will only be provided if and when the definitive terms are agreed upon.

I would note that the LBRD NAV discount has tightened considerably and since that filing is now in the mid-teens. Given ongoing discussions between Charter and Liberty Broadband, Charter did pause its buyback, which resulted in a limited amount of proceeds to Liberty Broadband from Charter sales during the period.

Looking now at Charter. Charter experienced strong subscriber results and accelerating financial growth in the third quarter. They experienced a 110,000 broadband -- or 110,000 broadband net loss would have been growth absent the impact of ACP. I think Charter is managing its ACP disruption well and anticipate October will be the last month of meaningful impact. Charter also experienced revenue growth of 1.6% and adjusted OIBDA growth of 3.6% during the quarter. They benefit from prior cost actions and the strong political ad cycle. I would note that residential ARPU was up 1.8%, which is an acceleration versus the recent trend.

Mobile continued to perform very well with 545,000 mobile net adds, which puts their base over 9 million lines. ARPU was growing in mobile due to the uptake of the Unlimited Plus tier plus was driven by the anytime upgrade program. Free cash flow was 1.6%, which was up 48% over the prior year. And net leverage was 4.22 times, slightly below the revised target. All of these were driven by high free cash flow generation and limited share repurchase activity.

Turning briefly to L Trip. Discussions are progressing with Trip and their special committee remain focused on the rationalization of our capital structure. As Trip mentioned on their call, they did not repurchase shares this quarter given the ongoing discussions with L Trip. We will provide an update on this transaction only when such discussions reach definitive conclusion. Our limited to what we can comment upon at this time. Given discussions, TripAdvisor has also elected not to present at Liberty's Investor Day. I will at that day make some remarks in the business since [Trip] will not be in attendance.

But looking at TripAdvisor itself now, brand TripAdvisor saw a positive growth from some of its product strategy work. MAUs returned to year-over-year growth year to date. The direct channel monthly active users was up 30% versus the prior year. This reflects Trip's ongoing efforts to increase engagement with updated app experience and engaging product features. For example, unique travel content, AI-powered review summaries, and hotel booking directly in the app.

Looking at this next segment, Viator experiences continue to balance growth in investment versus profit contribution, adjusted EBITDA was $30 million in the quarter, 11% margin. That was solid growth outside of search -- experienced solid growth outside of search and direct and low-cost channels, and they've continued to see stronger repeat bookings.

Turning briefly to the fourth. It was the best financial performance they had on record, with revenue up 17%; adjusted EBITDA of $5 million, which achieved a 10% margin, highest they've ever achieved; and they've had success adding B2B partnerships with MasterCard as well as a prior announcement with Vodafone. Trip has a robust liquidity picture. As of the end of the third quarter, they had approximately $1.1 billion of cash and just under $500 million of unborrowed revolver capacity.

So with that, I'll turn it over to Brian briefly to discuss the financials.

Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $168 million, which includes $47 million of cash at GCI. Value of our Charter investment based on our shares held as of November 1 and Charter share price at yesterday's close was at $18.6 billion. At quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion. Note that this excludes the preferred stock.

Looking quickly at GCI's results for the third quarter, revenue was up nicely, a $22 million increase over the prior year, driven by continued strength in data revenue. Business data revenue benefited from strong upgrade cycle in school and healthcare corporations in rural Alaska. Adjusted OIBDA increased $11 million, in line with the increased revenue, partially offset by some higher operating costs and SG&A expenses.

Over the last year, adjusted for the reclassification from GCI business, GCI consumer saw a decline of 1,800 revenue-generating wireless subscribers. Cable modem subscribers declined by 3,800, with 3,400 of these losses driven by the expiration of the ACP program. Quarter end, GCI's leverage was 3.1 times with sufficient cushion relative to the 6.5 times maximum leverage covenant threshold stipulated in the credit facility. They had 367 million of undrawn capacity under the revolver, net of letters of credit.

And with that, I will turn the call back over to Greg.

Thanks, Brian. To our listening audience, we look forward to seeing you on Thursday, November 14 for our annual investor meeting. You can tune in virtually or join us in person at our new location, Jazz at Lincoln Center. If you plan to attend in person, please make sure to register by Monday, November 11, as there will not be on-site registration. The link to register can be found on our website. John Malone and I will be hosting our annual Q&A session. If you'd like to submit questions in advance, you can e-mail investorday@libertymedia.com. We appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor.

And operator, with that, I'd like to open the line for questions.

(Operator Instructions) Ben Swinburne, Morgan Stanley.

Hey, Greg. On the Charter approach or the proposals, I guess the question I have is sort of why now? Obviously, we're seeing other kind of rationalization in the Liberty universe, but I'd love to just get you to step back and explain the thought processes moving forward. At least discussion-wise with this.

