Liberty Broadband Reports First Quarter 2022 Financial Results

Rhea-AI Summary

Liberty Broadband reported Q1 2022 results with a fair value of Charter holdings at $29 billion. The company received $753 million from selling 1.3 million Charter shares, maintaining a 26% interest. Additionally, Liberty repurchased 5.1 million shares for $719 million. GCI's revenue decreased 4% to $233 million, with operating income at $21 million and adjusted OIBDA down 9% to $87 million. Cash increased by $109 million, although total debt rose to $4.11 billion due to margin loan drawdowns. Liberty sold its Skyhook subsidiary for $170 million on May 2, 2022.

Positive

• Received $753 million from Charter share sales.
• Repurchased 5.1 million shares for $719 million, showing commitment to shareholder returns.
• Sold Skyhook subsidiary for approximately $170 million.

Negative

• GCI revenue decreased by 4% to $233 million.
• Operating income declined by 28% to $21 million.
• Adjusted OIBDA decreased by 9% to $87 million.
• Total debt increased by $299 million to $4.11 billion.

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq: LBRDA, LBRDK, LBRDP) today reported first quarter 2022 results. Headlines include⁽¹⁾:

• Fair value of Charter investment was $29 billion as of March 31^st
• From February 1^st through April 30^th, Liberty Broadband received $753 million of proceeds from sale of 1.3 million Charter shares to Charter
  • Maintained fully diluted equity interest in Charter of 26%⁽²⁾
• From February 1^st through April 30^th, Liberty Broadband repurchased 5.1 million LBRDA/K shares at an average price per share of $140.13 for total cash consideration of $719 million
• In the first quarter, GCI⁽³⁾ revenue decreased 4% to $233 million, generated operating income of $21 million and adjusted OIBDA⁽⁴⁾ declined 9% to $87 million
• Sold Skyhook subsidiary for approximately $170 million of net proceeds on May 2^nd

Share Repurchases

From February 1, 2022 through April 30, 2022, Liberty Broadband repurchased approximately 4.7 million shares of Series C Liberty Broadband common stock (Nasdaq: LBRDK) at an average cost per share of $140.52 for total cash consideration of $660 million and repurchased approximately 430 thousand shares of Series A Liberty Broadband common stock (Nasdaq: LBRDA) at an average cost per share of $135.84 for total cash consideration of $58 million. The total remaining repurchase authorization for Liberty Broadband as of May 1, 2022 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 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 February 1, 2022 through April 30, 2022, Liberty Broadband sold approximately 1.3 million shares of Charter Class A common stock to Charter for total proceeds of approximately $753 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, 2021 and March 31, 2022.

(amounts in millions)		12/31/2021				3/31/2022
Cash and Cash Equivalents:
GCI Holdings		$	34			$	111
Corporate and Other			157				189
Total Liberty Broadband Consolidated Cash		$	191			$	300
Fair Value of Public Holdings in Charter(a)		$	34,807			$	28,595
Debt:
Senior Notes(b)		$	600			$	600
Senior Credit Facility			399				399
Tower Obligations and Other(c)			98				97
Total GCI Holdings Debt		$	1,097			$	1,096
GCI Leverage(d)			3.0x				2.9x
Charter Margin Loan		$	1,300			$	1,600
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		$	2,715			$	3,015
Total Liberty Broadband Debt		$	3,812			$	4,111
Fair market value adjustment and deferred loan costs			41				(6	)
Tower obligations and finance leases (excluded from GAAP Debt)			(92	)			(91	)
Total Liberty Broadband Debt (GAAP)		$	3,761			$	4,014
Other Financial Obligations:
Indemnification Obligation(f)		$	324			$	239
Preferred Stock(g)			179				180

_______________________
a)		Represents fair value of the investment in Charter as of December 31, 2021 and March 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 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, 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 "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 increased $109 million in the first quarter driven by Charter share sales in the period and additional borrowing under the Charter margin loan, partially offset by share repurchases at Liberty Broadband. GCI cash grew $77 million in the first quarter primarily due to cash from operations, partially offset by capital expenditures.

On May 2, 2022, Liberty Broadband sold its wholly owned subsidiary Skyhook for approximately $170 million of net proceeds.

Liberty Broadband debt increased $299 million in the first quarter due to an additional draw down on the Charter margin loan. There is $700 million 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 2.9x.

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, 2022, 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, 2022 to the same period in 2021.

GCI revenue decreased 4% in the first quarter. Consumer revenue was flat driven by continued strength in demand for consumer data and wireless, offset by declines in video revenue. Business revenue declined in the first quarter primarily driven by the impact of extending a roaming wireless contract with a large partner in the fourth quarter of 2021, which results in lower quarterly and annual revenue in 2022, but GCI will benefit from the extension of the agreement for several years 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 declined in the first quarter and adjusted OIBDA declined largely in line with the decrease in revenue.

