Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq:
LBRDA, LBRDK, LBRDP) today reported first quarter 2021 results.
Headlines include (1):
- Fair value of Charter investment was $36 billion as of March
31st
- From March 1st through April 30th, Liberty Broadband received
$978 million of proceeds from sale of 1.6 million Charter shares to
Charter
- Maintained fully diluted equity interest in Charter of 26%
(2)
- From February 1st through April 30th, Liberty Broadband
repurchased 6.1 million LBRDK shares at an average price per share
of $152.30 and total cash consideration of $923 million
- In the first quarter, GCI (3) grew revenue 5% to $242 million,
generated operating income of $29 million and increased adjusted
OIBDA(4) 11% to $96 million
- GCI received $175 million of Rural Healthcare proceeds and
repaid $180 million under its revolving credit facility
“This was our first quarter participating in Charter’s buyback,
which provided almost $1 billion in proceeds through April. We used
all of these funds to repurchase Liberty Broadband shares at a
meaningful net asset discount, generating substantial value for our
shareholders,” said Greg Maffei, Liberty Broadband President and
CEO. “Despite fears of a pull forward in broadband demand during
the pandemic, Charter achieved strong data subscriber growth and
turned in a great first quarter.”
Share Repurchases
From February 1, 2021 through April 30, 2021, Liberty Broadband
repurchased approximately 6.1 million Series C Liberty Broadband
common stock (Nasdaq: LBRDK) at an average cost per share of
$152.30 for total cash consideration of $923 million. The total
remaining repurchase authorization for Liberty Broadband as of May
1, 2021 is approximately $1.7 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 reduce Liberty Broadband’s percentage equity interest to 26% on
a fully diluted basis. Such sales are executed by Liberty Broadband
monthly based on Charter’s repurchase activity in the month
prior.
In the first quarter, Liberty Broadband sold 834,576 shares of
Charter Class A common stock to Charter for total proceeds of
approximately $518 million. In April 2021, Liberty Broadband sold
735,209 shares of Charter Class A common stock to Charter for total
proceeds of approximately $460 million.
Balance Sheet
The following presentation is provided to separately identify
cash and liquid investments, debt and public holdings of Liberty
Broadband as of December 31, 2020 and March 31, 2021.
(amounts in millions)
12/31/2020
3/31/2021
Cash and Cash Equivalents:
GCI Holdings
$
32
$
51
Corporate and Other
1,386
1,126
Total Liberty Broadband Consolidated
Cash
$
1,418
$
1,177
Fair Value of Public Holdings in
Charter(a)
$
39,340
$
36,177
Debt:
Senior Notes(b)
$
600
$
600
Senior Credit Facility
704
523
Finance Leases and Other(c)
105
103
Total GCI Holdings Debt
$
1,409
$
1,226
GCI Leverage(d)
4.0x
3.4x
Charter Margin Loan
$
2,000
$
2,000
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
$
3,415
Total Liberty Broadband Debt
$
4,824
$
4,641
Fair market value adjustment and deferred
loan costs
91
43
Finance leases and tower obligations
(excluded from GAAP Debt)
(99
)
(97
)
Total Liberty Broadband Debt
(GAAP)
$
4,816
$
4,587
Other Financial Obligations:
Indemnification Obligation(f)
$
345
$
293
Preferred Stock(g)
178
178
________________
a)
Represents fair value of the
investment in Charter as of December 31, 2020 and March 31, 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 $241 million in the first
quarter as share repurchases at Liberty Broadband more than offset
proceeds from Charter share sales in the period. GCI cash increased
due to cash from operations, which includes Rural Healthcare
(“RHC”) proceeds, partially offset by debt repayment and capital
expenditures.
Liberty Broadband debt decreased $183 million in the first
quarter primarily due to GCI’s repayment under its revolving credit
facility. Total capacity under GCI’s revolving credit facility is
$550 million, of which undrawn capacity is $422 million (net of
letters of credit), and GCI’s leverage as defined in its credit
agreement is 3.4x.
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 March
31, 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 March 31, 2021 to
the same period in 2020.
In the first quarter, GCI revenue grew 5% due to robust demand
for data across both consumer and business customers. The consumer
growth was driven by a 12% 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.
Operating income improved and adjusted OIBDA grew 11% in the first
quarter primarily due to the revenue growth.
In the first quarter, GCI spent $19 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
GCI received approximately $175 million in payments during the
first quarter relating to services provided to its RHC customers
for the funding years that ended on June 30, 2019 and June 30,
2020. GCI is currently working with the FCC on RHC rates and
payments for the funding year that ends June 30, 2021. 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.
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 May 7, 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") and
subsidiary Skyhook.
