Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported second quarter 2021 results.
Headlines include(1):
- Fair value of Charter investment was $41 billion as of June
30th
- From May 1st through July 31st, Liberty Broadband received $1.1
billion of proceeds from sale of 1.6 million Charter shares to
Charter
- Maintained fully diluted equity interest in Charter of
26%(2)
- From May 1st through July 31st, Liberty Broadband repurchased
7.5 million LBRDK shares at an average price per share of $167.17
and total cash consideration of $1.3 billion
- Liberty Broadband’s Board of Directors increased remaining
repurchase authorization to approximately $2.5 billion
- In the second quarter, GCI(3) grew revenue 7% to $238 million,
generated operating income of $18 million and increased adjusted
OIBDA(4) 14% to $89 million
“We continued to use the proceeds from participating in
Charter’s buyback to repurchase Liberty Broadband shares at a
meaningful discount to net asset value,” said Greg Maffei, Liberty
Broadband President and CEO. “Additionally we opportunistically
amended our Charter margin loan, decreasing the pricing and
extending the maturity. Charter continues to demonstrate the power
of broadband with significant net adds and produced strong results
for the quarter. GCI posted impressive top and bottom line growth
driven by robust demand for data, as well as strong subscriber
growth on the wireless side with our customers enjoying the
benefits of our 5G network buildout in Anchorage.”
Share Repurchases
From May 1, 2021 through July 31, 2021, Liberty Broadband
repurchased approximately 7.5 million shares of Series C Liberty
Broadband common stock (Nasdaq: LBRDK) at an average cost per share
of $167.17 for total cash consideration of $1.3 billion. In August
2021, Liberty Broadband’s Board of Directors increased the
remaining repurchase authorization to approximately $2.5
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 May 1, 2021 through July 31, 2021, Liberty Broadband sold
1.6 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, 2021 and June 30, 2021.
(amounts in millions)
3/31/2021
6/30/2021
Cash and Cash Equivalents:
GCI Holdings
$
51
$
41
Corporate and Other
1,126
178
Total Liberty Broadband Consolidated
Cash
$
1,177
$
219
Fair Value of Public Holdings in
Charter(a)
$
36,177
$
40,909
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
523
492
Finance Leases and Other(c)
103
99
Total GCI Holdings Debt
$
1,226
$
1,191
GCI Leverage(d)
3.4x
3.3x
Charter Margin Loan
$
2,000
$
1,150
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
$
3,415
$
2,565
Total Liberty Broadband Debt
$
4,641
$
3,756
Fair market value adjustment and deferred
loan costs
43
79
Finance leases and tower obligations
(excluded from GAAP Debt)
(97
)
(93
)
Total Liberty Broadband Debt
(GAAP)
$
4,587
$
3,742
Other Financial Obligations:
Indemnification Obligation(f)
$
293
$
385
Preferred Stock(g)
178
178
a)
Represents fair value of the investment in
Charter as of March 31, 2021 and June 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 decreased $958 million in the second
quarter as share repurchases at Liberty Broadband and debt
repayment more than offset proceeds from Charter share sales in the
period. GCI cash decreased due to debt repayment and capital
expenditures, partially offset by cash from operations.
Liberty Broadband debt decreased $885 million in the second
quarter. On May 12, 2021, Liberty Broadband amended its $2.3
billion Charter margin loan, reducing pricing from 1.85% to 1.50%
and extending the maturity to May 2024. In connection with the
amendment, Liberty Broadband repaid $850 million under the Charter
margin loan. Undrawn capacity under the Charter margin loan is
$1.15 billion as of June 30, 2021. Also during the second quarter,
GCI repaid approximately $30 million under its revolving credit
facility funded with cash from operations. Total capacity under
GCI’s revolving credit facility is $550 million, of which undrawn
capacity is $452 million (net of letters of credit), and GCI’s
leverage as defined in its credit agreement is 3.3x.
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, 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 June 30, 2021 to
the same period in 2020.
In the second quarter, GCI revenue grew 7% due to robust demand
for data across both consumer and business customers. The consumer
data growth was driven by an 8% increase in revenue-generating
subscribers and an increase in data ARPU. The business growth was
driven by service upgrades for both school and medical customers.
Additionally, consumer wireless growth was strong driven by GCI’s
5G network buildout in Anchorage. Operating income improved and
adjusted OIBDA grew 14% in the second quarter primarily due to the
revenue growth.
