Liberty Broadband Reports Second Quarter 2024 Financial Results

Rhea-AI Summary

Liberty Broadband reported Q2 2024 results, highlighting key financial metrics and operations. The fair value of its Charter investment was $13.7 billion as of June 30th. The company issued $860 million in exchangeable senior debentures and used the proceeds to repay debt and repurchase debentures. GCI revenue remained flat at $246 million, with operating income of $30 million and a 7% decrease in Adjusted OIBDA to $86 million. Liberty Broadband maintained a 26% fully diluted equity interest in Charter and received $74 million from selling 270,000 Charter shares. The company's total debt decreased to $3.726 billion, and it has a remaining share repurchase authorization of approximately $1.7 billion.

Positive

• Issued $860 million in exchangeable senior debentures, using proceeds to repay debt and repurchase debentures
• Maintained 26% fully diluted equity interest in Charter
• Received $74 million from selling 270,000 Charter shares
• Total debt decreased to $3.726 billion
• Remaining share repurchase authorization of $1.7 billion

Negative

• GCI's Adjusted OIBDA decreased 7% to $86 million
• Operating income decreased from $32 million to $30 million
• GCI's leverage increased from 2.8x to 3.2x

Financial Analyst

Liberty Broadband's Q2 2024 results reveal a mixed financial picture. The fair value of their Charter investment increased to $13.7 billion, indicating potential upside. However, GCI's performance was lackluster, with flat revenue at $246 million and a 7% decrease in Adjusted OIBDA to $86 million.

The company's debt management strategy is noteworthy. They issued $860 million in exchangeable debentures, using the proceeds to repay $540 million of the Charter margin loan and repurchase $300 million of existing debentures. This refinancing could potentially lower interest costs and extend debt maturities.

Investors should monitor GCI's increasing leverage (now at 3.2x) and declining margins, which could impact future performance and financial flexibility. The continued investment in rural Alaska networks ($200 million expected for 2024) may pressure near-term financials but could drive long-term growth.

Telecom Industry Expert

Liberty Broadband's results highlight the challenges facing the telecom industry. GCI's flat revenue and declining profitability reflect ongoing pressures in both consumer and business segments. The slight growth in data revenue is offset by declines in wireless, indicating a shift in consumer preferences and competitive pressures.

The company's focus on rural Alaska expansion is strategic, potentially tapping into underserved markets. However, the $200 million capital expenditure plan for 2024 is significant and may strain resources in the short term. The emphasis on middle and last-mile connectivity aligns with industry trends towards improving infrastructure in less-connected areas.

The maintenance of a 26% stake in Charter through coordinated share sales demonstrates a balanced approach to portfolio management. This strategy allows Liberty Broadband to benefit from Charter's performance while maintaining a significant influence in the larger telecom landscape.

Investment Strategist

Liberty Broadband's Q2 results present a complex investment case. The company's primary value driver remains its Charter stake, now valued at $13.7 billion. This investment has appreciated, providing a solid foundation for the company's market value.

However, the operational performance of GCI is concerning. The flat revenue and declining Adjusted OIBDA suggest challenges in organic growth and profitability. The increased leverage (3.2x) also raises questions about financial flexibility and future capital allocation decisions.

The company's debt management appears prudent, with refinancing activities potentially improving the debt profile. The substantial share repurchase authorization of $1.7 billion signals confidence in the company's valuation but must be balanced against operational needs and debt levels.

Investors should weigh the stability and potential upside of the Charter investment against the operational challenges at GCI. The rural Alaska expansion strategy could provide growth opportunities but requires careful execution and patience.

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- Liberty Broadband Corporation (“Liberty Broadband”) (Nasdaq: LBRDA, LBRDK, LBRDP) today reported second quarter 2024 results.

Headlines include⁽¹⁾:

• Fair value of Charter investment was $13.7 billion as of June 30^th
• Issued $860 million aggregate principal amount of 3.125% exchangeable senior debentures due 2054 on July 2^nd
  • Used net proceeds to repay $540 million under Charter margin loan and repurchase $300 million principal amount of 3.125% exchangeable senior debentures due 2053
• From May 1, 2024 through July 31, 2024, Liberty Broadband received $74 million of proceeds from sale of 270 thousand Charter shares to Charter
  • Maintained fully diluted equity interest in Charter of 26%⁽²⁾
• In the second quarter, GCI⁽³⁾ revenue was flat at $246 million, generated $30 million in operating income and Adjusted OIBDA⁽⁴⁾ decreased 7% to $86 million

Share Repurchases

There were no repurchases of Liberty Broadband’s common stock (Nasdaq: LBRDA, LBRDK) from May 1, 2024 through July 31, 2024. The total remaining repurchase authorization for Liberty Broadband as of August 1, 2024 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 Charter Class A common stock as is necessary to maintain Liberty Broadband’s percentage equity interest at 26%⁽²⁾ on a fully diluted basis. Such sales are executed by Liberty Broadband monthly based on Charter’s repurchase activity in the month prior.

