Liberty Broadband Corp
NASDAQ:LBRDA
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Liberty Broadband Corp
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Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Broadband 2022 Q2 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, August 5.
I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer. Please go ahead.
Thank you.
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 or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K filed by Liberty Broadband and Liberty TripAdvisor with the SEC.
These forward-looking statements speak only as of 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 statements contained herein, to reflect any change in Liberty Broadband or Liberty TripAdvisor's 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 OIBDA. 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, as well as earnings releases for prior periods, which are available on Liberty Broadband's website.
Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.
Thank you, Courtnee. Good morning. Today, speaking on the call, we will also 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 be available to answer questions. Also during the Q&A, we'll be able to answer questions related to Liberty TripAdvisor.
So looking first in Liberty Broadband, from May 1st to the 31st of July, we repurchased 9 million LBRD shares for $1 billion. This includes 2.7 LBRDA shares at an average cost per share of $114.08. We were capitalizing on the spread between the A's and K's. These Liberty Broadband buybacks have been additive to our NAV above 3% per share over this period compared to Charter of 1% per share and we bought at a look-through price on Charter, these were purchases about $373 a share on Charter. Over the same period we received $1.1 billion of cash proceeds from Charter share sales back to Charter.
Looking at Charter itself, it was a strong quarter of financial results, with revenue up 6% and adjusted EBITDA up 10%. Organic broadbands were a relatively disappointing 38%, if you exclude the 59,000 customers disconnected from the Affordable Connectivity Program. That was 38,000 not 38%. Excuse me.
The market environment does remain more challenged than we've had in recent memory with low move activity and increased investment in promotion and fixed wireless by certain players. Spectrum mobile continues to expand at a rapid clip with 344,000 new wireless lines. Mobile revenue is now up 40% year-over-year and represents over 5% of total Charter revenue. I want to reiterate mobile has a real revenue and profit opportunity and we remain at the very early stages.
As far as Charter itself, we at Liberty feel very comfortable with strategic position and technical edge in the vast majority of our markets. We are still optimistic on the broadband outlook, including new world builds, which will extend the growth opportunity and we believe mobile is a competitive advantage, as well as a revenue opportunity and will help further solidify our value proposition versus competitors.
Turning to TripAdvisor's. We had our earnings call morning for Trip, which welcoming Matt Goldberg, the new CEO, who started on the 1st July. Consolidate results have reached the 2019 levels by the end of the quarter and the European recovery rate is caught up with the U.S. especially in the hotel auction. We're seeing the strongest recovering in Viator and TheFork, which were both exceeding the2019 revenue levels..
Viator M&A reached breakeven in the second quarter and we believe the attractive even if economics of the business are very appealing. We believe in the ability to build a large repeat revenue basis off relatively low marketing costs. We are focused on new customer acquisition and retention strategies, as well as brand marketing for Viator.
TheFork also exceeded its 2019 booking levels. European dining restrictions have eased and diners are returning to restaurants.
Consistent with the above results, TripAdvisor announced new reporting segments, which better reflect the growth profile and maturity stages of our respective three businesses. We believe this will allow investors to better track the progress of our performance across our growth areas.
And with that, let me turn it over to Brian to discuss the financials in more detail.
Thank you, Greg.
At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $301 million which includes approximately $80 million of cash held directly at GCI. The value of our Charter investment based on our shares held as of August 1 and Charter share price at yesterday's close was $23 billion.
On May 2, we sold our subsidiary, Skyhook, for aggregate consideration of $194 million, which includes $23 million of cash, that's held in escrow.
At quarter end, Liberty Broadband had a total principal amount of debt of $3.9 billion. We repaid $200 million on our Charter margin loan during the quarter and our available capacity is $900 million. Note the above amounts exclude the indemnification obligation to Qurate and preferred stock.
Now looking at GCI's results. GCI had a good second quarter. Company generated solid free cash flow. Cash for the quarter was down $31 million with strong cash from operations offset by a $70 million dividend to Liberty Broadband and CapEx during the quarter. Subsequent to quarter end, GCI paid an additional $40 million to Broadband using cash on hand.
