Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported first quarter 2023 results.
Headlines include(1):
- Fair value of Charter investment was $16.8 billion as of March
31st
- Issued $1.3 billion aggregate principal amount of 3.125%
exchangeable senior debentures due 2053 and used net proceeds and
cash on hand to repurchase $1.4 billion of near-term
liabilities
- Liberty Broadband did not sell Charter shares to Charter from
February 1st through April 30th as its fully diluted equity
interest in Charter remained below 26%(2)
- From February 1st through April 30th, Liberty Broadband
repurchased 137 thousand LBRDA/K shares at an average price per
share of $92.84 for total cash consideration of $13 million
- In the first quarter, GCI(3) increased revenue 6% to $246
million, generated $29 million in operating income and grew
Adjusted OIBDA(4) 3% to $90 million
Share Repurchases
From February 1, 2023 through April 30, 2023, Liberty Broadband
repurchased 99 thousand shares of Series C Liberty Broadband common
stock (Nasdaq: LBRDK) at an average cost per share of $92.82 for
total cash consideration of $9 million and repurchased 38 thousand
shares of Series A Liberty Broadband common stock (Nasdaq: LBRDA)
at an average cost per share of $92.88 for total cash consideration
of $4 million. The total remaining repurchase authorization for
Liberty Broadband as of May 1, 2023 is approximately $2.0
billion.
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 February 1, 2023 through April 30, 2023, Liberty Broadband
did not sell any Charter shares to Charter as its fully diluted
equity interest in Charter for the period was below 26%.
Balance Sheet
The following presentation is provided to separately identify
cash and liquid investments, debt and public holdings of Liberty
Broadband as of December 31, 2022 and March 31, 2023.
(amounts in millions)
12/31/2022
3/31/2023
Cash and Cash Equivalents:
GCI Holdings
$
85
$
59
Corporate and Other
290
110
Total Liberty Broadband Consolidated
Cash
$
375
$
169
Fair Value of Public Holdings in
Charter(a)
$
16,012
$
16,843
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
397
396
Tower Obligations and Other(c)
94
93
Total GCI Holdings Debt
$
1,091
$
1,089
GCI Leverage(d)
2.8x
2.9x
Charter Margin Loan
$
1,400
$
1,400
3.125% Exchangeable Senior Debentures due
2053(e)
—
1,265
1.25% Exchangeable Senior Debentures due
2050(e)
825
2
1.75% Exchangeable Senior Debentures due
2046(e)
15
—
2.75% Exchangeable Senior Debentures due
2050(e)
575
—
Total Corporate Level Debt
$
2,815
$
2,667
Total Liberty Broadband Debt
$
3,906
$
3,756
Fair market value adjustment and deferred
loan costs
(16
)
11
Tower obligations and finance leases
(excluded from GAAP Debt)
(89
)
(88
)
Total Liberty Broadband Debt
(GAAP)
$
3,801
$
3,679
Other Financial Obligations:
Indemnification Obligation(f)
$
50
$
29
Preferred Stock(g)
180
180
____________________
a)
Represents fair value of the investment in
Charter as of December 31, 2022 and March 31, 2023. 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 tower obligations and
finance leases.
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 "LI LLC Charter exchangeable debentures"), as described below.
LI LLC is a wholly owned subsidiary of Qurate Retail.
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 decreased $206 million in the first
quarter due to repurchases of the 1.75%, 2.75% and 1.25% debentures
(described below), partially offset by proceeds from the issuance
of $1,265 million principal amount of 3.125% exchangeable senior
debentures due 2053. GCI cash decreased $26 million in the first
quarter as cash from operations was more than offset by a $40
million dividend paid to Liberty Broadband and capital expenditures
during the quarter.
Liberty Broadband debt decreased $150 million in the first
quarter due to the repurchases of (i) $15 million aggregate
principal of all outstanding 1.75% exchangeable senior debentures
due 2046, (ii) $575 million aggregate principal of all outstanding
2.75% exchangeable senior debentures due 2050 and (iii) $823
million aggregate principal of almost all outstanding 1.25%
exchangeable senior debentures due 2050. There is $900 million of
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 the LI LLC Charter exchangeable debentures.
Pursuant to the indemnification agreement, Liberty Broadband will
be required to indemnify LI LLC for any payments made to a holder
of such debentures that exercises its exchange right on or before
the put/call date of October 5, 2023 in excess of the sum of the
adjusted principal amount of such debentures plus certain estimated
tax benefits to Qurate Retail, if any, resulting from the exchange.
