Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported fourth quarter and year end
2022 results.
Headlines include (1):
- Fair value of Charter investment was $16.0 billion as of
December 31, 2022
- From November 1, 2022 through January 31, 2023, Liberty
Broadband received $291 million of proceeds from sale of 868
thousand Charter shares to Charter
- Maintained fully diluted equity interest in Charter of
26%(2)
- From November 1, 2022 through January 31, 2023, Liberty
Broadband repurchased 2.1 million LBRDA/K shares at an average
price per share of $84.79 for total cash consideration of $177
million
- For the full year, GCI(3) generated revenue of $969 million and
operating income of $54 million, and grew Adjusted OIBDA(4) 1% to a
record $358 million
“Charter’s strategic investments in an upgraded network and
expanded footprint will provide both attractive returns and
enhanced position with its competitively-priced converged product
offering. We are pleased to welcome Chris Winfrey’s leadership and
believe these initiatives will drive value for customers and
shareholders,” said Greg Maffei, Liberty Broadband President &
CEO. “Despite facing tough revenue comparisons due to a change to
one of its roaming agreements, GCI posted solid financial results
in 2022 and is continuing to expand its high speed connectivity to
the most remote areas in Alaska.”
Share Repurchases
From November 1, 2022 through January 31, 2023, Liberty
Broadband repurchased 1.5 million shares of Series C Liberty
Broadband common stock (Nasdaq: LBRDK) at an average cost per share
of $84.55 for total cash consideration of $123 million and
repurchased 631 thousand shares of Series A Liberty Broadband
common stock (Nasdaq: LBRDA) at an average cost per share of $85.33
for total cash consideration of $54 million. The total remaining
repurchase authorization for Liberty Broadband as of February 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 November 1, 2022 through January 31, 2023, Liberty
Broadband sold 868 thousand shares of Charter Class A common stock
to Charter for total proceeds of $291 million.
Balance Sheet
The following presentation is provided to separately identify
cash and liquid investments, debt and public holdings of Liberty
Broadband as of September 30, 2022 and December 31, 2022.
(amounts in millions)
9/30/2022
12/31/2022
Cash and Cash Equivalents:
GCI Holdings
$
37
$
85
Corporate and Other
166
290
Total Liberty Broadband Consolidated
Cash
$
203
$
375
Fair Value of Public Holdings in
Charter(a)
$
14,693
$
16,012
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
398
397
Tower Obligations and Other(c)
95
94
Total GCI Holdings Debt
$
1,093
$
1,091
GCI Leverage(d)
3.1x
2.8x
Charter Margin Loan
$
1,400
$
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
$
2,815
$
2,815
Total Liberty Broadband Debt
$
3,908
$
3,906
Fair market value adjustment and deferred
loan costs
(42
)
(16
)
Tower obligations and finance leases
(excluded from GAAP Debt)
(90
)
(89
)
Total Liberty Broadband Debt
(GAAP)
$
3,776
$
3,801
Other Financial Obligations:
Indemnification Obligation(f)
$
35
$
50
Preferred Stock(g)
180
180
____________________
a)
Represents fair value of the investment in
Charter as of September 30, 2022 and December 31, 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 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 increased $172 million in the fourth
quarter as proceeds from Charter share sales more than offset share
repurchases in the period. GCI cash increased $48 million in the
fourth quarter as cash from operations and grant proceeds received
in the fourth quarter more than offset capital expenditures.
Liberty Broadband debt remained flat in the fourth quarter.
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 2.8x.
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
December 31, 2022, holders of the LI LLC Charter exchangeable
debentures have the ability to exchange their debentures on October
5, 2023, and accordingly, the indemnification obligation is
classified as a current liability.
