Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported second quarter 2022 results.
Headlines include(1):
- Fair value of Charter investment was $23.5 billion as of June
30th
- From May 1st through July 31st Liberty Broadband received $1.1
billion of proceeds from sale of 2.2 million Charter shares to
Charter
- Maintained fully diluted equity interest in Charter of
26%(2)
- From May 1st through July 31st, Liberty Broadband repurchased
9.0 million LBRDA/K shares at an average price per share of $116.40
for total cash consideration of $1.0 billion
- In the second quarter, GCI(3) revenue was flat at $238 million,
generated $10 million in operating income and grew adjusted
OIBDA(4) 1% to $90 million
Share Repurchases
From May 1, 2022 through July 31, 2022, Liberty Broadband
repurchased approximately 6.3 million shares of Series C Liberty
Broadband common stock (Nasdaq: LBRDK) at an average cost per share
of $117.40 for total cash consideration of $737 million and
repurchased approximately 2.7 million shares of Series A Liberty
Broadband common stock (Nasdaq: LBRDA) at an average cost per share
of $114.08 for total cash consideration of $310 million. The total
remaining repurchase authorization for Liberty Broadband as of
August 1, 2022 is approximately $700 million.
Charter Ownership
Under the terms of Liberty Broadband and Charter’s stockholder
agreement, Liberty Broadband has sold and will continue to sell to
Charter a number of shares of Class A common stock as is necessary
to maintain Liberty Broadband’s percentage equity interest at 26%
on a fully diluted basis. Such sales are executed by Liberty
Broadband monthly based on Charter’s repurchase activity in the
month prior.
From May 1, 2022 through July 31, 2022, Liberty Broadband sold
approximately 2.2 million shares of Charter Class A common stock to
Charter for total proceeds of approximately $1.1 billion.
Balance Sheet
The following presentation is provided to separately identify
cash and liquid investments, debt and public holdings of Liberty
Broadband as of March 31, 2022 and June 30, 2022.
(amounts in millions)
3/31/2022
6/30/2022
Cash and Cash Equivalents:
GCI Holdings
$
111
$
80
Corporate and Other
189
221
Total Liberty Broadband Consolidated
Cash
$
300
$
301
Fair Value of Public Holdings in
Charter(a)
$
28,595
$
23,502
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
399
398
Tower Obligations and Other(c)
97
95
Total GCI Holdings Debt
$
1,096
$
1,093
GCI Leverage(d)
2.9x
2.9x
Charter Margin Loan
$
1,600
$
1,400
1.25% Exchangeable Senior Debentures due
2050(e)
825
825
1.75% Exchangeable Senior Debentures due
2046(e)
15
15
2.75% Exchangeable Senior Debentures due
2050(e)
575
575
Total Corporate Level Debt
$
3,015
$
2,815
Total Liberty Broadband Debt
$
4,111
$
3,908
Fair market value adjustment and deferred
loan costs
(6
)
(45
)
Tower obligations and finance leases
(excluded from GAAP Debt)
(91
)
(90
)
Total Liberty Broadband Debt
(GAAP)
$
4,014
$
3,773
Other Financial Obligations:
Indemnification Obligation(f)
$
239
$
175
Preferred Stock(g)
180
180
_______________________
a)
Represents fair value of the investment in
Charter as of March 31, 2022 and June 30, 2022. A portion of the
Charter equity securities are considered covered shares and subject
to certain contractual restrictions in accordance with the
indemnification obligation, as described below.
b)
Principal amount of Senior Notes.
c)
Includes the Wells Fargo Note Payable and
current and long-term obligations under finance leases and tower
obligations.
d)
As defined in GCI's credit agreement.
e)
Principal amount of Senior Exchangeable
Debentures exclusive of fair market value adjustments.
f)
Indemnity to Qurate Retail, Inc. (“Qurate
Retail”), pursuant to an indemnification agreement (the
"indemnification agreement"), with respect to the Liberty
Interactive LLC ("LI LLC") 1.75% exchangeable debentures due 2046
(the "Charter exchangeable debentures"), as described below.
g)
Liquidation value of preferred stock.
