Liberty Broadband Corporation Q2 FY2024 earnings call

• Liberty Broadband issued $860 million of 3.125% Charter exchangeables in July, used proceeds to repay debt and repurchase exchangeables, extended margin loan maturity. Resumed sales into Charter's buyback and focusing on retiring debt.
• Charter had strong results in the quarter despite ACP program expiration, saw broadband trend improvement, solid EBITDA growth, margin improvement, mobile profitability achieved with 557 mobile line net additions.
• Liberty TripAdvisor is evaluating strategic alternatives, TripAdvisor faced pressure on Hotel Meta but strategy work beginning to take hold, Viator and TheFork increased profit mix contribution.

Liberty Broadband had consolidated cash and cash equivalents of $73 million at quarter end, with the value of its Charter investment as of August 1 and Charter share price as of yesterday's close at $16.2 billion. At quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion, including debt at GCI. For GCI, revenue was up $1 million over the prior year, driven by strength in data sales but offset by declines in wireless and other revenue. Adjusted OIBDA decreased $6 million due to higher operating costs and increased SG&A expense. GCI's leverage was at 3.2x with $347 million of undrawn capacity under its revolver.

• Expect substantial interest savings from debt actions. Anticipate continued EBITDA growth for Charter in the back half of the year. GCI's leverage is at 3.2x with sufficient cushion relative to credit facility covenant.

• Risks related to actual events or results differing materially from forward-looking statements, including those in recent SEC filings. Market competition risks affecting Charter and GCI's business.

Q: There were a couple of things I was kind of interested in. 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 kind of device purchases, just update us on that, if we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16? And also if you have any thoughts about what you expect there in terms of the size of that cycle for GCI? And then for Charter, and I guess over to Greg, just more broadly, I mean, obviously, Charter is not doing the device subsidies at the level that the major wireless carriers are today. But one could imagine over time, as the Charter and the cable peers get bigger in wireless that they will want to compete in more kind of toe-to-toe on that basis. and I was just wondering, 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, quickly? Any steps that could kind of transition you over there?

A: Thanks, Barton. Ron, do you want to take the GCI Wireless part of that? Ronald Duncan: Sure. I can do that. And obviously, Barton, 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. We're probably 40% of the Alaska mobile market overall, and it's one of our 2 core businesses along -- for 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. In the last couple of years, we've extended the device subsidies from 2-year contracts to 3-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 and 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. 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. Greg Maffei: 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 for your mobile as well is very attractive compared to the alternative. 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 they're attracting us with a combined offering.

Q: 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 Lumos 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 obviously are pretty far apart right now? And this 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?

A: Yes. Thanks for the question, Ben. I think the actions of T-Mobile and really of many of the mobile players talking about offering fiber -- 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. 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've not seen big upticks. What 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's strategy to be first and foremost, a fixed line provider and then off that MVNO, which is very attractive. And it's a much more nimble around the edge is for people like T-Mobile with the JV that they're doing.

Q: I have a question specifically regarding Liberty TripAdvisor. And that's with respect to the Series A preferred stock. Is the current expectation to 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%?

A: Yes. I think we're -- as we've said, we're in discussions with TripAdvisor and with Certares about transactions that might arise. So it's -- I can't comment on whether that will be the result. All I can tell you is that there are active discussions between Certares, TripAdvisor and ourselves.

Q: Okay. Great. And just a follow-up, if I may. Would you like share the opinion that somehow that just the Liberty TripAdvisor kind of holding structure of the Trip shares ways on TripAdvisor's stock?

A: 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.