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)
1Q20
1Q21
Revenue
GCI Holdings
$
NA
$
242,216
Corporate and other
4,104
4,318
Total Liberty Broadband Revenue
$
4,104
$
246,534
Operating Income (Loss)
GCI Holdings
$
NA
$
28,748
Corporate and other(a)
(7,275
)
(129,627
)
Total Liberty Broadband Operating
Income (Loss)
$
(7,275
)
$
(100,879
)
Adjusted OIBDA
GCI Holdings
$
NA
$
96,059
Corporate and other
(4,981
)
(13,306
)
Total Liberty Broadband Adjusted OIBDA
(Loss)
$
(4,981
)
$
82,753
________________
a)
Included in Corporate and other
is a proposed one-time payment to settle pending litigation
relating to the merger of Liberty Broadband and GCI Liberty
(Hollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc.,
et al.) pursuant to an agreement in principle signed with
plaintiffs’ counsel on May 5, 2021. For more information, see our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2021.
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 March 31, 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 March 31, 2021. In future periods the most
significant effect of acquisition accounting is an expected
increase to depreciation and amortization 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.
1Q20
1Q21
% Change
(amounts in thousands, except operating
metrics)
GCI Consolidated Financial
Metrics
Revenue
Consumer
$
109,834
$
119,229
9
%
Business
121,727
122,987
1
%
Total revenue
$
231,561
$
242,216
5
%
Operating income (loss)
$
23,186
$
28,748
24
%
Operating income margin (%)
10.0
%
11.9
%
190
bps
Adjusted OIBDA(a)
$
86,395
$
96,059
11
%
Adjusted OIBDA margin(a) (%)
37.3
%
39.7
%
240
bps
GCI Consumer
Financial Metrics
Revenue
Wireless
$
40,773
$
44,388
9
%
Data
44,294
52,225
18
%
Video
20,762
18,933
(9
)
%
Voice
4,005
3,683
(8
)
%
Total revenue
$
109,834
$
119,229
9
%
Operating Metrics
Wireless:
Revenue generating lines in service(b)
175,000
181,000
3
%
Data:
Revenue generating cable modem
subscribers(c)
128,400
143,900
12
%
Video:
Basic subscribers
79,200
71,000
(10
)
%
Homes passed
253,400
253,400
-
%
Voice - Total access lines in
service(d)
38,900
37,900
(3
)
%
GCI Business
Financial Metrics
Revenue
Wireless
$
22,489
$
20,387
(9
)
%
Data
84,214
91,130
8
%
Video
4,022
802
(80
)
%
Voice
11,002
10,668
(3
)
%
Total revenue
$
121,727
$
122,987
1
%
Operating Metrics
Wireless - Revenue generating lines in
service(b)
23,700
21,400
(10
)
%
Data - Revenue generating cable modem
subscribers(c)
8,800
12,900
47
%
Voice - Total access lines in
service(d)
34,000
30,400
(11
)
%
________________
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 May 7, 2021. The call can be accessed by
dialing (800) 289-0571 or (323) 794-2093, passcode 3168007, 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, matters relating to the Universal Service Administrative
Company and Rural Health Care program, 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 March 31,
2020 and March 31, 2021, respectively.
GCI HOLDINGS
ADJUSTED OIBDA RECONCILIATION
(amounts in thousands)
1Q20
1Q21
GCI Holdings Operating Income
$
23,186
$
28,748
Depreciation and amortization
62,361
63,712
Stock-based compensation
848
3,599
GCI Holdings Adjusted OIBDA
$
86,395
$
96,059
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 March 31, 2020 and
March 31, 2021, respectively.
LIBERTY BROADBAND
ADJUSTED OIBDA RECONCILIATION
(amounts in thousands)
1Q20
1Q21
Liberty Broadband Operating
Loss
$
(7,275
)
$
(100,879
)
Depreciation and amortization
493
63,762
Stock-based compensation
1,801
9,870
Litigation settlement(a)
—
110,000
Liberty Broadband Adjusted OIBDA
(Loss)
$
(4,981
)
$
82,753
GCI Holdings
$
NA
96,059
Corporate and other
(4,981
)
(13,306
)
________________
a)
Represents proposed one-time
payment to settle pending litigation relating to the merger of
Liberty Broadband and GCI Liberty (Hollywood Firefighters’ Pension
Fund, et al. v. GCI Liberty, Inc., et al.) pursuant to an agreement
in principle signed with plaintiffs’ counsel on May 5, 2021. For
more information, see our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2021.