Preferred stock has a 7% coupon, $25/share liquidation preference
plus accrued and unpaid dividends and 1/3 vote per share. The
redemption date is the first business day following March 8, 2039.
The preferred stock is considered a liability for GAAP
purposes.
Liberty Broadband cash was flat in the second quarter. The
primary sources of cash were Charter share sales in the period and
proceeds from the sale of Skyhook Holdings, Inc. (“Skyhook”),
offset by share repurchases and debt repayment at Liberty
Broadband. GCI cash decreased $31 million in the second quarter as
cash from operations was more than offset by a $70 million dividend
paid to Liberty Broadband and capital expenditures during the
quarter.
Skyhook was a wholly owned subsidiary of Liberty Broadband until
its sale on May 2, 2022 for aggregate consideration of
approximately $194 million, including amounts held in escrow of
approximately $23 million. Liberty Broadband recognized a gain on
the sale of $179 million, net of fees contingent upon closing, in
the second quarter of 2022, which is recorded in Gain (loss) on
dispositions, net in the accompanying condensed consolidated
statement of operations.
Liberty Broadband debt decreased $203 million in the second
quarter due to repayment on the Charter margin loan. There is $900
million available capacity under the Charter margin loan. GCI’s
credit facility has undrawn capacity of $397 million (net of
letters of credit), and GCI’s leverage as defined in its credit
agreement is 2.9x.
Liberty Broadband has an indemnification agreement with Qurate
Retail with respect to Qurate Retail’s Charter exchangeable
debentures. Pursuant to the indemnification agreement, Liberty
Broadband will compensate Qurate Retail for any payments made in
excess of the adjusted principal amount of the LI LLC Charter
exchangeable debentures to any holder that exercises its exchange
right on or before the put/call date of October 5, 2023. This
indemnity is supported by a negative pledge in favor of Qurate
Retail on the reference shares of Class A common stock of Charter
held at Liberty Broadband that underlie the LI LLC Charter
exchangeable debentures. The indemnification obligation on Liberty
Broadband’s balance sheet is valued based on the estimated exchange
feature in the LI LLC Charter exchangeable debentures. As of June
30, 2022, a holder of the LI LLC Charter exchangeable debentures
has the ability to exchange, and accordingly, the indemnification
obligation is classified as a current liability.
GCI Operating and
Financial Results
2Q21
2Q22
% Change
(amounts in millions, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
120
$
117
(3
)%
Business
118
121
3
%
Total revenue
$
238
$
238
-
%
Operating income
$
18
$
10
(44
)%
Operating income margin (%)
7.4
%
4.2
%
(320
)bps
Adjusted OIBDA(a)
$
89
$
90
1
%
Adjusted OIBDA margin(a) (%)
37.3
%
37.8
%
50
bps
GCI Consumer
Financial Metrics
Revenue
Wireless
$
45
$
47
4
%
Data
53
57
8
%
Other
22
13
(41
)%
Total revenue
$
120
$
117
(3
)%
Operating Metrics
Wireless:
Revenue generating lines in service(b)
189,100
194,000
3
%
Data:
Revenue generating cable modem
subscribers(c)
145,400
154,500
6
%
GCI Business
Financial Metrics
Revenue
Wireless
$
20
$
13
(35
)%
Data
87
97
11
%
Other
11
11
-
%
Total revenue
$
118
$
121
3
%
_______________________
a)
See reconciling schedule 1.
b)
A revenue generating wireless line in
service is defined as a wireless device with a monthly fee for
services.
c)
A revenue generating cable modem
subscriber is defined by the purchase of cable modem service
regardless of the level of service purchased.
Unless otherwise noted, the following discussion compares
financial information for the three months ended June 30, 2022 to
the same period in 2021.