Leverages defined in it's credit agreement was 2.9x times at quarter end and GCI has 397 million of undrawn capacity under its revolver. Revenue was flat. Adjusted OBIDA was up $1 million in the second quarter due to a better mix of higher margin revenue. As we noted at year-end, revenue and adjusted OBIDA are seeing the effects of a new roaming agreement effective in the fourth quarter of 2021, which is positive long-term but does create some negative comparisons in 2022 to prior periods.
Additionally, our video business continues to shrink which significantly impacts revenue, but does not meaningfully impact margin or free cash flow. This decline in our video business and the impact of the new roaming agreement were offset by growth in our consumer broadband and wireless offerings, as well as our business data revenue.
Over the last year GCI has added 5,000 revenue-generating wireless subs and over 9,000 revenue-generating cable modem customers, including 900 broadband sub-adds in the second quarter of this year. We believe many of these games are directly attributable to our deployment of 2 gig speeds in communities across the Alaska. GCI is expecting to launch 2 gig residential internet speeds in non-Alaska by the end of the year. Last week, the company announced that the subsea fiber for the AU-Aleutians fiber project completed its 12,000 mile journey from Germany and has arrived in on Alaska. The 800 plus miles of fiber will bring these 2 gig speeds to some of the most remote communities in the country.
With that I'll turn the call back over to Greg.
Thank you, Brian.
I want to remind some of you who may not know our Annual Investor Day will be Thursday, November 17, in New York. Please save the date. Additional details will be provided soon. We hope to see many of you there. We also appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor.
And with that, operator, I'd like to open the floor for questions.
Of course. Thank you. [Operator Instructions].
And we'll go ahead and take our first question from James Ratcliffe with Evercore ISI. Please go ahead.
Thanks. I have two related ones for Greg and one for Ron, if I could. Greg, recently we saw significant increase in discussion of potential cable and M&A, and at the same time, there also seems to be greater uncertainty about the M&A regulatory environment, in general. Can you give us a read on what you're seeing in terms of the interest in cable assets, amongst strategic financial investors? And also your sense of what the antitrust environment looks like right now for cable consolidation? And Ron, you are seeing a lot of attention on fixed wireless in the lower 48 at the moment. Is it relevant as a competitor or opportunity for GCI?
So thank you, James. I'll go first. I think Charter's perspective has been consistent. There are a series of assets at the right price that we could be effective consolidators of and add value in terms of our ability be a more efficient and customer touch, our ability to bring scale synergies, our ability to run them on a nationwide basis on a more consistent attractive level.
I don't think that's changed. I think some of the prices have obviously come down, which would make that a more interesting opportunity potentially if we were a cash buyer. The regulatory environment is very unclear and I think you really have to look at what scale you're talking about on a deal. It's something we believe we could defend of any of the stuff that's out there. But obviously the -- there's been a lot of changes in what's going on between DOJ, FTC, and FCC. So we'll see, it's hard to predict with certainty, but I'm comfortable, optimistic we could do a transaction if anyone to discuss those been publicly rumored. Ron?
Thank you. The short answer to is fixed wireless relevant to us in Alaska is no for two principal reasons. T-Mobile who is probably the most aggressive fixed wireless provider in the lower 48 doesn't operate its own facilities in Alaska. They roam on our network in Alaska. So there's no direct retail competition from T-Mobile and Verizon, the other principal competitor does not have C-band spectrum in Alaska. The C-band auction did not cover Alaska because we still use C-band for important long haul satellite connectivity in the state.
So the FCC excluded C-band in Alaska from the auction and C-band is the principle frequency, which Verizon is using for fixed wireless access. They are doing some in millimeter wave, but Alaska doesn't have any locations that are nearly dense enough to make millimeter wave fixed wireless access, significant competitors. So we haven't seen anything on that front and don't expect to.
And we'll go ahead and move onto our next question from Barton Crockett with Rosenblatt Securities. Please go ahead.
Hi, thanks for taking the question. Greg, I wanted to just ask about kind of the evergreen question, but what your current thinking is about the merits from your perspective and how you might kind of characterize the Charter perspective of a potential combination of Liberty Broadband and Charter. It seems like we've settled into a pattern where you're pretty happy sitting at, they're buying some stock back, you're buying some stock back seems like a pretty kind of steady equilibrium. But the bigger possibility still remains and could be interesting. I'm just wondering what you think about that now? Is there any reason to think that that would be desirable or not at this point?