From May 1, 2024 through July 31, 2024, Liberty Broadband sold 270 thousand shares of Charter Class A common stock to Charter for total proceeds of $74 million.

Balance Sheet

The following presentation is provided to separately identify cash and liquid investments, debt and public holdings of Liberty Broadband as of March 31, 2024 and June 30, 2024.

(amounts in millions)		3/31/2024				6/30/2024
Cash and Cash Equivalents:
GCI Holdings		$	70			$	47
Corporate and Other			38				26
Total Liberty Broadband Consolidated Cash		$	108			$	73
Fair Value of Public Holdings in Charter(a)		$	13,385			$	13,730
Debt:
Senior Notes(b)		$	600			$	600
Senior Credit Facility			334				443
Tower Obligations and Other(c)			90				88
Total GCI Holdings Debt		$	1,024			$	1,131
GCI Leverage(d)			2.8x				3.2x
Charter Margin Loan		$	1,480			$	1,330
3.125% Exchangeable Senior Debentures due 2053(e)			1,265				1,265
Total Corporate Level Debt		$	2,745			$	2,595
Total Liberty Broadband Debt		$	3,769			$	3,726
Fair market value adjustment and deferred loan costs			(45	)			(33	)
Tower obligations and finance leases (excluded from GAAP Debt)			(85	)			(84	)
Total Liberty Broadband Debt (GAAP)		$	3,639			$	3,609
Other Financial Obligations:
Preferred Stock(f)			180				180

____________________
a)		Represents fair value of the investment in Charter as of March 31, 2024 and June 30, 2024.
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 Exchangeable Senior Debentures exclusive of fair market value adjustments.
f)		Liquidation value of preferred stock. Preferred stock has a 7% coupon, $25 per 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 $35 million in the second quarter as net debt repayment at Liberty Broadband more than offset proceeds from Charter share sales. GCI cash decreased $23 million in the second quarter as cash from operations and net debt borrowings were more than offset by capital expenditures (net of grant proceeds) and a $150 million dividend to Liberty Broadband during the period. These proceeds were used to pay down the Charter margin loan and were therefore net debt neutral to Liberty Broadband.

Liberty Broadband debt decreased $43 million in the second quarter as Liberty Broadband repaid $150 million of borrowings under the Charter margin loan, partially offset by additional borrowing under GCI’s senior credit facility. As of June 30, 2024, GCI’s credit facility has undrawn capacity of $347 million (net of letters of credit), and GCI’s leverage as defined in its credit agreement is 3.2x. On June 26, 2024, the Charter margin loan was amended to extend the maturity to June 30, 2027, among other modifications.

On July 2, 2024, Liberty Broadband closed a private offering of $860 million aggregate principal amount of 3.125% exchangeable senior debentures due 2054 and used net proceeds to repay $540 million of borrowings under the Charter margin loan, leaving $1.15 billion of available capacity under the Charter margin loan, and also repurchased $300 million in aggregate principal amount of 3.125% exchangeable senior debentures due 2053.

GCI Operating and Financial Results

			2Q23				2Q24				% Change
(amounts in millions, except operating metrics)
GCI Consolidated Financial Metrics
Revenue
Consumer		$	117			$	117				—	%
Business			128				129				1	%
Total revenue		$	245			$	246				—	%
Operating income		$	32			$	30				(6	)%
Operating income margin (%)			13.1	%			12.2	%			(90)bps
Adjusted OIBDA(a)		$	92			$	86				(7	)%
Adjusted OIBDA margin(a) (%)			37.6	%			35.0	%			(260)bps
GCI Consumer
Financial Metrics
Revenue
Data		$	59			$	60				2	%
Wireless			48				47				(2	)%
Other			10				10				—	%
Total revenue		$	117			$	117				—	%
Operating Metrics
Data:
Cable modem subscribers(b)			159,600				158,000				(1	)%
Wireless:
Lines in service(c)			201,100				201,900				—	%
GCI Business
Financial Metrics
Revenue
Data		$	106			$	109				3	%
Wireless			13				12				(8	)%
Other			9				8				(11	)%
Total revenue		$	128			$	129				1	%

____________________
a)		See reconciling schedule 1.
b)		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. Data cable modem subscribers as of June 30, 2024 include 900 subscribers that were reclassified from GCI Business to GCI Consumer subscribers in the first quarter of 2024 and are not new additions.
c)		A wireless line in service is defined as a wireless device with a monthly fee for services. Wireless lines in service as of June 30, 2024 include 1,800 lines that were reclassified from GCI Business to GCI Consumer lines in the first quarter of 2024 and are not new additions.