GCI Operating and Financial
Results
4Q21
4Q22
% Change
2021
2022
% Change
(amounts in millions, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
123
$
123
-
%
$
484
$
479
(1
)%
Business
121
127
5
%
486
490
1
%
Total revenue
$
244
$
250
2
%
$
970
$
969
-
%
Operating income(a)
$
9
$
22
144
%
$
72
$
54
(25
)%
Operating income margin (%)
3.7
%
8.8
%
510
bps
7.4
%
5.6
%
(180
)bps
Adjusted OIBDA(b)
$
80
$
91
14
%
$
354
$
358
1
%
Adjusted OIBDA margin(b) (%)
32.8
%
36.4
%
360
bps
36.5
%
36.9
%
40
bps
GCI Consumer
Financial Metrics
Revenue
Data
$
55
$
59
7
%
$
214
$
231
8
%
Wireless
49
51
4
%
184
193
5
%
Other
19
13
(32
)%
86
55
(36
)%
Total revenue
$
123
$
123
-
%
$
484
$
479
(1
)%
Operating Metrics
Data:
Cable modem subscribers(c)
151,900
157,200
3
%
Wireless:
Lines in service(d)
185,200
191,100
3
%
GCI Business
Financial Metrics
Revenue
Data
$
98
$
104
6
%
$
368
$
395
7
%
Wireless
14
12
(14
)%
74
53
(28
)%
Other
9
11
22
%
44
42
(5
)%
Total revenue
$
121
$
127
5
%
$
486
$
490
1
%
____________________
a)
Operating income for the year ended
December 31, 2022 includes a $29 million legal settlement accrual
recognized in the second and third quarters of 2022 related to
discussions and settlement offers that GCI made to the DOJ and
Enforcement Bureau of the FCC.
b)
See reconciling schedule 1.
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 wireless line in service is defined as a
wireless device with a monthly fee for services.
Unless otherwise noted, the following discussion compares
financial information for the three and twelve months ended
December 31, 2021 and December 31, 2022.
GCI revenue increased 2% in the fourth quarter, driven by
strength in demand for data in both business and consumer. GCI
revenue was flat for the full year due to robust demand for data in
both business and consumer customers throughout the year, offset by
the decline in video and voice subscriber counts and the impact of
extending a roaming wireless contract with a large partner in the
fourth quarter of 2021. The extension of the agreement resulted in
lower revenue through the third quarter of 2022, but will benefit
GCI for several years from the extension of the agreement 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 increased in the fourth quarter due to higher
revenue and mix shift into higher margin revenue and declined for
the full year primarily due to a $29 million accrual for a
potential litigation settlement related to RHC matters. Adjusted
OIBDA grew 14% in the fourth quarter and 1% for the full year. Data
growth was strong throughout 2022, highlighting this shift to
higher margin revenue, and the fourth quarter also benefited from
lapping the impact of the aforementioned roaming agreement.
In 2022, GCI spent $156 million, net on capital expenditures.
Capital expenditure spending was related primarily to improvements
to the wireless and hybrid fiber coax networks. GCI's net capital
expenditures for 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.
Rural Healthcare Update
There were no material RHC updates in the fourth quarter. Please
reference our Form 10-K for the year ended December 31, 2022 for a
summary of RHC matters.
FOOTNOTES
1)
Liberty Broadband will discuss these
highlights and other matters on Liberty Broadband's earnings
conference call that will begin at 11:00 a.m. (E.T.) on February
17, 2023. 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)
4Q21
4Q22
2021
2022
Revenue
GCI Holdings
$
244
$
250
$
970
$
969
Corporate and other(a)
5
-
18
6
Total Liberty Broadband Revenue
$
249
$
250
$
988
$
975
Operating Income (Loss)
GCI Holdings(b)
$
9
$
22
$
72
$
54
Corporate and other(a)(c)
(29
)
(55
)
(170
)
(93
)
Total Liberty Broadband Operating
Income (Loss)
$
(20
)
$
(33
)
$
(98
)
$
(39
)
Adjusted OIBDA
GCI Holdings
$
80
$
91
$
354
$
358
Corporate and other
(13
)
(10
)
(49
)
(31
)
Total Liberty Broadband Adjusted
OIBDA
$
67
$
81
$
305
$
327
____________________
a)
Corporate and other included Skyhook
Holdings, Inc. until its sale on May 2, 2022.
