Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported third quarter 2021 results.
Headlines include(1):
- Fair value of Charter investment was $40 billion as of
September 30th
- From August 1st through October 31st, Liberty Broadband
received $1.2 billion of proceeds from sale of 1.5 million Charter
shares to Charter
- Maintained fully diluted equity interest in Charter of
26%(2)
- From August 1st through October 31st, Liberty Broadband
repurchased 5.3 million LBRDA/K shares at an average price per
share of $177.50 and total cash consideration of $935 million
- In the third quarter, GCI(3) grew revenue 1% to $246 million,
generated operating income of $16 million and adjusted OIBDA(4)
declined 3% to $89 million
- GCI amended its credit facility on October 15th, extending the
maturity to October 2026
Share Repurchases
From August 1, 2021 through October 31, 2021, Liberty Broadband
repurchased approximately 3.9 million shares of Series C Liberty
Broadband common stock (Nasdaq: LBRDK) at an average cost per share
of $178.79 for total cash consideration of $692 million and
repurchased approximately 1.4 million shares of Series A Liberty
Broadband common stock (Nasdaq: LBRDA) at an average cost per share
of $173.92 for total cash consideration of $243 million. The total
remaining repurchase authorization for Liberty Broadband as of
November 1, 2021 is approximately $1.6 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 August 1, 2021 through October 31, 2021, Liberty Broadband
sold 1.5 million shares of Charter Class A common stock to Charter
for total proceeds of approximately $1.2 billion.
Balance Sheet
The following presentation is provided to separately identify
cash and liquid investments, debt and public holdings of Liberty
Broadband as of June 30, 2021 and September 30, 2021.
(amounts in millions)
6/30/2021
9/30/2021
Cash and Cash Equivalents:
GCI Holdings
$
41
$
37
Corporate and Other
178
282
Total Liberty Broadband Consolidated
Cash
$
219
$
319
Fair Value of Public Holdings in
Charter(a)
$
40,909
$
40,382
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
492
426
Tower Obligations and Other(c)
99
98
Total GCI Holdings Debt
$
1,191
$
1,124
GCI Leverage(d)
3.3x
3.0x
Charter Margin Loan
$
1,150
$
1,500
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
$
2,565
$
2,915
Total Liberty Broadband Debt
$
3,756
$
4,039
Fair market value adjustment and deferred
loan costs
79
95
Tower obligations and finance leases
(excluded from GAAP Debt)
(93
)
(92
)
Total Liberty Broadband Debt
(GAAP)
$
3,742
$
4,042
Other Financial Obligations:
Indemnification Obligation(f)
$
385
$
394
Preferred Stock(g)
178
178
____________________
a)
Represents fair value of the
investment in Charter as of June 30, 2021 and September 30, 2021. 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,
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.
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 increased $100 million in the third
quarter driven by Charter share sales in the period and additional
borrowing under the Charter margin loan, partially offset by share
repurchases at Liberty Broadband and funding the escrow account
discussed below. Restricted cash increased $110 million in the
third quarter as Liberty Broadband made a payment to an escrow
account as part of its settlement agreement with respect to the
Hollywood Firefighters’ Pension Fund litigation. GCI cash decreased
modestly in the third quarter primarily due to debt repayment and
capital expenditures, partially offset by cash from operations.
Liberty Broadband debt increased $283 million in the third
quarter primarily due to drawing down an additional $350 million on
the Charter margin loan. There is $800 million available capacity
under the Charter margin loan. Also during the third quarter, GCI
repaid approximately $65 million under its revolving credit
facility funded with cash from operations. On October 15, 2021, GCI
amended its credit facility to, among other things, extend the
maturity date to October 15, 2026. Simultaneously, GCI entered into
a $250 million Term Loan A with a maturity date of October 15,
2027. The Term Loan B was repaid in full using the proceeds from
the new Term Loan A together with $150 million in borrowings under
its credit facility. Including this drawdown, total capacity under
GCI’s credit facility is $550 million, of which undrawn capacity is
$367 million (net of letters of credit), and GCI’s leverage as
defined in its credit agreement is 3.0x.