And also what kind of has to happen from a process point of view to allow Charter to get back in the market buying back stock, which obviously impacts Liberty and its ability to fund its own buybacks? And then I just want -- I don't know if Ron can comment on this, but is there anything we should be thinking about from a regulatory point of view around change of control in Alaska that's different than what we might see in the typical cable acquisition, telecom acquisition? Thanks a lot.

Thanks, Ben. I'll start up. Why now, I think we came up with a -- it's been proposed a structure that would work for both Charter and Liberty Broadband in terms of allowing us to tighten the discount, eliminate the dual corporate structure over time, but still provide support and a partnership in the interim until the closing. So I think it was at the meeting of the minds that this was an unattractive time for both parties to construct something that worked to eliminate -- to help both of our set of interests.

On the buyback, I think upon either the announcement of a signed deal or the cessation, if they were unable to reach a deal, they would be able to begin their buybacks again. But (inaudible) that would be my understanding. Ron, do you want to comment anything on Glasgow regulatory? I know you guys do have a unique regulator to have to go through approval.

We do and that actually makes it fairly simple up here. Our franchises and our certificates come from single-state agencies that are not municipally based. Well, as to a regulatory approval, if there was a change of control, would be small in comparison to the normal slip we'd have to go through at the federal level with the FCC. So not a significant issue on the state side.

Anything, Ron, on the trend for -- I actually don't know if you guys had FCC licenses, I apologize. But from a wireless point of view, anything we should be thinking about there?

So we have wireless, we have microwave, we have cable-landing licensees. We are flush with FCC stuff so there would be a normal FCC process in several different segments with the FCC.

Don Morel, Evercore ISI.

Good afternoon and thanks for taking the questions. Two quick ones on the Charter negotiations. And then since I assumed you can't share much more, a separate follow-up if I could. So on the negotiations, I wanted to see if you could help us think about where GCI fits into those discussions. Is there a realistic scenario where GCI is not included in a potential transaction or is that unlikely given what might be a desire to potentially avoid complications around? I don't know. Maybe taxes or having a separate drawn out process with another third party.

Relatedly, there's some confusion around the mid-2027 closed timeline that both companies referenced. Is there any more context you could provide on that timeline? And assuming GCI is included in the deal, is there any reason why that date can't be moved up? And then I have a follow-up.

Okay. So click on the -- I think I can't comment because you've seen that the two proposals had different use of GCI, and I can't comment until there's a resolution of those publicly.

On the question of the timing, I think that was outlined in the some of the letter so that went back and forth. The delayed timing was to accompany -- compensate for the regulatory process, give some opportunity to delever at Liberty Broadband, and to continue the partnership for a period of time where it's known that they'll eventually come together, but we can be supportive.

Understood. I appreciate that. And maybe switching gears a bit to topic where you might be able to speak a little bit more on. Greg, we've seen a number of announcements and targets over the last few months be announced from the telcos around their fiber and fixed wireless emissions. I assume you'll share a lot more of your views next week, but anything you could touch on in terms of how you see the broadband market and competitive dynamics evolving in the coming years, and where Charter sits within that as arguably we're the most attractive plays on convergence?

Yes, I think you touched the point as far as convergence. Charter is pursuing aggressively with their mobile offering, Spectrum One and the other offerings like that that they've done, which bring both broadband, video, and mobile together. Bringing that converged network is absolutely one of Charter's goals, to take advantage of the strength of the network they have. The upgrade program that they have with the high split, allowing symmetric broadband up and down is an important part of that. And I think it leverages Charter's strengths and the strength of their [co-act] network -- co-act and fiber network.

The trends in the marketplace suggest that we've seen less growth in FWA and more people looking at fixed plant and being desirous of fixed plant, and Charter believes (inaudible) that their plan, particularly after that high split, is going to be a powerful competitive weapon and make an attractive consumer offering.

Barton Crockett, Rosenblatt Securities.

I was curious about your thoughts on just antitrust in a Republican administration. Do you think if there was a relaxation of views on antitrust, would that open opportunities that would be meaningful for M&A around Charter, do you think? Or do you think you can already do what you want to do so that doesn't really matter?

Barton, as far as Charter being acquired, there are not that many [subsidize] targets out there. Most of them I suspect could have been accomplished even under the current regulatory regime. As far as other larger combinations, I think it's too soon to tell what would be allowed.

But could you see more convergence to build national networks? That should -- I think that would be be a competitive strength, could be interesting. Could you see more combinations reflect in that converged network? That would be interesting as well, potentially. But probably, it's more likely than not, just looking as a casual observer, that a new regulatory regime would be more open to that, but it's hard to know for certain.

I guess, operator, we are through with the questions. Thank you for our listening audience for their interest in Liberty Broadband and Liberty TripAdvisor. As I said, we look forward to seeing some of you in person and some of you virtually next week. And until then, be well.

Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.