LIBERTY BROADBAND CORPORATION

(LBRDK)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

LIBERTY BROADBAND CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/04/2021 | 03:55pm EDT

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding business, product and marketing strategies; new service and product offerings; revenue growth; future expenses; anticipated changes to regulations; the performance, results of operations and cash flows of our equity affiliate, Charter Communications, Inc. ("Charter"); projected sources and uses of cash; the effects of regulatory developments; the EBB (as defined below); the impact of COVID-19 (as defined below); the Rural Healthcare Program; indebtedness and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

our, GCI Holdings, LLC ("GCI Holdings"), GCI, LLC, and Charters' ability to

? obtain cash in sufficient amounts to service financial obligations and meet

other commitments;

? our ability to use net operating loss carryforwards and disallowed business

interest carryforwards;

? our, GCI Holdings, GCI, LLC and Charters' ability to obtain additional

financing, or refinance existing indebtedness, on acceptable terms;

the impact of our, GCI Holdings, GCI, LLC and Charters' significant

? indebtedness and our, GCI Holdings and Charters' ability to comply with any

covenants in our and their respective debt instruments;

general business conditions, unemployment levels and the level of activity in

the housing sector and economic uncertainty or downturn, including the impact

? of the novel coronavirus ("COVID-19") pandemic to GCI Holdings and Charter's

customers and vendors and local, state and federal governmental responses to

the pandemic;

? competition faced by GCI Holdings and Charter;

? the ability of GCI Holdings and Charter to acquire and retain subscribers;

the impact of governmental legislation and regulation including, without

? limitation, regulations of the Federal Communications Commission (the "FCC"),

on GCI Holdings and Charter, their ability to comply with regulations, and

adverse outcomes from regulatory proceedings;

? changes in the cost of programming expenses and the ability of GCI Holdings and

Charter to pass on related costs to their customers;

? changes in the amount of data used on the networks of GCI Holdings and Charter;

? the ability of third-party providers to supply equipment, services, software or

licenses;

? the ability of GCI Holdings and Charter to respond to new technology and meet

customer demands for new products and services;

? changes in customer demand for the products and services of GCI Holdings and

Charter and their ability to adapt to changes in demand;

? the ability of GCI Holdings and Charter to license or enforce intellectual

property rights;

natural or man-made disasters, terrorist attacks, pandemics; cyberattacks,

? network disruptions, service interruptions and system failures and the impact

of related uninsured liabilities;

? the ability to hire and retain key personnel;

? risks related to the Investment Company Act of 1940;

? the outcome of any pending or threatened litigation; and


                                      I-29

  Table of Contents

? changes to general economic conditions, including economic conditions in

Alaska, and their impact on potential customers, vendors and third parties.

For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2020.

Overview

The information contained herein relates to Liberty Broadband Corporation and its controlled subsidiaries (collectively, "Liberty Broadband," the "Company, "us," "we," or "our" unless the context otherwise requires). Liberty Broadband Corporation is primarily comprised of a wholly owned subsidiary, GCI Holdings (as of December 18, 2020), and an equity method investment in Charter.

On December 18, 2020, pursuant to the Agreement and Plan of Merger, dated as of August 6, 2020, entered into by GCI Liberty, Inc. ("GCI Liberty"), Liberty Broadband, Grizzly Merger Sub 1, LLC, a wholly owned subsidiary of Liberty Broadband ("Merger LLC"), and Grizzly Merger Sub 2, Inc., a wholly owned subsidiary of Merger LLC ("Merger Sub"), Merger Sub merged with and into GCI Liberty (the "First Merger"), with GCI Liberty surviving the First Merger as an indirect wholly owned subsidiary of Liberty Broadband (the "Surviving Corporation"), and immediately following the First Merger, GCI Liberty (as the Surviving Corporation in the First Merger) merged with and into Merger LLC (the "Upstream Merger", and together with the First Merger, the "Combination"), with Merger LLC surviving the Upstream Merger as a wholly owned subsidiary of Liberty Broadband.

As a result of the Combination, each holder of a share of Series A common stock and Series B common stock of GCI Liberty received 0.58 of a share of Series C common stock and Series B common stock, respectively, of Liberty Broadband.