I think you're right, that the equilibrium is attractive for us. We continue to increase our NAV per share at faster rate than Charter because of the taking advantage of that discount, even net of taxes. We also like our role and our involvement on the governance side and our oversight and understanding of the business better by being there.
So I think it's a positive. Will it be a forever condition? Don't know, not something we are contemplating today to change. But we always remain flexible on that. I think you are on the earlier call; we have taken a lot of actions historically to take advantage of when we thought it was the right time, whether it be Expedia, the GCI transaction, DIRECTV, so never say never.
Okay. And then, if I could just ask another question, the mostly curious about your perspective about what was once a hot button issue for the industry. And that is the potential for industrial kind of reorganization of telecom companies and cable companies, potential mergers of large companies in that space and talk that would involve Charter in some scenarios. We don't hear about that so much these days. And I note that the telecom wireless companies and cable companies are more competitive with each other. Is that day done as something that might have even be contemplated is that course kind of left the barn and not really to come back? Or where do you think about that as an evolution over time?
Yes. I think the progress we're making in wireless on our own is very attractive, could there be some logic down the road to combine one of the issues those have been if you look at the convergence of broadband and wireless, the difficulty for us or the relative unattractiveness to offer wireless in territories where we don't have broadband, which would be the case if we were merged or we bought a national broadband -- national wireless player.
So we like our hand in broadband. We like our hand in wireless extending our broadband capabilities, not to say there isn't somewhere that might change down the road. And there have been people imagining combinations where cable bought active together. Maybe that solves the problem, but we feel very good about our prospects both in broadband and in wireless really they're a converged combination on our footprint. That's attractive for us.
And we'll go ahead and take our last question from Michael Rollins with Citi. Please go ahead.
Thanks and good morning. Two topics, the first, Greg, you made a comment in your opening comments that you're comfortable in the vast majority of Charter's markets, when you talk about the strategic and technical position. Just curious, what would be the characteristics of markets or the state of systems in which you wouldn't be comfortable? And then switching gears to ACP, Ron, I'm curious if you could share more about the ACP experience, is it getting easier for customers to qualify? And how does this tool instruct you in terms of the risk of recession and maybe this program being able to have something in your toolbox that you haven't had before as you try to help customers during what could be just a tougher period for some? Thanks.
Yes. I'll go first. I think the -- maybe I was not articulate enough or you misheard me. What I think is that do I like our position better where we have less fiber competition? Yes. That's the places where I'm most happy and feel our strategic and technical edges better. Obviously, we gain more share against DSL and other technologies like that. I think we compete well against fiber, but obviously I prefer competing against non-fiber competitors.
All right. On the ACP, the ACP has been -- I'm sorry. Were you done, Greg?
Yes, I was. Thank you and go ahead.
Okay. Just checking. Don't want to cut you off. ACP has been a very, very powerful, very powerful tool for GCI. And I think is one of the, our success in transferring customers from the emergency broadband protection program. The prior subsidy program to ACP is one of the reasons that we continue to grow broadband subs in spite of the slowdown in the rest of the industry.
We did have good growth this last quarter in spite of traditionally would've been a down quarter. I would note that Alaska as a whole is denoted as tribal land. So we qualify for the $75 subsidy instead of the $30 subsidy on ACP. It has been a very, very important tool for us, and we've aggressively marketed it into the marketplace, including converting our lifeline wireline customers -- lifeline wireless customers over to the ACP program. So it's a benefit for us on both wireless and the broadband side.
And I think it probably is a material offset to any recessionary effect because it there's a very broad swath of customers that are covered by or eligible for ACP. And they're typically the ones that would churn the most in a difficult economic environment. So we see it as a particular strength kind of it's been a key component of our marketing program on the consumer side for the last six months.
Thanks. And just one other follow-up. Does the proposed tax legislation for either Liberty Broadband or GCI have any specific implications that investors should be mindful of?
I don't believe so, but do we have Albert or Tim there who want to add anything?
No, they're not. They're not in the room, but not that we're aware of.
Yes. Yes.
I think that was our last question. Thank you very much for your continued interest in Liberty Broadband and Liberty TripAdvisor. We hope to speak with you next quarter, if not sooner, and again hope to see many of you in November at our Investor Day. Thank you very much and have a great rest of your summer.
And with that, that does conclude today's call. Thank you for your participation. You may now disconnect.