GCI revenue was flat in the second quarter. Consumer revenue was
down 3% driven by significant declines in the lower margin video
and voice products included in Other consumer revenue, partially
offset by 4% and 8% growth in consumer wireless and data revenue,
respectively. Business revenue was up 3% with growth in data
revenue more than offsetting the impact of extending a roaming
wireless contract with a large partner in the fourth quarter of
2021, which results in lower quarterly and annual revenue in 2022,
but will benefit GCI from the extension of the agreement for
several years as well as the continued receipt of backhaul services
for GCI’s network post expiration. The previous agreement was
expected to be terminated in 2022.
Operating income declined in the second quarter due to a $10
million accrual for a potential litigation settlement and adjusted
OIBDA grew 1% primarily due to mix shift into higher margin
revenue.
In the second quarter, GCI spent $55 million on capital
expenditures, including accrued capital expenditures. Capital
expenditure spending was related primarily to improvements to the
wireless and hybrid fiber coax networks. GCI's net capital
expenditures for the full year 2022 are expected to be
approximately $150 million.
FOOTNOTES
1)
Liberty Broadband will discuss these
highlights and other matters on Liberty Broadband's earnings
conference call that will begin at 11:15 a.m. (E.D.T.) on August 5,
2022. For information regarding how to access the call, please see
“Important Notice” later in this document.
2)
Calculated pursuant to Liberty Broadband
and Charter’s stockholder agreement.
3)
Liberty Broadband’s principal operating
asset is GCI Holdings, LLC (“GCI” or “GCI Holdings”), Alaska's
largest communications provider, and also holds an interest in
Charter Communications, Inc. ("Charter").
4)
For a definition of adjusted OIBDA and
adjusted OIBDA margin and applicable reconciliations, see the
accompanying schedules.
NOTES
LIBERTY BROADBAND
FINANCIAL METRICS
(amounts in millions)
2Q21
2Q22
Revenue
GCI Holdings
$
238
$
238
Corporate and other
4
1
Total Liberty Broadband Revenue
$
242
$
239
Operating Income (Loss)
GCI Holdings
$
18
$
10
Corporate and other
(20
)
(11
)
Total Liberty Broadband Operating
Income (Loss)
$
(2
)
$
(1
)
Adjusted OIBDA (Loss)
GCI Holdings
$
89
$
90
Corporate and other
(14
)
(7
)
Total Liberty Broadband Adjusted OIBDA
(Loss)
$
75
$
83
Important Notice: Liberty Broadband (Nasdaq: LBRDA,
LBRDK, LBRDP) will discuss Liberty Broadband’s earnings release on
a conference call which will begin at 11:15 a.m. (E.D.T.) on August
5, 2022. The call can be accessed by dialing (800) 458-4121 or
(323) 794-2093, passcode 5262692, at least 10 minutes prior to the
start time. The call will also be broadcast live across the
Internet and archived on our website. To access the webcast go to
https://www.libertybroadband.com/investors/news-events/ir-calendar.
Links to this press release and replays of the call will also be
available on Liberty Broadband’s website.
This press release includes certain forward-looking statements
under the Private Securities Litigation Reform Act of 1995,
including statements about business strategies, market potential,
future financial prospects, capital expenditures, matters relating
to Liberty Broadband’s equity interest in Charter and Charter’s
buyback of common stock, Liberty Broadband’s participation in
Charter’s buyback of common stock, indemnification by Liberty
Broadband, the continuation of our stock repurchase program,
benefits from extending a roaming contract, backhaul services and
other matters that are not historical facts. These forward-looking
statements involve many risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statements, including, without limitation, possible changes
in market acceptance of new products or services, competitive
issues, regulatory matters affecting our businesses, continued
access to capital on terms acceptable to Liberty Broadband, changes
in law and government regulations, the availability of investment
opportunities, general market conditions (including as a result of
COVID-19) and market conditions conducive to stock repurchases.