In the second quarter, GCI spent $26 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
On January 19, 2021, the Wireline Competition Bureau of the FCC
issued an order which provides rate certainty to Alaska providers
for funding years ending June 30, 2022 and June 30, 2023 by
requiring them to use previously approved rates from the FCC, which
we expect will provide increased certainty for the RHC business in
the aforementioned funding years. On May 25, 2021, the FCC approved
the cost studies submitted by GCI Holdings for the funding year
that ended June 30, 2021.
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 August 6, 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)
2Q20
2Q21
Revenue
GCI Holdings
$
NA
$
237,856
Corporate and other
4,114
4,428
Total Liberty Broadband Revenue
$
4,114
$
242,284
Operating Income (Loss)
GCI Holdings
$
NA
$
17,574
Corporate and other(a)
(9,832
)
(19,666
)
Total Liberty Broadband Operating
Income (Loss)
$
(9,832
)
$
(2,092
)
Adjusted OIBDA (Loss)
GCI Holdings
$
NA
$
88,656
Corporate and other
(7,407
)
(13,309
)
Total Liberty Broadband Adjusted OIBDA
(Loss)
$
(7,407
)
$
75,347
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 June 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 June 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.
2Q20
2Q21
% Change
(amounts in thousands, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
112,047
$
119,937
7
%
Business
110,534
117,919
7
%
Total revenue
$
222,581
$
237,856
7
%
Operating income (loss)
$
14,806
$
17,574
19
%
Operating income margin (%)
6.7
%
7.4
%
70
bps
Adjusted OIBDA(a)
$
78,045
$
88,656
14
%
Adjusted OIBDA margin(a) (%)
35.1
%
37.3
%
220
bps
GCI Consumer
Financial Metrics
Revenue
Wireless
$
42,327
$
44,756
6
%
Data
45,416
52,661
16
%
Video
20,461
18,709
(9
)
%
Voice
3,843
3,811
(1
)
%
Total revenue
$
112,047
$
119,937
7
%
Operating Metrics
Wireless:
Revenue generating lines in service(b)
179,400
189,100
5
%
Data:
Revenue generating cable modem
subscribers(c)
134,900
145,400
8
%
Video:
Basic subscribers
77,700
64,600
(17
)
%
Voice - Total access lines in
service(d)
38,200
36,300
(5
)
%
GCI Business
Financial Metrics
Revenue
Wireless
$
21,035
$
19,876
(6
)
%
Data
73,756
86,583
17
%
Video
4,427
880
(80
)
%
Voice
11,316
10,580
(7
)
%
Total revenue
$
110,534
$
117,919
7
%
Operating Metrics
Wireless - Revenue generating lines in
service(b)
25,000
21,700
(13
)
%
Data - Revenue generating cable modem
subscribers(c)
8,700
13,400
54
%
Voice - Total access lines in
service(d)
33,500
29,500
(12
)
%
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. 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 August 6, 2021. The call can be accessed
by dialing (800) 289-0571 or (323) 794-2093, passcode 3865735, 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 www.libertybroadband.com/events. 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 June 30,
2020 and June 30, 2021, respectively.
GCI HOLDINGS ADJUSTED OIBDA
RECONCILIATION
(amounts in thousands)
2Q20
2Q21
GCI Holdings Operating Income
$
14,806
$
17,574
Depreciation and amortization
60,543
66,825
Stock-based compensation
2,696
4,257
GCI Holdings Adjusted OIBDA
$
78,045
$
88,656
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, 2020 and
June 30, 2021, respectively.