In the first quarter, GCI spent $28 million on capital expenditures, excluding capitalized interest. Capital expenditure spending was related primarily to improvements to the wireless and hybrid fiber coax networks. GCI's net capital expenditures for the full year 2022 are expected to be approximately $150 million.

FOOTNOTES

1)		Liberty Broadband 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 6, 2022. 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)		1Q21				1Q22
Revenue
GCI Holdings		$	242			$	233
Corporate and other			5				5
Total Liberty Broadband Revenue		$	247			$	238
Operating Income (Loss)
GCI Holdings		$	29			$	21
Corporate and other(a)			(130	)			(14	)
Total Liberty Broadband Operating Income (Loss)		$	(101	)		$	7
Adjusted OIBDA (Loss)
GCI Holdings		$	96			$	87
Corporate and other			(13	)			(7	)
Total Liberty Broadband Adjusted OIBDA (Loss)		$	83			$	80

_______________________
a)		Included in Corporate and other for the three months ended March 31, 2021 is the accrual of a one-time payment to settle 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. Liberty Broadband agreed to the final settlement amounts with its insurance carriers in the third quarter of 2021. For more information, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

GCI OPERATING METRICS AND FINANCIAL RESULTS
			1Q21			1Q22			% Change
(amounts in millions, except operating metrics)
GCI Consolidated Financial Metrics
Revenue
Consumer		$	119		$	119			—	%
Business			123			114			(7	)%
Total revenue		$	242		$	233			(4	)%
Operating income		$	29		$	21			(28	)%
Operating income margin (%)			11.9%			9.0%			(290	)bps
Adjusted OIBDA(a)		$	96		$	87			(9	)%
Adjusted OIBDA margin(a) (%)			39.7%			37.3%			(240	)bps
GCI Consumer
Financial Metrics
Revenue
Wireless		$	44		$	46			5	%
Data			52			58			12	%
Other			23			15			(35	)%
Total revenue		$	119		$	119			—	%
Operating Metrics
Wireless:
Revenue generating lines in service(b)			181,000			185,900			3	%
Data:
Revenue generating cable modem subscribers(c)			143,900			153,600			7	%
GCI Business
Financial Metrics
Revenue
Wireless		$	20		$	14			(30	)%
Data			91			90			(1	)%
Other			12			10			(17	)%
Total revenue		$	123		$	114			(7	)%

_______________________
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 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.

Important Notice: Liberty Broadband (Nasdaq: LBRDA, LBRDK, LBRDP) will discuss Liberty Broadband’s earnings release on a conference call which will begin at 11:15 a.m. (E.D.T.) on May 6, 2022. The call can be accessed by dialing (800) 458-4121 or (323) 794-2093, passcode 3992653, 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 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, 2021 and March 31, 2022, respectively.

GCI HOLDINGS ADJUSTED OIBDA RECONCILIATION
(amounts in millions)		1Q21			1Q22
GCI Holdings Operating Income		$	29		$	21
Depreciation and amortization			64			63
Stock-based compensation			3			3
GCI Holdings Adjusted OIBDA		$	96		$	87

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, 2021 and March 31, 2022, respectively.

LIBERTY BROADBAND ADJUSTED OIBDA RECONCILIATION
(amounts in millions)		1Q21				1Q22
Liberty Broadband Operating Income (Loss)		$	(101	)		$	7
Depreciation and amortization			64				64
Stock-based compensation			10				9
Litigation settlement, net of recoveries(a)			110				—
Liberty Broadband Adjusted OIBDA (Loss)		$	83			$	80
GCI Holdings		$	96				87
Corporate and other			(13	)			(7	)

_______________________
a)		Included in Corporate and other for the three months ended March 31, 2021 is the accrual of a one-time payment to settle 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. Liberty Broadband agreed to the final settlement amounts with its insurance carriers in the third quarter of 2021. For more information, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

