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
31st
- From February 1st through April 30th, 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 1st through April 30th, 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 2nd
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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