b)
GCI’s operating income for the year ended
December 31, 2022 includes a $29 million legal settlement accrual
recognized in the second and third quarters of 2022 related to
discussions and settlement offers that GCI made to the DOJ and
Enforcement Bureau of the FCC.
c)
During the fourth quarter of 2022, Liberty
Broadband accrued $38 million for a litigation settlement relating
to a tentative settlement of the Charter and Liberty Broadband
Delaware litigation. During 2021, Liberty Broadband settled
litigation relating to the Hollywood Firefighters’ Pension Fund
litigation and also agreed to final settlement amounts with its
insurance carriers for insurance recoveries. Additional
litigation-related fees were settled and paid in the fourth quarter
of 2021. As such, corporate and other operating loss for the twelve
months ended December 31, 2021 includes a $95 million net
litigation settlement.
Important Notice: Liberty Broadband (Nasdaq: LBRDA,
LBRDK, LBRDP) will discuss Liberty Broadband’s earnings release on
a conference call which will begin at 11:00 a.m. (E.T.) on February
17, 2023. The call can be accessed by dialing (877) 407-3944 or
(412) 902-0038, passcode 13735593, 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 Form 10-K, 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 and twelve months ended
December 31, 2021 and December 31, 2022.
GCI HOLDINGS
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
4Q21
4Q22
2021
2022
GCI Holdings Operating Income
$
9
$
22
$
72
$
54
Depreciation and amortization
67
67
266
262
Stock-based compensation
4
2
16
13
Litigation settlement(a)
—
—
—
29
GCI Holdings Adjusted OIBDA
$
80
$
91
$
354
$
358
____________________
a)
GCI’s operating income for the year ended
December 31, 2022 includes a $29 million legal settlement accrual
recognized in the second and third quarters of 2022 related to
discussions and settlement offers that GCI made to the DOJ and
Enforcement Bureau of the FCC.
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 and twelve months ended
December 31, 2021 and December 31, 2022.
LIBERTY BROADBAND ADJUSTED OIBDA
RECONCILIATION
(amounts in millions)
4Q21
4Q22
2021
2022
Liberty Broadband Operating Income
(Loss)
$
(20
)
$
(33
)
$
(98
)
$
(39
)
Depreciation and amortization
68
67
267
262
Stock-based compensation
10
9
41
37
Litigation settlement, net of
recoveries(a)
9
38
95
67
Liberty Broadband Adjusted OIBDA
(Loss)
$
67
$
81
$
305
$
327
GCI Holdings
$
80
91
$
354
358
Corporate and other
(13
)
(10
)
(49
)
(31
)
____________________
a)
GCI’s operating income for the year ended
December 31, 2022 includes a $29 million legal settlement accrual
recognized in the second and third quarters of 2022 related to
discussions and settlement offers that GCI made to the DOJ and
Enforcement Bureau of the FCC. Additionally, during the fourth
quarter of 2022, Liberty Broadband accrued $38 million for a
litigation settlement relating to a tentative settlement of the
Charter and Liberty Broadband Delaware litigation. During 2021,
Liberty Broadband settled litigation relating to the Hollywood
Firefighters’ Pension Fund litigation and also agreed to final
settlement amounts with its insurance carriers for insurance
recoveries. Additional litigation-related fees were settled and
paid in the fourth quarter of 2021.