LIBERTY BROADBAND CORPORATION
BALANCE SHEET INFORMATION
(unaudited)
		March 31,			December 31,
		2022			2021
		amounts in millions,
		except share amounts
Assets
Current assets:
Cash and cash equivalents		$	300		191
Trade and other receivables, net of allowance for credit losses of $4 and $4, respectively			169		206
Prepaid and other current assets			77		62
Total current assets			546		459
Investment in Charter, accounted for using the equity method			12,902		13,260
Property and equipment, net			1,010		1,031
Intangible assets not subject to amortization
Goodwill			762		762
Cable certificates			550		550
Other			37		37
Intangible assets subject to amortization, net			559		573
Tax sharing receivable			63		86
Other assets, net			201		210
Total assets		$	16,630		16,968
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities		$	97		99
Deferred revenue			22		25
Current portion of debt, including $22 and $25 measured at fair value, respectively			25		28
Indemnification obligation			239		324
Other current liabilities			154		106
Total current liabilities			537		582
Long-term debt, net, including $1,359 and $1,403 measured at fair value, respectively			3,989		3,733
Obligations under finance leases and tower obligations, excluding current portion			88		89
Long-term deferred revenue			35		35
Deferred income tax liabilities			2,002		1,998
Preferred stock			203		203
Other liabilities			177		189
Total liabilities			7,031		6,829
Equity
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 22,558,925 and 23,232,342 at March 31, 2022 and December 31, 2021, respectively			—		—
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,544,548 and 2,544,548 at March 31, 2022 and December 31, 2021, respectively			—		—
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 139,860,028 and 144,854,780 at March 31, 2022 and December 31, 2021, respectively			1		1
Additional paid-in capital			5,375		6,214
Accumulated other comprehensive earnings (loss), net of taxes			10		14
Retained earnings			4,197		3,898
Total stockholders' equity			9,583		10,127
Non-controlling interests			16		12
Total equity			9,599		10,139
Commitments and contingencies
Total liabilities and equity		$	16,630		16,968

LIBERTY BROADBAND CORPORATION
STATEMENT OF OPERATIONS INFORMATION
(unaudited)
		Three months ended
		March 31,
		2022				2021
		amounts in millions, except per share amounts
Revenue		$	238			247
Operating costs and expenses:
Operating expense (exclusive of depreciation and amortization shown separately below)			66			69
Selling, general and administrative, including stock-based compensation			101			105
Depreciation and amortization			64			64
Litigation settlement, net of recoveries			—			110
			231			348
Operating income (loss)			7			(101	)
Other income (expense):
Interest expense (including amortization of deferred loan fees)			(26	)		(33	)
Share of earnings (losses) of affiliate			303			189
Gain (loss) on dilution of investment in affiliate			(56	)		(82	)
Realized and unrealized gains (losses) on financial instruments, net			137			99
Other, net			(21	)		(8	)
Earnings (loss) before income taxes			344			64
Income tax benefit (expense)			(45	)		(12	)
Net earnings (loss)			299			52
Less net earnings (loss) attributable to the non-controlling interests			—			—
Net earnings (loss) attributable to Liberty Broadband shareholders		$	299			52
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share		$	1.79			0.27
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share		$	1.77			0.27

LIBERTY BROADBAND CORPORATION
STATEMENT OF CASH FLOWS INFORMATION
(unaudited)
		Three months ended
		March 31,
		2022				2021
		amounts in millions
Cash flows from operating activities:
Net earnings (loss)		$	299			52
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Depreciation and amortization			64			64
Stock-based compensation			9			10
Litigation settlement, net of recoveries			—			110
Share of (earnings) losses of affiliate, net			(303	)		(189	)
(Gain) loss on dilution of investment in affiliate			56			82
Realized and unrealized (gains) losses on financial instruments, net			(137	)		(99	)
Deferred income tax expense (benefit)			6			11
Other, net			(1	)		(2	)
Change in operating assets and liabilities:
Current and other assets			65			165
Payables and other liabilities			32			(11	)
Net cash provided by (used in) operating activities			90			193
Cash flows from investing activities:
Capital expenditures			(32	)		(28	)
Cash received for Charter shares repurchased by Charter			602			518
Other investing activities, net			4			—
Net cash provided by (used in) investing activities			574			490
Cash flows from financing activities:
Borrowings of debt			300			—
Repayment of debt, finance leases and tower obligations			(2	)		(183	)
Repurchases of Liberty Broadband common stock			(843	)		(738	)
Other financing activities, net			(3	)		(2	)
Net cash provided by (used in) financing activities			(548	)		(923	)
Net increase (decrease) in cash, cash equivalents and restricted cash			116			(240	)
Cash, cash equivalents and restricted cash, beginning of period			206			1,433
Cash, cash equivalents and restricted cash, end of period		$	322			1,193

 

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Liberty Broadband Corporation

Courtnee Chun, 720-875-5420

Source: Liberty Broadband Corporation

FAQ

What were Liberty Broadband's Q1 2022 results?

In Q1 2022, Liberty Broadband reported a revenue of $238 million, a decline from the previous year, with GCI revenue falling 4% to $233 million.

How much did Liberty Broadband repurchase in shares during Q1 2022?

Liberty Broadband repurchased approximately 5.1 million shares for a total cash consideration of $719 million.

What was the fair value of Liberty Broadband's investment in Charter as of Q1 2022?

As of March 31, 2022, the fair value of Liberty Broadband's investment in Charter was reported at $29 billion.

How did GCI's operating income change in Q1 2022?

GCI's operating income declined by 28% to $21 million in Q1 2022 compared to the same period in the previous year.

What was the cash position of Liberty Broadband at the end of Q1 2022?

Liberty Broadband's cash and cash equivalents increased to $300 million as of March 31, 2022.