Liberty Broadband Corp (LBRDK) 2021 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Liberty Broadband 2021 Quarter 2 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded, August 10 (sic) [August 6], and I'd now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer. Please go ahead.

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent 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 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 for 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 the earnings press release issued today, which is available on Liberty Broadband's website.

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

Thank you, Courtnee, and good morning to all our listeners. Today, speaking on the call, we will also have Liberty Broadband's Chief Accounting Officer and Principal Financial Officer, Brian Wendling. Also during Q&A, we will answer questions related to Liberty TripAdvisor, who hosted their earnings call earlier this morning. Ron Duncan, the CEO of GCI and Pete Pounds, the CFO of GCI, will also be available to answer questions.

So let me start with the numbers at Liberty Broadband itself. We continue to participate in Charter's buyback, holding our fully diluted ownership at 26%. From May 1 through July 31, we received $1.1 billion of proceeds. We used these proceeds plus additional cash held at LBRD to repurchase 7.5 million LBRDK shares for $1.3 billion over the same period at an average price per share of $167.17. This is a very attractive look-through price for Charter compared to the approximately -- of approximately $5.60 per share versus yesterday's close of $7.70 per share.

As we said before, Liberty Broadband is a very attractive levered play on Charter, and you can see that in our results, year-to-date, our LBRD repurchases plus strong performance in Charter have accreted our NAV per share almost 17% compared to Charter's growth of 15% over the same period. As we mentioned last quarter, we expect LBRD purchases -- repurchases on an annual basis to match or exceed the after tax proceeds from our Charter share sales. Notably, the Board also increased the buyback authorization at Liberty Broadband to $2.5 billion.

So turning to Charter itself, which had another quarter of great results. Residential revenue was up 6.9%, and still over 6% adjusting for last year's COVID impacts. Adjusted EBITDA was up 11.8%, the fourth consecutive quarter of double-digit EBITDA growth at Charter. We had another strong broadband quarter, with net adds of 400,000, up meaningfully compared to the second quarter of 2019, pre-COVID. In mobile, Charter added 265,000 new lines and is approaching a 3 million total lines after only 3 years of offering the service.

We are seeing a nice rebound in the segments that have been -- that were most affected by the pandemic. Notably, Charter is participating in a recovery of the advertising market, and advertising revenue was up 65% over 2020 and 4% over 2019. We also see a continued recovery in commercial revenue with strong growth of 5.6%.

So with that, let me turn it over to Liberty TripAdvisor. And at TripAdvisor, leisure travel is back. The U.S. continues to lead with our hotel auction revenue nearly reaching 2019 levels in the second quarter and trending positively throughout the quarter. Europe has picked up recently with hotel shoppers reaching approximately 75% of 2019 comparable levels, up 45% from the first quarter.

Consolidated monthly revenue as a percent of revenue of 2019 -- excuse me, consolidated monthly revenues as a percent of 2019 revenues continues to trend up, growing from 46% in April to 66% in June. EBITDA turned positive to $25 million in the second quarter, up $51 million from our first quarter results.

This was driven by the revenue recovery as well as cost discipline that were instituted during the pandemic. The majority of our 2020 fixed cost savings were expected to remain in place in 2021.

TRIP, during the pandemic, has been building the tools to be even more relevant as travel resumes. We are differentiating our offerings and experiences in dining. We've rolled out a redesigned TRIP app, and we continue to invest in TripAdvisor Plus subscription service. We expanded the TripAdvisor Plus to all customers, U.S. customers, in June, and we've entered into new partnerships to enhance the value proposition, including partnering with the first major OTA trip.com group, adding car rental benefits through Hertz and flight discounts through Dollar Flight Club.

You should expect we will continue to enhance the supply offering at TripAdvisor Plus through further OTA and direct hotel partnerships. 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 $219 million, which includes $41 million of cash at GCI. The value of our Charter investment based on the shares that we held on August 1, the Charter's closing price as of yesterday, was $43 billion. At quarter end, Liberty Broadband had a total principal amount of debt of $3.8 billion, which includes $1.2 billion of debt at GCI. During the quarter, we amended our Charter margin loan, reducing pricing 35 basis points and extending the maturity, by 2 years to May 2024.

In connection with the amendment, we repaid $850 million under the margin loan, leaving $1.15 billion of undrawn margin loan capacity.

GCI continued to delever, driven by strong results and an additional $30 million paid down on the revolver. Leverage as defined in its credit agreement was 3.3x as of quarter end. GCI has $452 million undrawn capacity on its line of credit. Note that the above amounts exclude the indemnification obligation and preferred stock.

Looking at GCI. GCI had a great second quarter. Revenue grew 7% and adjusted OIBDA grew 14% to $89 million, driven by continued strong demand for consumer wireless and data as well as business data. Operationally, GCI added over 10,000 consumer revenue-generating cable modem subscribers and nearly 10,000 consumer revenue-generating wireless subscribers over the past year.