These forward-looking statements speak only as of the date of this
press release, and Liberty Broadband expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any
change in Liberty Broadband's expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based. Please refer to the publicly filed documents of
Liberty Broadband, including the most recent Forms 10-K and 10-Q,
for additional information about Liberty Broadband and about the
risks and uncertainties related to Liberty Broadband which may
affect the statements made in this press release.
NON-GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our
financial results, this press release includes a presentation of
adjusted OIBDA, which is a non-GAAP financial measure, for Liberty
Broadband (and certain of its subsidiaries) and GCI Holdings
together with a reconciliation to that entity or such businesses’
operating income, as determined under GAAP. Liberty Broadband
defines adjusted OIBDA as operating income (loss) plus depreciation
and amortization, stock-based compensation, transaction costs,
separately reported litigation settlements, restructuring,
acquisition and other related costs and impairment charges.
Further, this press release includes adjusted OIBDA margin which is
also a non-GAAP financial measure. Liberty Broadband defines
adjusted OIBDA margin as adjusted OIBDA divided by revenue.
Liberty Broadband believes adjusted OIBDA is an important
indicator of the operational strength and performance of its
businesses by identifying those items that are not directly a
reflection of each business' performance or indicative of ongoing
business trends. In addition, this measure allows management to
view operating results and perform analytical comparisons and
benchmarking between businesses and identify strategies to improve
performance. Because adjusted OIBDA is used as a measure of
operating performance, Liberty Broadband views operating income as
the most directly comparable GAAP measure. Adjusted OIBDA is not
meant to replace or supersede operating income or any other GAAP
measure, but rather to supplement such GAAP measures in order to
present investors with the same information that Liberty
Broadband’s management considers in assessing the results of
operations and performance of its assets. Please see the tables
below for applicable reconciliations.
SCHEDULE 1
The following table provides a reconciliation of GCI’s operating
income to its adjusted OIBDA for the three months ended June 30,
2021 and June 30, 2022, respectively.
GCI HOLDINGS
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
2Q21
2Q22
GCI Holdings Operating Income
$
18
$
10
Depreciation and amortization
67
66
Stock-based compensation
4
4
Litigation settlement(a)
—
10
GCI Holdings Adjusted OIBDA
$
89
$
90
_______________________
a)
GCI recorded a $10 million settlement
expense in June 2022 related to legal proceedings with the
Department of Justice on Rural Healthcare matters that commenced in
2019.
SCHEDULE 2
The following table provides a reconciliation of operating
income (loss) calculated in accordance with GAAP to adjusted OIBDA
for Liberty Broadband for the three months ended June 30, 2021 and
June 30, 2022, respectively.
LIBERTY BROADBAND
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
2Q21
2Q22
Liberty Broadband Operating Income
(Loss)
$
(2
)
$
(1
)
Depreciation and amortization
67
65
Stock-based compensation
10
9
Litigation settlement(a)
—
10
Liberty Broadband Adjusted OIBDA
(Loss)
$
75
$
83
GCI Holdings
$
89
90
Corporate and other
(14
)
(7
)
_______________________
a)
GCI recorded a $10 million settlement
expense in June 2022 related to legal proceedings with the
Department of Justice on Rural Healthcare matters that commenced in
2019.
