Liberty Broadband Corporation

Hello, and welcome to the Liberty Broadband 2022 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 keypad. As a reminder, this conference will be recorded February 17th. I would now like to turn the call over to Shane Kleinstein, Vice President, Investor Relations. Please go ahead, Shane.

Good morning. Before we begin, we'd like to remind everyone this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K filed by Liberty Broadband and Liberty Trip Advisor with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband and Liberty Trip Advisor 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 OIDA. Information regarding the possible GAAP metrics, along with required definitions and reconciliations, including preliminary notes in Schedules 1 and 2, as well as earnings releases for prior periods, which are available on Liberty Broadband's website. I'd like to introduce Greg Muffet, Liberty's president and CEO.

Good morning. Thank you, Shane. Today, speaking on the call, we will have Liberty Broadband's chief accounting officer and principal financial officer, Brian Wendling. Ron Duncan, CEO of GCI, and Pete Pounds, CFO of GCI, will also be available to answer questions. Also during Q&A, we will answer questions, we are available to answer questions with the Liberty Trip Advisor. Let me start with Liberty Broadband. As we mentioned in the last call in September, we began retaining approximately 50% of the cash flow from the charter sales to address our near-term liabilities. We have approximately a billion and a half related to the charter exchangeables that is due by October based on current prices. Therefore, from about the first of November to the end of January, we received two to nine million of proceeds from charter sales and spent only $177 million on Liberty broadband repurchases. The look-through price to charter on those repurchases was about $272 versus the current charter, just under $500, $400 a share. There's a slight mismatch on the timing of the proceeds when they come and when we spend them, and that may account for it being slightly more than the 50%. Going forward, we do plan to continue to apply 50% of proceeds from the charter share sales towards Liberty Broadband purchases. We do also expect total proceeds from charter to be lowered this year in 2023. Similar to last year, we are under the 26% fully loaded ownership cap early in the year, driven by charter's annual compensation grants. But as the year goes forward, we do expect a lighter buybacks at Charter compared to 2022 to the investments they are making at the company. And you've previously heard from them, and we'll discuss more in a bit. We will revisit capital allocation later in the year after our debt maturities are addressed. So let's look at Charter. We had lower broadband unit growth in 2022. Some of this is a COVID pull forward, no doubt. Some of it was lower move environment with fewer sales opportunities for a share taker like ourselves. fewer chances for us to get at the customer, and increased competition from new entrants, including fixed wireless. Though we would note that in many cases, fixed wireless has been a market expander, not a share-taker, and we do not view them over the long term as a competitor, although we surely feel them in the short term. Nonetheless, the Charter has posted strong operating results. In the fourth quarter, 92,000 residential broadband units were added, and we had sequential improvement over the prior two quarters. Spectrum One, our new pricing product, is helping drive momentum in mobile, and we recorded a record 615,000 mobile net ads in the fourth quarter. It has been a huge success compared to other mobile operators, and I would note cable share of mobile net ads in the fourth quarter was 35%, and charters was 22% of all mobile net ads. So charter was nearly a quarter of all the mobile net ads, which is a stunning number. We believe this demonstrates the value of cost savings to customers through bundling and seamless connectivity. As Chris Winfrey outlined in December, Charter is undertaking a series of initiatives to accelerate growth and attack large connectivity opportunities. That includes accelerating our network evolution plans through high split, differentiated converged product offerings like Spectrum One, and a rural build which we think has attractive returns with penetration way above expectations so far in initial bills, and we are targeting mid- to high-teens IRRs. By 2026, we do expect CapEx as a percent of revenue, excluding line extensions, to be below 22 and decline further, but in the interim, these investments will increase that CapEx as a percent of revenue. Liberty here have had a long, positive relationship working with Chris Winfrey and are excited by his strategy. that he's articulated both to the board and the marketplace. Even with the investments in the business, the increase in the stock price, charter, and Liberty Broadband both offer attractive free cash flow yields in a growth vehicle. I would note it's even more compelling relative value of Liberty Broadband. The charter free cash flow yield is about 9.1% despite their investments, and the Liberty Broadband looked through, 22 free cash flow yield was 12.9%. Let me turn now to TripAdvisor. The travel recovery continued in the fourth quarter, exceeding management's expectations. Full year trip revenue was 96% of the 2019 number, and the fourth quarter actually reached 106% of the 2019 number. The hotel matter recovery accelerated throughout the year. In the US in 2022, Hotel Meta reached parity with 2019 with strength in both auction pricing and volumes, and we are driving more revenue from paid traffic and less from free revenue, which is obviously hitting our margins to a degree. I'm going to talk more about that in a sec. 5-4 was up 115% in the fourth quarter over the prior year, and we've reduced losses despite the increased marketing spend. We continue to see benefits in improved customer improve conversion, and repeat customers, and we are very confident in the growth of this experiences segment. Management is focused on the long-term strategic opportunities and using product enhancements to drive growth. I would note they expect in 2022 to maintain flat margins through disciplined cost management and allocation despite increased investment in our growth segments, including experiences. And with that, I'll turn it over to Brian to discuss the financials.