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
BALANCE SHEET
INFORMATION
(unaudited)
March 31,
December 31,
2021
2020
amounts in thousands,
except share amounts
Assets
Current assets:
Cash and cash equivalents
$
1,177,161
1,417,802
Trade and other receivables, net of
allowance for doubtful accounts of $537 and $10, respectively
201,228
349,256
Other current assets
82,954
79,453
Total current assets
1,461,343
1,846,511
Investment in
Charter, accounted for using the equity method
15,734,862
16,178,939
Property and equipment, net
1,071,969
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
624,956
674,049
Tax sharing receivable
86,260
94,549
Other assets, net
160,466
151,487
Total assets
$
20,491,042
21,371,124
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
198,045
97,933
Deferred revenue
22,244
24,926
Current portion of debt, including $24,741
and $26,350 measured at fair value, respectively
29,425
31,026
Indemnification obligation
292,873
344,643
Other current liabilities
133,499
113,234
Total current liabilities
676,086
611,762
Long-term debt, net, including $1,399,600
and $1,445,775 measured at fair value, respectively
4,557,172
4,785,207
Obligations under finance leases and tower
obligations, excluding current portion
91,524
92,840
Long-term deferred revenue
38,278
39,649
Deferred income tax liabilities
1,974,045
1,977,643
Preferred stock
202,795
202,917
Other liabilities
140,910
146,687
Total liabilities
7,680,810
7,856,705
Equity
Series A common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 26,495,557
and 26,495,249 at March 31, 2021 and December 31, 2020,
respectively
265
265
Series B common stock, $.01 par value.
Authorized 18,750,000 shares; issued and outstanding 2,549,162 and
2,549,470 at March 31, 2021 and December 31, 2020, respectively
25
25
Series C common stock, $.01 par value.
Authorized 500,000,000 shares; issued and outstanding 162,652,971
and 167,480,926 at March 31, 2021 and December 31, 2020,
respectively
1,627
1,675
Additional paid-in capital
9,563,275
10,319,754
Accumulated other comprehensive earnings
(loss), net of taxes
15,597
15,436
Retained earnings
3,217,724
3,165,504
Total stockholders' equity
12,798,513
13,502,659
Non-controlling interests
11,719
11,760
Total equity
12,810,232
13,514,419
Commitments and contingencies
Total liabilities and equity
$
20,491,042
21,371,124
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
March 31,
2021
2020
amounts in thousands, except
per share amounts
Revenue
$
246,534
4,104
Operating costs and expenses:
Operating, including stock-based
compensation
69,178
2,468
Selling, general and administrative,
including stock-based compensation and transaction costs
104,473
8,418
Depreciation and amortization expense
63,762
493
Litigation settlement
110,000
—
347,413
11,379
Operating income (loss)
(100,879
)
(7,275
)
Other income (expense):
Interest expense (including amortization
of deferred loan fees)
(33,143
)
(5,861
)
Share of earnings (losses) of
affiliates
188,979
61,682
Gain (loss) on dilution of investment in
affiliate
(82,215
)
(59,325
)
Realized and unrealized gains (losses) on
financial instruments, net
99,348
—
Other, net
(8,126
)
163
Earnings (loss) before income taxes
63,964
(10,616
)
Income tax (expense) benefit
(11,785
)
2,774
Net earnings (loss)
52,179
(7,842
)
Less net earnings (loss) attributable to
the non-controlling interests
(41
)
—
Net earnings (loss) attributable to
Liberty Broadband shareholders
$
52,220
(7,842
)
Basic net earnings (loss) attributable to
Series A, Series B and Series C Liberty Broadband shareholders per
common share
$
0.27
(0.04
)
Diluted net earnings (loss) attributable
to Series A, Series B and Series C Liberty Broadband shareholders
per common share
$
0.27
(0.04
)
LIBERTY BROADBAND CORPORATION
AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Three months ended
March 31,
2021
2020
amounts in thousands
Cash flows from operating activities:
Net earnings (loss)
$
52,179
(7,842
)
Adjustments to reconcile net earnings
(loss) to net cash from operating activities:
Depreciation and amortization
63,762
493
Stock-based compensation
9,870
1,801
Litigation settlement
110,000
—
Share of (earnings) losses of affiliates,
net
(188,979
)
(61,682
)
(Gain) loss on dilution of investment in
affiliate
82,215
59,325
Realized and unrealized (gains) losses on
financial instruments, net
(99,348
)
—
Deferred income tax expense (benefit)
10,669
(2,774
)
Other, net
(739
)
436
Change in operating assets and
liabilities:
Current and other assets
164,639
(192
)
Payables and other liabilities
(11,304
)
(4,066
)
Net cash provided by (used in) operating
activities
192,964
(14,501
)
Cash flows from investing activities:
Capital expended for property and
equipment
(28,617
)
(15
)
Exercise of preemptive right to purchase
Charter shares
—
(14,910
)
Cash received for Charter shares
repurchased by Charter
518,405
—
Other investing activities, net
141
—
Net cash provided by (used in) investing
activities
489,929
(14,925
)
Cash flows from financing activities:
Repayment of debt, finance leases and
tower obligations
(182,571
)
—
Repurchases of Liberty Broadband common
stock
(738,411
)
—
Other financing activities, net
(2,481
)
(1,941
)
Net cash provided by (used in) financing
activities
(923,463
)
(1,941
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(240,570
)
(31,367
)
Cash, cash equivalents and restricted
cash, beginning of period
1,433,292
49,724
Cash, cash equivalents and restricted
cash, end of period
$
1,192,722
18,357
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