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 March
31, 2023, holders of the LI LLC Charter exchangeable debentures
have the ability to put their debentures on October 5, 2023, and
accordingly, the indemnification obligation is classified as a
current liability. During the three months ended March 31, 2023,
indemnification payments of $24 million were made by Liberty
Broadband to Qurate Retail in connection with exchanges of $157
million of the LI LLC Charter exchangeable debentures that settled
in the quarter.
GCI Operating and
Financial Results
1Q22
1Q23
% Change
(amounts in millions, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
119
$
118
(1
)%
Business
114
128
12
%
Total revenue
$
233
$
246
6
%
Operating income
$
21
$
29
38
%
Operating income margin (%)
9.0
%
11.8
%
280
bps
Adjusted OIBDA(a)
$
87
$
90
3
%
Adjusted OIBDA margin(a) (%)
37.3
%
36.6
%
(70
)bps
GCI Consumer
Financial Metrics
Revenue
Data
$
58
$
59
2
%
Wireless
46
47
2
%
Other
15
12
(20
)%
Total revenue
$
119
$
118
(1
)%
Operating Metrics
Data:
Cable modem subscribers(b)
153,600
159,100
4
%
Wireless:
Lines in service(c)
185,900
193,700
4
%
GCI Business
Financial Metrics
Revenue
Data
$
90
$
106
18
%
Wireless
14
13
(7
)%
Other
10
9
(10
)%
Total revenue
$
114
$
128
12
%
____________________
a)
See reconciling schedule 1.
b)
A cable modem subscriber is defined by the
purchase of cable modem service regardless of the level of service
purchased. If one entity purchases multiple cable modem service
access points, each access point is counted as a subscriber. Data
cable modem subscribers as of March 31, 2023 include 1,100
subscribers that were reclassified from GCI Business to GCI
Consumer subscribers in the first quarter of 2023 and are not new
additions.
c)
A wireless line in service is defined as a
wireless device with a monthly fee for services. Wireless lines in
service as of March 31, 2023 include 1,400 lines that were
reclassified from GCI Business to GCI Consumer lines in the first
quarter of 2023 and are not new additions.
Unless otherwise noted, the following discussion compares
financial information for the three months ended March 31, 2023 to
the same period in 2022.
GCI revenue increased 6% in the first quarter. Consumer revenue
was down 1% driven by declines in video revenue that offset demand
for consumer data and wireless. Business revenue increased 12% with
strength in data primarily driven by sales to rural health care and
schools due to service upgrades as well as new customer growth.
Operating income increased by $8 million in the first quarter
and Adjusted OIBDA increased $3 million due to higher revenue,
partially offset by increased labor related costs and comparisons
against certain one-time benefits recognized in the prior year
period.
In the first quarter, GCI spent $54 million on net 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 2023 are expected to be
approximately $185 million related to increased investment in
middle mile and last mile data connectivity, including network
expansion in rural Alaska.
FOOTNOTES
1)
Liberty Broadband will discuss these
highlights and other matters on Liberty Broadband's earnings
conference call that will begin at 4:30 p.m. (E.T.) on May 2, 2023.
For information regarding how to access the call, please see
“Important Notice” later in this document.
2)
Calculated pursuant to the stockholder
agreement between Liberty Broadband and Charter Communications,
Inc. ("Charter").
3)
Liberty Broadband’s principal operating
asset is GCI Holdings, LLC (“GCI” or “GCI Holdings”), Alaska's
largest communications provider. Liberty Broadband also holds an
interest in 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)
1Q22
1Q23
Revenue
GCI Holdings
$
233
$
246
Corporate and other(a)
5
—
Total Liberty Broadband Revenue
$
238
$
246
Operating Income (Loss)
GCI Holdings
$
21
$
29
Corporate and other(a)
(14
)
(13
)
Total Liberty Broadband Operating
Income (Loss)
$
7
$
16
Adjusted OIBDA (Loss)
GCI Holdings
$
87
$
90
Corporate and other(a)
(7
)
(8
)
Total Liberty Broadband Adjusted OIBDA
(Loss)
$
80
$
82
____________________
a)
Corporate and other included Skyhook
Holdings, Inc. until its sale on May 2, 2022
Important Notice: Liberty Broadband (Nasdaq: LBRDA,
LBRDK, LBRDP) will discuss Liberty Broadband’s earnings release on
a conference call which will begin at 4:30 p.m. (E.T.) on May 2,
2023. The call can be accessed by dialing (877) 407-3944 or (412)
902-0038, passcode 13736369, 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 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
inflationary pressures) 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 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 March 31,
2022 and March 31, 2023.
GCI HOLDINGS
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
1Q22
1Q23
GCI Holdings Operating Income
$
21
$
29
Depreciation and amortization
63
58
Stock-based compensation
3
3
GCI Holdings Adjusted OIBDA
$
87
$
90
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 March 31, 2022 and
March 31, 2023.