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
September 30, 2021, 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 Results
Unless otherwise noted, the following discussion compares
financial information for the three months ended September 30, 2021
to the same period in 2020.
In the third quarter, GCI revenue was flat as the robust demand
for data across both consumer and business customers was offset by
the loss of revenue from its broadcast television business that was
sold in the third quarter of 2020, the loss of revenue from its
time and materials business that has been de-emphasized in order to
focus on GCI’s core Alaska network and the absence of political
advertising revenue that was earned in the prior year period. The
consumer data growth was driven by a 7% increase in
revenue-generating subscribers and an increase in data ARPU. The
business growth was driven by service upgrades for both education
and medical customers. Operating income decreased and adjusted
OIBDA declined in the third quarter primarily due to the prior year
including unusually low employee health care costs.
In the third quarter, GCI spent approximately $47 million on
capital expenditures, excluding capitalized interest. Capital
expenditure spending was related primarily to improvements to the
wireless and hybrid fiber coax networks.
Rural Healthcare Update
There were no material RHC updates in the third quarter. Please
reference our latest Form 10-Q for a summary of RHC matters.
FOOTNOTES
1)
Liberty Broadband’s President and
CEO, Greg Maffei, 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 November 4, 2021. 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. Other assets include its
interests 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 GAAP FINANCIAL
METRICS
(amounts in thousands)
3Q20
3Q21
Revenue
GCI Holdings
$
NA
$
245,688
Corporate and other
4,219
4,532
Total Liberty Broadband Revenue
$
4,219
$
250,220
Operating Income (Loss)
GCI Holdings
$
NA
$
16,444
Corporate and other(a)
(16,328
)
8,793
Total Liberty Broadband Operating
Income (Loss)
$
(16,328
)
$
25,237
Adjusted OIBDA (Loss)
GCI Holdings
$
NA
$
88,800
Corporate and other
(14,270
)
(8,372
)
Total Liberty Broadband Adjusted OIBDA
(Loss)
$
(14,270
)
$
80,428
HISTORICAL GCI OPERATING METRICS AND
FINANCIAL RESULTS
GCI’s results are only included in Liberty Broadband’s results
following the merger of Liberty Broadband and GCI Liberty on
December 18, 2020. However, we believe a discussion of GCI’s
results for a comparative two-year period promotes a better
understanding of GCI’s operations. For comparison and discussion
purposes, the following information presents actual historical
results of GCI for the quarter ended September 30, 2020, exclusive
of the effects of acquisition accounting, and the actual historical
results of GCI as included in Liberty Broadband’s results for the
quarter ended September 30, 2021. The most significant effect of
acquisition accounting is an increase to depreciation and
amortization as compared to prior periods as a result of an
increase in fair values of depreciable or amortizable assets. This
historical financial information of GCI can be found in historical
filings of GCI Liberty, Inc. The financial information below is
presented voluntarily and does not purport to represent what the
results of operations of GCI would have been if it were a wholly
owned subsidiary of Liberty Broadband for the periods presented or
to project the results of operations of GCI for any future
periods.