With that, I'll turn it back over to Greg.

Thanks, Brian. An exciting news, our Investor Meeting will be held on Thursday, November 18. The full experience will be offered in person at the New York Times Center and virtually. Please save the date. Additional details will be provided soon. And please note that all in-person attendees must be fully vaccinated against COVID-19.

We appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor. And with that, I'd like to open the line for questions, operator.

(Operator Instructions) We'll now take the first question from James Ratcliffe at Evercore ISI.

One question for 2 people, if I could. Greg, regarding Charter and Ron regarding GCI. Can you talk about the -- what looks like to be the infrastructure bill and both -- what opportunities and what risks that comes with it for the 2 businesses?

Ron, I'll let you go first.

Thanks, Greg. I appreciate that. I think a lot is up in the air right now on the Infrastructure Bill in terms of exactly how it will impact the market up here. Obviously, we have a substantial number of locations that would fit in the unserved category. So they would be eligible for a funding under the proposal. There are some upside opportunities for GCI.

There are some facilities where we could expand our coverage, building fiber out to the Bethel area is something we've been trying to figure out how to put together for a long time. And we're working with one group now under the Tribal broadband program to see if that could come together. There's also some risks because there are likely to be some start-up operators coming in. I think it's hard for people to compete with just sections of our network, but clearly some risk for us, not necessarily of overbuilding, but a market disruption when you pour that much money that fast into the marketplace, it does create disruptions.

Also, I think, some real challenges in terms of the anticipated time frames. I think the -- what they anticipate in terms of the requirements for build are not particularly realistic in terms of available workforce, available equipment, available technology, but a lot more to be determined once there's a final version of the bill.

Yes. And I'd agree with Ron's comments, I think for Charter, the potential in certain markets, you have increased competition doing money being funded. I think there's going to be a rush of entities, whether it's states or municipalities thinking counties that thinking that they can enter the broadband business, whether they actually can, we'll see.

But there will be some probably impact on talent. As Ron pointed out, pouring all that money and expecting the time frames that things are going to get done, means, in a lot of cases, you'll be seeing people trying to hire installers or pick whatever you want, that is going to have an impact -- secondary impact on us in some of our markets.

The bill could have been, and there's still details to be worked out, as Ron rightly points out, the bill could have been far worse in terms of potential for encouraging either fiber only, 100 to 100 symmetric, muni overbuilds. All of those things are fairly mutated appears in terms of what the most radical elements would have liked. So all in all, I would say it's a TBD on a lot of things, but probably not as bad as it could have been.

We'll now take the next question from Matthew Harrigan of Benchmark.

Greg, given your very broad prism on TMT, former EA Board member, Xbox, Formula 1, AR. What's your perspective on really creating the apps to justify the demand from full gig broadband, not just the gaming sliver. But just overall, I mean, it's a nice marketing proposition, but it feels like there's a ways to go in terms of realizing the laying potential.

I'm making sure I understand, Matthew. Do I think there's going to be further opportunities around real-time gaming as networks get faster and demand gets higher? Is that...

Yes. Not just low latency gaming, but I mean -- I mean, just everything comes over your [trans hub] in terms of deals and start-ups and ventures and all that. I mean just starting off with gaming as a subset in AR, where do you think really justifies consumers paying up or ponying up for full gig or even faster broadband, which is kind of becoming (inaudible) where for a lot of entrants in the market right now?

Well, you're right that there are certainly customers who we very much appreciate who are buying things like a gig who probably don't need it, but can afford it and want to have the best. There's probably not that much demand for people really need a gig. But I would say the pandemic has pointed out that the demand is certainly very high.

The return path we treated somewhat cavalierly has become way more important in a world of Zoom. And I suspect that the people who have platforms like Zoom, whether it be WebEx or BlueJeans or Microsoft Teams, will continue to build those platforms up and they will require -- and there'll be more bandwidth consuming as they build them.

It truly is the case, and I think Charlie Ergen has been articulate about, that as you build that network, you'll see apps develop that are -- consume the available. You mentioned breadth of experience. I certainly spent a lot of years at Microsoft, where Intel would build a new chip with more processing power, and we would come up as others with new software, which utilize that power.

I do think there is a case of "Field of Dreams, build it and they will come." But I also think we've seen examples like, as I mentioned, all the things around the pandemic pushing the requirements of the network like things, like low latency gaming which are clearly going to benefit from increased speed. But I certainly wouldn't say I know them all today, where we could spec them all today.

Operator, I believe we have no other questions. So if that is the limit, we'll thank our listening audience, appreciate your continued interest in Liberty TripAdvisor and Liberty Broadband. And look forward to speaking with you again next quarter, if not earlier, and seeing you in November. Thank you, operator.

That concludes today's call. Thank you for your participation. You may now disconnect.