Liberty Broadband Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Broadband 2020 Year-End Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press star 1 on your telephone. As a reminder, this conference is being recorded February 26th. I would now like to turn the conference over to Courtney Chun, Chief Portfolio Officer. Please go ahead.

Thank you and good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent Form 10-K filed with the SEC. These forward-looking statements speak only as to the date of this call, and Liberty Broadband and Liberty TripAdvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Broadband or Liberty Trip Advisors' expectations with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Broadband, including adjusted OIDDA and adjusted OIDDA margins, information regarding the comparable GAAP metrics along with required definitions and reconciliations, including preliminary note and Schedules 1 and 2, can be found in the earnings press release issued today, which is available on Liberty Broadband's website. Now I'd like to turn the call over to Greg Maffei, Liberty President and CEO.

Thank you, Courtney, and good morning to all of our listeners. Today speaking on the call, we will also have Liberty Broadband's Chief Accounting Officer and Principal Financial Officer, Brian Wendling. Also during Q&A, we will be available to answer questions related to Liberty Trip Advisor, Ron Duncan, CEO of GCI and Pete Pounds, CFO of GCI, will also be available to answer questions. Let me start by talking about Liberty Broadband itself. On December 18th, earlier than expected, we completed the acquisition of GCI Liberty. During the period of November 1st to January 31st, we repurchased 1.9 million shares of Liberty Broadband for $293 million. 1.8 million of the repurchases were completed after the December shareholder vote for the GCI Liberty merger. Since then, we've spent about $272 million on repurchases at an average price of about $155 a share. While you may note the average repurchase price on LBRD over this period is higher than yesterday's close, they represent an attractive look-through price to charter of $528 per share versus yesterday's close at $602. and we remain long-term bullish. In the first quarter, we exceeded our 26% ownership cap in Charter and expect to sell into their buyback beginning in March and do so going forward on a monthly basis. Based on Charter's historic buyback cadence, we expect our share sales to Charter to generate cash well north of $2 billion for Liberty Broadband this year with about a 5.5% tax leakage. Our plan is to use this capital plus the ample liquidity we have on hand already at Broadband to attack the discount at Liberty Broadband and take advantage of it. With this in mind, our board has increased the repurchase authorization at Liberty Broadband to approximately $2.5 billion. Looking at charter, in 2020, Broadband affirmed its place as one of the most important consumer and business services and Charter added more broadband subscribers in the first half of 2020 than in any calendar year since the Time Warner merger. With operational efficiencies through increased self-installation, self-service platforms, and online digital sales, the combination of these, combined with the continuing mix shift to broadband, resulted in full-year 2020 cable dividend margins exceeding 40% for the first time in the company's history. We had a small number of video subscribers in 20, a lone star in the current MVBP market. Mobile is also an exciting growth business for Charter with improving economics. Charter added 1.3 million lines during 2020 and is the fastest growing wireless provider in its footprint. In fact, in several quarters, we were the fastest growing wireless player in the nation. Free cash flow at Charter increased 50% for the year, and Charter repurchased over $12 billion of stock. All in all, pretty good. Finally, let's turn to Liberty TripAdvisor. TripAdvisor is well-positioned for what we believe is the pent-up travel demand that continues to grow. To keep some of our investors stuck in colder climates thinking about the right things, check out the best speeches of 2021 Trip announced this week. It's led by Whitehaven Beach in Australia and Santa Maria Beach in Cuba. Perhaps you'll soon be there. Cost controls taken at TRIP in 2020 have enabled operating leverage as revenue returns. We're also excited about TRIP Advisor Plus, the first of its kind direct-to-consumer subscription offering in the travel space. Currently in beta, we expect to roll it out in the U.S. in the first half of 2021. It provides travelers with compelling value through deals on hotels and experiences, as well as giving access to perks and benefits, and this is just the beginning. Over time, we envision adding more services and more benefits and VIP amenities, in-destination travel benefits, airline perks, et cetera. The addressable market for TripAdvisor Plus is enormous. We continue to have over 400 million monthly unique visitors to TripAdvisor in 2019 and we're converting even a small percentage of that traffic implies a meaningful long-term growth opportunity and recurring revenue stream for TRIP. And with that, let me turn it over to Brian to talk about the financials. Thanks, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $1.4 billion, which includes $32 million of cash at GCI. After year end, GCI received $174 million in payments from the government. relating to RAC funding years 18 and 19. These payments allowed GCI to pay down their line of credit by $180 million subsequent to year end. The value of our charter investment at Liberty Broadband as of yesterday's close was $36 billion. At quarter end, Liberty Broadband had a total principal amount of debt of $4.8 billion. Including the impact of the $180 million pay down on GCI's line of credit subsequent to quarter end, Liberty Broadband had principal amount of debt of $4.6 billion. GCI's leverage is defined in its credit agreement as 3.5 times. A meaningful delevering from year-end 2019 when GCI's leverage was 5.1 times. GCI has substantial cushion under its maximum leverage covenant of 6.5 times. Liberty Broadband has $300 million of undrawn margin loan capacity, and GCI has approximately $420 million of undrawn borrowing capacity on its line of credit following the paydown. These amounts exclude the indemnification obligation and preferred stock. Now just a quick update on GCI. 2020 was a great year for the company. For the full year, revenue grew 9% and adjusted OIBIT grew 34% to $345 million. The company's highest ever adjusted OIBIT is driven by data demand and lower costs associated with reduced bad debt and health care expenses, combined with previous cost-saving initiatives. We also had $15 million of one-time items favorably impacting revenue for the year. The impact for the quarter was $6 million. There was additional discussion of GCI's results in our 10-K that will be filed later today. Fourth quarter experienced 12% revenue growth and 20% adjusted weather growth. Operationally, they added nearly 14,000 cable modem subscribers and built out Alaska's first 5G network in Anchorage. Strategically, they sold the broadcast TV business and reduced their time and materials business to focus on their core competitive advantage, the Alaska network, that had a favorable impact to overall margins. While there was definitely some favorable macro trends impacting the strength of the 2020 number, there was solid performance by the team from top to bottom that generated those results in the midst of truly trying times. On RHC matters, we are currently working with the SEC on rates and payments for the funding year ending June 21. In more positive news, we received a new order from the SEC in January that gives rate certainty to Alaska providers for funding years ending in June 22 and 23. We expect to have a shorter period between service delivery and cash collection going forward. With that, I'll turn the call back over to Greg. Thanks, Brian, and thank you to our listening audience for your continued interest in Liberty Broadband and Liberty Trip Advisor. Operator, with that, I'd like to open the floor for questions.