Unless otherwise noted, the following discussion compares financial information for the three months ended June 30, 2024 to the same period in 2023.

GCI revenue was flat in the second quarter. Consumer revenue was flat as growth in data was offset by declines in wireless revenue. Business revenue increased 1% driven by growth in data, partially offset by declines in wireless and other revenue.

Operating income and Adjusted OIBDA decreased $2 million and $6 million, respectively, in the second quarter due to higher operating costs primarily driven by increased distribution costs to healthcare customers as well as increased selling, general and administrative expense due to increases in labor-related costs and professional service fees. These were partially offset by lower depreciation expense as certain assets became fully depreciated during 2023.

In the second quarter, GCI spent $58 million, net, on capital expenditures. Capital expenditure spending was related primarily to improvements to the wireless and data networks in rural Alaska. GCI's net capital expenditures for the full year 2024 are expected to be approximately $200 million related to additional high-returning investments in middle and last mile connectivity, with continued network expansion in GCI’s most important markets in rural Alaska including the Bethel and AU-Aleutians fiber projects.

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.T.) on August 8, 2024. For information regarding how to access the call, please see “Important Notice” later in this document.
2)		Calculated pursuant to the stockholder agreement between Liberty Broadband and Charter Communications, Inc. ("Charter").
3)		Liberty Broadband’s principal operating asset is GCI Holdings, LLC (“GCI” or “GCI Holdings”), Alaska's largest communications provider. Liberty Broadband also holds an interest in 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)		2Q23				2Q24
Revenue
GCI Holdings		$	245			$	246
Corporate and other			—				—
Total Liberty Broadband Revenue		$	245			$	246
Operating Income
GCI Holdings		$	32			$	30
Corporate and other			(9	)			(9	)
Total Liberty Broadband Operating Income		$	23			$	21
Adjusted OIBDA
GCI Holdings		$	92			$	86
Corporate and other			(5	)			(6	)
Total Liberty Broadband Adjusted OIBDA		$	87			$	80

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.T.) on August 8, 2024. The call can be accessed by dialing (877) 407-3944 or (412) 902-0038, passcode 13742821, 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, 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 inflationary pressures) 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 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 June 30, 2023 and June 30, 2024.

GCI HOLDINGS ADJUSTED OIBDA RECONCILIATION

(amounts in millions)		2Q23				2Q24
GCI Holdings Operating Income		$	32			$	30
Depreciation and amortization			56				52
Stock-based compensation			4				4
GCI Holdings Adjusted OIBDA		$	92			$	86

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 June 30, 2023 and June 30, 2024.

LIBERTY BROADBAND ADJUSTED OIBDA RECONCILIATION

(amounts in millions)		2Q23				2Q24
Liberty Broadband Operating Income		$	23			$	21
Depreciation and amortization			56				52
Stock-based compensation			8				7
Liberty Broadband Adjusted OIBDA		$	87			$	80
GCI Holdings		$	92			$	86
Corporate and other			(5	)			(6	)

LIBERTY BROADBAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(unaudited)
		June 30,				December 31,
		2024				2023
		amounts in millions,
		except share amounts
Assets
Current assets:
Cash and cash equivalents		$	73			158
Trade and other receivables, net of allowance for credit losses of $5 and $5, respectively			176			178
Prepaid and other current assets			60			94
Total current assets			309			430
Investment in Charter, accounted for using the equity method			12,535			12,116
Property and equipment, net			1,109			1,053
Intangible assets not subject to amortization
Goodwill			755			755
Cable certificates			550			550
Other			41			40
Intangible assets subject to amortization, net			436			461
Other assets, net			224			236
Total assets		$	15,959			15,641
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities		$	101			86
Deferred revenue			30			30
Current portion of debt			3			3
Other current liabilities			50			59
Total current liabilities			184			178
Long-term debt, net, including $1,211 and $1,255 measured at fair value, respectively			3,606			3,733
Obligations under tower obligations and finance leases, excluding current portion			81			83
Long-term deferred revenue			76			65
Deferred income tax liabilities			2,311			2,216
Preferred stock			201			202
Other liabilities			139			141
Total liabilities			6,598			6,618
Equity
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 18,236,186 and 18,233,573 at June 30, 2024 and December 31, 2023, respectively			—			—
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,022,532 and 2,025,232 at June 30, 2024 and December 31, 2023, respectively			—			—
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 122,589,251 and 123,704,814 at June 30, 2024 and December 31, 2023, respectively			1			1
Additional paid-in capital			3,023			3,107
Accumulated other comprehensive earnings (loss), net of taxes			40			52
Retained earnings			6,279			5,843
Total stockholders' equity			9,343			9,003
Non-controlling interests			18			20
Total equity			9,361			9,023
Commitments and contingencies
Total liabilities and equity		$	15,959			15,641