3Q20
3Q21
% Change
(amounts in thousands, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
119,327
$
121,785
2
%
Business
124,939
123,903
(1
)%
Total revenue
$
244,266
$
245,688
1
%
Operating income
$
28,048
$
16,444
(41
)%
Operating income margin (%)
11.5
%
6.7
%
(480
) bps
Adjusted OIBDA(a)
$
91,617
$
88,800
(3
)%
Adjusted OIBDA margin(a) (%)
37.5
%
36.1
%
(140
) bps
GCI Consumer
Financial Metrics
Revenue
Wireless
$
43,749
$
45,901
5
%
Data
47,852
53,608
12
%
Video
23,931
18,277
(24
)%
Voice
3,795
3,999
5
%
Total revenue
$
119,327
$
121,785
2
%
Operating Metrics
Wireless:
Revenue generating lines in service(b)
179,600
188,800
5
%
Data:
Revenue generating cable modem
subscribers(c)
138,200
147,800
7
%
Video:
Basic subscribers
76,000
62,200
(18
)%
Voice - Total access lines in
service(d)
37,300
34,800
(7
)%
GCI Business
Financial Metrics
Revenue
Wireless
$
21,440
$
20,162
(6
)%
Data
90,377
92,626
2
%
Video
2,277
904
(60
)%
Voice
10,845
10,211
(6
)%
Total revenue
$
124,939
$
123,903
(1
)%
Operating Metrics
Wireless - Revenue generating lines in
service(b)
25,200
21,500
(15
)%
Data - Revenue generating cable modem
subscribers(c)
12,800
13,700
7
%
Voice - Total access lines in
service(d)
33,400
29,000
(13
)%
____________________
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 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.
d)
A local access line in service is
defined as a revenue generating circuit or channel connecting a
customer to the public switched telephone network.
Important Notice: Liberty Broadband (Nasdaq: LBRDA,
LBRDK, LBRDP) President and CEO, Greg Maffei, will discuss Liberty
Broadband’s earnings release on a conference call which will begin
at 11:15 a.m. (E.D.T.) on November 4, 2021. The call can be
accessed by dialing (800) 289-0571 or (323) 794-2093, passcode
7729813, 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, 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
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 September
30, 2020 and September 30, 2021, respectively.
GCI HOLDINGS
ADJUSTED OIBDA RECONCILIATION
(amounts in thousands)
3Q20
3Q21
GCI Holdings Operating Income
$
28,048
$
16,444
Depreciation and amortization
60,284
68,083
Stock-based compensation
3,285
4,273
GCI Holdings Adjusted OIBDA
$
91,617
$
88,800
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 September 30, 2020
and September 30, 2021, respectively.
LIBERTY BROADBAND
ADJUSTED OIBDA RECONCILIATION
(amounts in thousands)
3Q20
3Q21
Liberty Broadband Operating Income
(Loss)
$
(16,328
)
$
25,237
Depreciation and amortization
56
68,130
Stock-based compensation
2,002
10,581
Litigation settlement, net of
recoveries(a)
—
(23,520
)
Liberty Broadband Adjusted OIBDA
(Loss)
$
(14,270
)
$
80,428
GCI Holdings
$
NA
88,800
Corporate and other
(14,270
)
(8,372
)
____________________
a)
During the third quarter 2021,
Liberty Broadband agreed to final settlement amounts with its
insurance carriers for insurance recoveries relating to the
Hollywood Firefighters’ Pension Fund litigation.
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
BALANCE SHEET
INFORMATION
(unaudited)
September 30,
December 31,
2021
2020
amounts in thousands,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
319,415
1,417,802
Trade and other receivables, net of
allowance for doubtful accounts of $2,265 and $10, respectively
245,562
349,256
Other current assets
177,470
79,453
Total current assets
742,447
1,846,511
Investment in Charter, accounted for using
the equity method
14,386,719
16,178,939
Property and equipment, net
1,043,831
1,098,512
Intangible assets not subject to
amortization
Goodwill
762,084
745,577
Cable certificates
550,000
560,000
Other
37,112
21,500
Intangible assets subject to amortization,
net
589,227
674,049
Tax sharing receivable
110,836
94,549
Other assets, net
217,456
151,487
Total assets
$
18,439,712
21,371,124
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
228,230
97,933
Deferred revenue
28,028
24,926
Current portion of debt, including $30,105
and $26,350 measured at fair value, respectively
34,797
31,026
Indemnification obligation
393,578
344,643
Other current liabilities
82,490
113,234
Total current liabilities
767,123
611,762
Long-term debt, net, including $1,448,354