LIBERTY BROADBAND ADJUSTED OIBDA
RECONCILIATION
(amounts in thousands)
2Q20
2Q21
Liberty Broadband Operating
Loss
$
(9,832
)
$
(2,092
)
Depreciation and amortization
492
66,874
Stock-based compensation
1,933
10,565
Liberty Broadband Adjusted OIBDA
(Loss)
$
(7,407
)
$
75,347
GCI Holdings
$
NA
88,656
Corporate and other
(7,407
)
(13,309
)
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
BALANCE SHEET
INFORMATION
(unaudited)
June 30,
December 31,
2021
2020
amounts in thousands,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
219,241
1,417,802
Trade and other receivables, net of
allowance for doubtful accounts of $1,741 and $10, respectively
233,571
349,256
Other current assets
66,237
79,453
Total current assets
519,049
1,846,511
Investment in Charter, accounted for using
the equity method
14,947,277
16,178,939
Property and equipment, net
1,046,634
1,098,512
Intangible assets not subject to
amortization
Goodwill
764,686
745,577
Cable certificates
550,000
560,000
Other
36,500
21,500
Intangible assets subject to amortization,
net
606,656
674,049
Tax sharing receivable
108,602
94,549
Other assets, net
195,653
151,487
Total assets
$
18,775,057
21,371,124
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
216,508
97,933
Deferred revenue
30,488
24,926
Current portion of debt, including $27,250
and $26,350 measured at fair value, respectively
31,939
31,026
Indemnification obligation
385,212
344,643
Other current liabilities
64,726
113,234
Total current liabilities
728,873
611,762
Long-term debt, net, including $1,434,549
and $1,445,775 measured at fair value, respectively
3,710,090
4,785,207
Obligations under finance leases and tower
obligations, excluding current portion
90,630
92,840
Long-term deferred revenue
37,236
39,649
Deferred income tax liabilities
1,991,624
1,977,643
Preferred stock
202,615
202,917
Other liabilities
183,937
146,687
Total liabilities
6,945,005
7,856,705
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 26,498,671
and 26,495,249 at June 30, 2021 and December 31, 2020,
respectively
265
265
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,546,048 and
2,549,470 at June 30, 2021 and December 31, 2020, respectively
25
25
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 155,067,969
and 167,480,926 at June 30, 2021 and December 31, 2020,
respectively
1,551
1,675
Additional paid-in capital
8,530,684
10,319,754
Accumulated other comprehensive earnings
(loss), net of taxes
11,870
15,436
Retained earnings
3,273,980
3,165,504
Total stockholders' equity
11,818,375
13,502,659
Non-controlling interests
11,677
11,760
Total equity
11,830,052
13,514,419
Commitments and contingencies
Total liabilities and equity
$
18,775,057
21,371,124
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
June 30,
2021
2020
amounts in thousands, except
per share amounts
Revenue
$
242,284
4,114
Operating costs and expenses:
Operating, including stock-based
compensation
67,104
2,524
Selling, general and administrative,
including stock-based compensation and transaction costs
110,398
10,930
Depreciation and amortization expense
66,874
492
244,376
13,946
Operating income (loss)
(2,092
)
(9,832
)
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(28,734
)
(5,131
)
Share of earnings (losses) of
affiliates
248,848
158,128
Gain (loss) on dilution of investment in
affiliate
(14,538
)
(46,001
)
Realized and unrealized gains (losses) on
financial instruments, net
(125,064
)
—
Other, net
22,720
28
Earnings (loss) before income taxes
101,140
97,192
Income tax (expense) benefit
(44,926
)
(24,978
)
Net earnings (loss)
56,214
72,214
Less net earnings (loss) attributable to
the non-controlling interests
(42
)
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
56,256
72,214
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
0.30
0.40
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
0.30
0.39
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Six months ended
June 30,
2021
2020
amounts in thousands
Cash flows from operating activities:
Net earnings (loss)
$
108,393
64,372
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
130,636
985
Stock-based compensation
20,435
3,734
Litigation settlement
110,000
—
Share of (earnings) losses of affiliates,
net
(437,827
)
(219,810
)
(Gain) loss on dilution of investment in
affiliate
96,753
105,326
Realized and unrealized (gains) losses on
financial instruments, net
25,716
—
Deferred income tax expense (benefit)
(17,968
)
22,204
Other, net
(1,682
)
625
Change in operating assets and
liabilities:
Current and other assets
137,407
(72
)
Payables and other liabilities
(60,406
)
6,938
Net cash provided by (used in) operating
activities
111,457
(15,698
)
Cash flows from investing activities:
Capital expended for property and
equipment
(50,099
)
(35
)
Exercise of preemptive right to purchase
Charter shares
—
(14,910
)
Cash received for Charter shares
repurchased by Charter
1,762,555
—
Other investing activities, net
1,762
—
Net cash provided by (used in) investing
activities
1,714,218
(14,945
)
Cash flows from financing activities:
Borrowings of debt
716,684
—
Repayment of debt, finance leases and
tower obligations
(1,781,459
)
—
Repurchases of Liberty Broadband common
stock
(1,957,030
)
—
Other financing activities, net
(1,942
)
(1,919
)
Net cash provided by (used in) financing
activities
(3,023,747
)
(1,919
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(1,198,072
)
(32,562
)
Cash, cash equivalents and restricted
cash, beginning of period
1,433,292
49,724
Cash, cash equivalents and restricted
cash, end of period
$
235,220
17,162
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