LIBERTY BROADBAND
CORPORATION
BALANCE SHEET
INFORMATION
(unaudited)
December 31,
December 31,
2022
2021
amounts in millions,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
375
191
Trade and other receivables, net
201
206
Prepaid and other current assets
84
62
Total current assets
660
459
Investment in Charter, accounted for using
the equity method
11,433
13,260
Property and equipment, net
1,011
1,031
Intangible assets not subject to
amortization
Goodwill
755
762
Cable certificates
550
550
Other
37
37
Intangible assets subject to amortization,
net
516
573
Other assets, net
180
296
Total assets
$
15,142
16,968
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
92
99
Deferred revenue
20
25
Current portion of debt, including $1,373
and $25 measured at fair value, respectively
1,376
28
Indemnification obligation
50
324
Other current liabilities
137
106
Total current liabilities
1,675
582
Long-term debt, net, including zero and
$1,403 measured at fair value, respectively
2,425
3,733
Obligations under finance leases and tower
obligations, excluding current portion
86
89
Long-term deferred revenue
63
35
Deferred income tax liabilities
2,040
1,998
Preferred stock
202
203
Other liabilities
150
189
Total liabilities
6,641
6,829
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 18,528,468
and 23,232,342 at December 31, 2022 and 2021 respectively
—
—
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,106,636 and
2,544,548 at December 31, 2022 and 2021, respectively
—
—
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 125,962,296
and 144,854,780 at December 31, 2022 and 2021, respectively
1
1
Additional paid-in capital
3,318
6,214
Accumulated other comprehensive earnings
(loss), net of taxes
9
14
Retained earnings
5,155
3,898
Total stockholders' equity
8,483
10,127
Non-controlling interests
18
12
Total equity
8,501
10,139
Commitments and contingencies
Total liabilities and equity
$
15,142
16,968
LIBERTY BROADBAND
CORPORATION
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Years ended
December 31,
2022
2021
amounts in millions,
except per share
amounts
Revenue
$
975
988
Operating costs and expenses:
Operating expense (exclusive of
depreciation and amortization shown separately below)
253
282
Selling, general and administrative,
including stock-based compensation
432
442
Depreciation and amortization
262
267
Litigation settlement, net of
recoveries
67
95
1,014
1,086
Operating income (loss)
(39
)
(98
)
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(133
)
(117
)
Share of earnings (losses) of
affiliate
1,326
1,194
Gain (loss) on dilution of investment in
affiliate
(63
)
(102
)
Realized and unrealized gains (losses) on
financial instruments, net
334
67
Gain (loss) on dispositions, net
179
12
Other, net
(70
)
(6
)
Earnings (loss) before income taxes
1,534
950
Income tax benefit (expense)
(277
)
(218
)
Net earnings (loss)
1,257
732
Less net earnings (loss) attributable to
the non-controlling interests
—
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
1,257
732
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
8.01
3.97
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
7.96
3.93
LIBERTY BROADBAND
CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Years ended
December 31,
2022
2021
amounts in millions
Cash flows from operating activities:
Net earnings (loss)
$
1,257
732
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
262
267
Stock-based compensation
37
41
Litigation settlement, net of
recoveries
67
—
Share of (earnings) losses of affiliate,
net
(1,326
)
(1,194
)
(Gain) loss on dilution of investment in
affiliate
63
102
Realized and unrealized (gains) losses on
financial instruments, net
(334
)
(67
)
Deferred income tax expense (benefit)
54
(15
)
(Gain) loss on dispositions, net
(179
)
(12
)
Other, net
(4
)
(3
)
Change in operating assets and
liabilities:
Current and other assets
140
214
Payables and other liabilities
(93
)
(62
)
Net cash provided by (used in) operating
activities
(56
)
3
Cash flows from investing activities:
Capital expenditures
(181
)
(134
)
Grant proceeds received for capital
expenditures
25
—
Cash received for Charter shares
repurchased by Charter
3,034
4,179
Cash proceeds from dispositions, net
163
15
Other investing activities, net
6
2
Net cash provided by (used in) investing
activities
3,047
4,062
Cash flows from financing activities:
Borrowings of debt
325
1,467
Repayments of debt, finance leases and
tower obligations
(231
)
(2,476
)
Repurchases of Liberty Broadband common
stock
(2,882
)
(4,272
)
Other financing activities, net
(9
)
(11
)
Net cash provided by (used in) financing
activities
(2,797
)
(5,292
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
194
(1,227
)
Cash, cash equivalents and restricted
cash, beginning of period
206
1,433
Cash, cash equivalents and restricted
cash, end of period
$
400
206
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230216005859/en/
Liberty Broadband Corporation Shane Kleinstein, (720)
875-5432
Liberty Broadband (NASDAQ:LBRDP)
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Liberty Broadband (NASDAQ:LBRDP)
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