LIBERTY BROADBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
(unaudited)
		Three months ended
		June 30,
		2024				2023
		amounts in millions,
		except per share amounts
Revenue		$	246			245
Operating costs and expenses:
Operating expense (exclusive of depreciation and amortization shown separately below)			62			59
Selling, general and administrative, including stock-based compensation			111			107
Depreciation and amortization			52			56
			225			222
Operating income (loss)			21			23
Other income (expense):
Interest expense (including amortization of deferred loan fees)			(52	)		(52	)
Share of earnings (losses) of affiliate			297			318
Gain (loss) on dilution of investment in affiliate			(4	)		(5	)
Realized and unrealized gains (losses) on financial instruments, net			(17	)		40
Other, net			8			2
Earnings (loss) before income taxes			253			326
Income tax benefit (expense)			(58	)		(74	)
Net earnings (loss)			195			252
Less net earnings (loss) attributable to the non-controlling interests			—			—
Net earnings (loss) attributable to Liberty Broadband shareholders		$	195			252
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share		$	1.36			1.73
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share		$	1.36			1.71

LIBERTY BROADBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION
(unaudited)
		Six months ended
		June 30,
		2024				2023
		amounts in millions
Cash flows from operating activities:
Net earnings (loss)		$	436			321
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Depreciation and amortization			102			114
Stock-based compensation			14			16
Share of (earnings) losses of affiliate, net			(577	)		(566	)
(Gain) loss on dilution of investment in affiliate			32			32
Realized and unrealized (gains) losses on financial instruments, net			(59	)		74
Deferred income tax expense (benefit)			101			95
Other, net			(2	)		(2	)
Change in operating assets and liabilities:
Current and other assets			57			(40	)
Payables and other liabilities			(25	)		(99	)
Net cash provided by (used in) operating activities			79			(55	)
Cash flows from investing activities:
Capital expenditures			(123	)		(97	)
Grant proceeds received for capital expenditures			19			2
Cash received for Charter shares repurchased by Charter			116			42
Cash released from escrow related to dispositions			—			23
Purchases of investments			—			(53	)
Other investing activities, net			(16	)		2
Net cash provided by (used in) investing activities			(4	)		(81	)
Cash flows from financing activities:
Borrowings of debt			266			1,451
Repayments of debt, tower obligations and finance leases			(348	)		(1,545	)
Repurchases of Liberty Broadband common stock			(89	)		(40	)
Indemnification payment to Qurate Retail			—			(25	)
Other financing activities, net			(1	)		(2	)
Net cash provided by (used in) financing activities			(172	)		(161	)
Net increase (decrease) in cash, cash equivalents and restricted cash			(97	)		(297	)
Cash, cash equivalents and restricted cash, beginning of period			176			400
Cash, cash equivalents and restricted cash, end of period		$	79			103

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807993177/en/

Shane Kleinstein (720) 875-5432

Source: Liberty Broadband Corporation

FAQ

What was Liberty Broadband's (LBRDA) fair value of Charter investment as of June 30, 2024?

Liberty Broadband's fair value of Charter investment was $13.7 billion as of June 30, 2024.

How much did Liberty Broadband (LBRDA) receive from selling Charter shares in Q2 2024?

Liberty Broadband received $74 million from selling 270,000 Charter shares between May 1, 2024, and July 31, 2024.

What was GCI's revenue and operating income for Q2 2024?

GCI's revenue was flat at $246 million, and operating income was $30 million for Q2 2024.

How much debt did Liberty Broadband (LBRDA) have as of June 30, 2024?

Liberty Broadband's total debt was $3.726 billion as of June 30, 2024.