and $1,445,775 measured at fair value, respectively
4,006,855
4,785,207
Obligations under finance leases and tower
obligations, excluding current portion
89,648
92,840
Long-term deferred revenue
35,649
39,649
Deferred income tax liabilities
2,008,399
1,977,643
Preferred stock
202,417
202,917
Other liabilities
198,234
146,687
Total liabilities
7,308,325
7,856,705
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 25,785,742
and 26,495,249 at September 30, 2021 and December 31, 2020,
respectively
258
265
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,544,548 and
2,549,470 at September 30, 2021 and December 31, 2020,
respectively
25
25
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 150,469,139
and 167,480,926 at September 30, 2021 and December 31, 2020,
respectively
1,505
1,675
Additional paid-in capital
7,593,816
10,319,754
Accumulated other comprehensive earnings
(loss), net of taxes
13,298
15,436
Retained earnings
3,510,849
3,165,504
Total stockholders' equity
11,119,751
13,502,659
Non-controlling interests
11,636
11,760
Total equity
11,131,387
13,514,419
Commitments and contingencies
Total liabilities and equity
$
18,439,712
21,371,124
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
September 30,
2021
2020
amounts in thousands, except
per share amounts
Revenue
$
250,220
4,219
Operating costs and expenses:
Operating, including stock-based
compensation
70,308
2,523
Selling, general and administrative,
including stock-based compensation and transaction costs
110,065
17,968
Depreciation and amortization expense
68,130
56
Litigation settlement, net of
recoveries
(23,520
)
—
224,983
20,547
Operating income (loss)
25,237
(16,328
)
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(28,155
)
(3,719
)
Share of earnings (losses) of
affiliates
314,563
188,586
Gain (loss) on dilution of investment in
affiliate
(1,693
)
(35,284
)
Realized and unrealized gains (losses) on
financial instruments, net
(26,839
)
(39,324
)
Other, net
14,788
8
Earnings (loss) before income taxes
297,901
93,939
Income tax (expense) benefit
(61,073
)
(24,979
)
Net earnings (loss)
236,828
68,960
Less net earnings (loss) attributable to
the non-controlling interests
(41
)
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
236,869
68,960
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
1.31
0.38
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
1.29
0.38
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Nine months ended
September 30,
2021
2020
amounts in thousands
Cash flows from operating activities:
Net earnings (loss)
$
345,221
133,332
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
198,766
1,041
Stock-based compensation
31,016
5,736
Litigation settlement, net of
recoveries
86,480
—
Share of (earnings) losses of affiliates,
net
(752,390
)
(408,396
)
(Gain) loss on dilution of investment in
affiliate
98,446
140,610
Realized and unrealized (gains) losses on
financial instruments, net
52,555
39,324
Deferred income tax expense (benefit)
(10,613
)
47,183
Other, net
(14,415
)
1,070
Change in operating assets and
liabilities:
Current and other assets
158,035
244
Payables and other liabilities
(57,133
)
3,044
Net cash provided by (used in) operating
activities
135,968
(36,812
)
Cash flows from investing activities:
Capital expended for property and
equipment
(91,219
)
(42
)
Exercise of preemptive right to purchase
Charter shares
—
(14,910
)
Cash received for Charter shares
repurchased by Charter
2,642,797
—
Other investing activities, net
17,312
—
Net cash provided by (used in) investing
activities
2,568,890
(14,952
)
Cash flows from financing activities:
Borrowings of debt
1,066,684
700,000
Repayment of debt, finance leases and
tower obligations
(1,848,212
)
—
Repurchases of Liberty Broadband common
stock
(2,910,587
)
(285,722
)
Other financing activities, net
(1,115
)
(11,970
)
Net cash provided by (used in) financing
activities
(3,693,230
)
402,308
Net increase (decrease) in cash, cash
equivalents and restricted cash
(988,372
)
350,544
Cash, cash equivalents and restricted
cash, beginning of period
1,433,292
49,724
Cash, cash equivalents and restricted
cash, end of period
$
444,920
400,268
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