LIBERTY BROADBAND
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
1Q22
1Q23
Liberty Broadband Operating Income
(Loss)
$
7
$
16
Depreciation and amortization
64
58
Stock-based compensation
9
8
Liberty Broadband Adjusted OIBDA
(Loss)
$
80
$
82
GCI Holdings
$
87
$
90
Corporate and other
(7
)
(8)
LIBERTY BROADBAND
CORPORATION
BALANCE SHEET
INFORMATION
(unaudited)
March 31,
December 31,
2023
2022
amounts in millions,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
169
375
Trade and other receivables, net of
allowance for credit losses of $4 and $4, respectively
194
201
Prepaid and other current assets
91
84
Total current assets
454
660
Investment in Charter, accounted for using
the equity method
11,609
11,433
Property and equipment, net
1,012
1,011
Intangible assets not subject to
amortization
Goodwill
755
755
Cable certificates
550
550
Other
37
37
Intangible assets subject to amortization,
net
506
516
Other assets, net
206
180
Total assets
$
15,129
15,142
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
86
92
Deferred revenue
21
20
Current portion of debt, including $2 and
$1,373 measured at fair value, respectively
5
1,376
Indemnification obligation
29
50
Other current liabilities
152
137
Total current liabilities
293
1,675
Long-term debt, net, including $1,251 and
zero measured at fair value, respectively
3,674
2,425
Obligations under tower obligations and
finance leases, excluding current portion
85
86
Long-term deferred revenue
62
63
Deferred income tax liabilities
2,074
2,040
Preferred stock
202
202
Other liabilities
155
150
Total liabilities
6,545
6,641
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 18,221,602
and 18,528,468 at March 31, 2023 and December 31, 2022,
respectively
—
—
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,037,259 and
2,106,636 at March 31, 2023 and December 31, 2022, respectively
—
—
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 125,938,456
and 125,962,296 at March 31, 2023 and December 31, 2022,
respectively
1
1
Additional paid-in capital
3,282
3,318
Accumulated other comprehensive earnings
(loss), net of taxes
59
9
Retained earnings
5,224
5,155
Total stockholders' equity
8,566
8,483
Non-controlling interests
18
18
Total equity
8,584
8,501
Commitments and contingencies
Total liabilities and equity
$
15,129
15,142
LIBERTY BROADBAND
CORPORATION
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
March 31,
2023
2022
amounts in millions, except
per share amounts
Revenue
$
246
238
Operating costs and expenses:
Operating expense (exclusive of
depreciation and amortization shown separately below)
62
66
Selling, general and administrative,
including stock-based compensation
110
101
Depreciation and amortization
58
64
230
231
Operating income (loss)
16
7
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(45
)
(26
)
Share of earnings (losses) of
affiliate
248
303
Gain (loss) on dilution of investment in
affiliate
(27
)
(56
)
Realized and unrealized gains (losses) on
financial instruments, net
(114
)
137
Other, net
14
(21
)
Earnings (loss) before income taxes
92
344
Income tax benefit (expense)
(23
)
(45
)
Net earnings (loss)
69
299
Less net earnings (loss) attributable to
the non-controlling interests
—
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
69
299
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
0.47
1.79
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
0.47
1.77
LIBERTY BROADBAND
CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Three months ended
March 31,
2023
2022
amounts in millions
Cash flows from operating activities:
Net earnings (loss)
$
69
299
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
58
64
Stock-based compensation
8
9
Share of (earnings) losses of affiliate,
net
(248
)
(303
)
(Gain) loss on dilution of investment in
affiliate
27
56
Realized and unrealized (gains) losses on
financial instruments, net
114
(137
)
Deferred income tax expense (benefit)
22
6
Other, net
(1
)
(1
)
Change in operating assets and
liabilities:
Current and other assets
(6
)
65
Payables and other liabilities
(2
)
32
Net cash provided by (used in) operating
activities
41
90
Cash flows from investing activities:
Capital expenditures
(54
)
(32
)
Cash received for Charter shares
repurchased by Charter
42
602
Other investing activities, net
—
4
Net cash provided by (used in) investing
activities
(12
)
574
Cash flows from financing activities:
Borrowings of debt
1,248
300
Repayments of debt, tower obligations and
finance leases
(1,416
)
(2
)
Repurchases of Liberty Broadband common
stock
(40
)
(843
)
Indemnification payment to Qurate
Retail
(24
)
—
Other financing activities, net
(3
)
(3
)
Net cash provided by (used in) financing
activities
(235
)
(548
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(206
)
116
Cash, cash equivalents and restricted
cash, beginning of period
400
206
Cash, cash equivalents and restricted
cash, end of period
$
194
322
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Shane Kleinstein (720) 875-5432
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