LIBERTY BROADBAND
CORPORATION
BALANCE SHEET
INFORMATION
(unaudited)
June 30,
December 31,
2022
2021
amounts in millions,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
301
191
Trade and other receivables, net of
allowance for credit losses of $4 and $4, respectively
179
206
Prepaid and other current assets
71
62
Total current assets
551
459
Investment in Charter, accounted for using
the equity method
12,051
13,260
Property and equipment, net
1,013
1,031
Intangible assets not subject to
amortization
Goodwill
755
762
Cable certificates
550
550
Other
37
37
Intangible assets subject to amortization,
net
546
573
Tax sharing receivable
44
86
Other assets, net
191
210
Total assets
$
15,738
16,968
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
100
99
Deferred revenue
21
25
Current portion of debt, including zero
and $25 measured at fair value, respectively
3
28
Indemnification obligation
175
324
Other current liabilities
149
106
Total current liabilities
448
582
Long-term debt, net, including $1,342 and
$1,403 measured at fair value, respectively
3,770
3,733
Obligations under finance leases and tower
obligations, excluding current portion
88
89
Long-term deferred revenue
36
35
Deferred income tax liabilities
1,999
1,998
Preferred stock
203
203
Other liabilities
166
189
Total liabilities
6,710
6,829
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 21,633,055
and 23,232,342 at June 30, 2022 and December 31, 2021,
respectively
—
—
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,328,901 and
2,544,548 at June 30, 2022 and December 31, 2021, respectively
—
—
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 132,311,691
and 144,854,780 at June 30, 2022 and December 31, 2021,
respectively
1
1
Additional paid-in capital
4,319
6,214
Accumulated other comprehensive earnings,
net of taxes
30
14
Retained earnings
4,662
3,898
Total stockholders' equity
9,012
10,127
Non-controlling interests
16
12
Total equity
9,028
10,139
Commitments and contingencies
Total liabilities and equity
$
15,738
16,968
LIBERTY BROADBAND
CORPORATION
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
June 30,
2022
2021
amounts in millions, except
per share amounts
Revenue
$
239
242
Operating costs and expenses:
Operating expense (exclusive of
depreciation and amortization shown separately below)
60
67
Selling, general and administrative,
including stock-based compensation
105
110
Depreciation and amortization
65
67
Litigation settlement, net of
recoveries
10
—
240
244
Operating income (loss)
(1
)
(2
)
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(30
)
(29
)
Share of earnings (losses) of
affiliate
386
249
Gain (loss) on dilution of investment in
affiliate
(11
)
(15
)
Realized and unrealized gains (losses) on
financial instruments, net
77
(125
)
Gain (loss) on dispositions, net
179
—
Other, net
(18
)
23
Earnings (loss) before income taxes
582
101
Income tax benefit (expense)
(117
)
(45
)
Net earnings (loss)
465
56
Less net earnings (loss) attributable to
the non-controlling interests
—
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
465
56
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
2.89
0.30
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
2.87
0.30
LIBERTY BROADBAND
CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Six months ended
June 30,
2022
2021
amounts in millions
Cash flows from operating activities:
Net earnings (loss)
$
764
108
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
129
131
Stock-based compensation
18
20
Litigation settlement, net of
recoveries
10
110
Share of (earnings) losses of affiliate,
net
(689
)
(438
)
(Gain) loss on dilution of investment in
affiliate
67
97
Realized and unrealized (gains) losses on
financial instruments, net
(214
)
26
Deferred income tax expense (benefit)
1
(18
)
(Gain) loss on dispositions, net
(179
)
—
Other, net
(3
)
(2
)
Change in operating assets and
liabilities:
Current and other assets
113
137
Payables and other liabilities
1
(60
)
Net cash provided by (used in) operating
activities
18
111
Cash flows from investing activities:
Capital expenditures
(78
)
(50
)
Cash received for Charter shares
repurchased by Charter
1,806
1,762
Cash proceeds from dispositions, net
163
—
Other investing activities, net
4
2
Net cash provided by (used in) investing
activities
1,895
1,714
Cash flows from financing activities:
Borrowings of debt
300
717
Repayment of debt, finance leases and
tower obligations
(203
)
(1,781
)
Repurchases of Liberty Broadband common
stock
(1,890
)
(1,957
)
Other financing activities, net
(3
)
(2
)
Net cash provided by (used in) financing
activities
(1,796
)
(3,023
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
117
(1,198
)
Cash, cash equivalents and restricted
cash, beginning of period
206
1,433
Cash, cash equivalents and restricted
cash, end of period
$
323
235
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