Additionally, each holder of a share of Series A Cumulative Redeemable Preferred Stock of GCI Liberty received one share of newly issued Liberty Broadband Series A Cumulative Redeemable Preferred Stock ("Liberty Broadband Preferred Stock"), which has substantially identical terms to GCI Liberty's former Series A Cumulative Redeemable Preferred Stock, including a mandatory redemption date of March 9, 2039. Cash was paid in lieu of issuing fractional shares of Liberty Broadband stock in the Combination. No shares of Liberty Broadband stock were issued with respect to shares of GCI Liberty capital stock held by (i) GCI Liberty as treasury stock, (ii) any of GCI Liberty's wholly owned subsidiaries or (iii) Liberty Broadband or its wholly owned subsidiaries.

Through a number of prior years' transactions, including the Combination, Liberty Broadband has acquired an interest in Charter.

During the first quarter of 2021, as a result of the closing of the Combination on December 18, 2020, Skyhook Holding, Inc. ("Skyhook"), a wholly owned subsidiary of the Company, is no longer significant to the Company and has been included in Corporate and other for presentation purposes. The revised segment reporting structure includes the following reportable segments: (1) GCI Holdings and (2) Charter. All prior period segment disclosure information has been reclassified to conform to the current reporting structure. These reclassifications had no effect on our condensed consolidated financial statements in any period.


Update on Economic Conditions

GCI Holdings

GCI Holdings offers wireless and wireline telecommunication services, data services, video services, and managed services to customers primarily throughout Alaska. Because of this geographic concentration, growth of GCI Holdings'


                                      I-30

Table of Contents

business and operations depends upon economic conditions in Alaska. In December 2019, Chinese officials reported a novel coronavirus outbreak. COVID-19 has since spread through China and internationally. On March 11, 2020, the World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices, which has caused a significant disruption to most sectors of the economy.

Although the COVID-19 pandemic has significantly impacted Alaska, GCI Holdings has continued to deliver services uninterrupted by the pandemic and expects to be able to continue to respond to the increase in network activity. As a major provider of Internet services in Alaska, GCI Holdings believes it plays an instrumental role in enabling social distancing through telecommuting and e-learning across the state and remains focused on its service to customers, as well as the health and safety of its employees and customers.

The majority of GCI Holdings' workforce has transitioned to working at home full time and it expects to keep those employees working from home through at least May 2022.

GCI Holdings cannot predict the ultimate impact of COVID-19 on its business, including the depth and duration of the economic impact to its customers' ability to pay for products and services including the impact of extended unemployment benefits and other stimulus packages and what assistance may be provided to its customers. There is a risk that GCI Holdings' accounts receivable and bad debt expense will increase substantially due to the economic impact of the COVID-19 pandemic. In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to GCI Holdings and the risk of limitations on the deployment and maintenance of its services.

The Alaska economy is dependent upon the oil industry, state government spending, United States military spending, investment earnings and tourism. A decline in oil prices would put significant pressure on the Alaska state government budget. Although Alaska state government has significant reserves that GCI Holdings believes will help fund the state government for the next couple of years, major structural budgetary reforms will be required in order to offset the impact of the COVID-19 pandemic and a decline in oil prices. Although GCI Holdings cannot predict the long-term impact COVID-19 will have on these sectors of the Alaska economy, adverse circumstances in these industries may have an adverse impact on the demand for its products and services and on its results of operations and financial condition.

The Alaska economy is in a recession that started in late 2015 and has continued as a result of the COVID-19 pandemic. While it is difficult for GCI Holdings to predict the future impact of a continuing recession on its business, these conditions have had an adverse impact on its business and could adversely affect the affordability of and demand for some of its products and services and cause customers to shift to lower priced products and services or to delay or forgo purchases of its products and services. Additionally, GCI Holdings' customers may not be able to obtain adequate access to credit, which could affect their ability to make timely payments to GCI Holdings. If that were to occur, GCI Holdings could be required to increase its allowance for doubtful accounts, and the number of days outstanding for its accounts receivable could increase. If the recession continues, it could negatively affect GCI Holdings' business including its financial position, results of operations, or liquidity, as well as its ability to service debt, pay other obligations and enhance shareholder returns.


                                      I-31

  Table of Contents

Rural Health Care ("RHC") Program

GCI Holdings receives support from various Universal Service Fund ("USF") programs including the RHC Program. The USF programs are subject to change by regulatory actions taken by the FCC, interpretations of or compliance with USF program rules, or legislative actions. Changes to any of the USF programs that GCI Holdings participates in could result in a material decrease in revenue and accounts receivable, which could have an adverse effect on GCI Holdings' business and the Company's financial position, results of operations or liquidity. The following paragraphs describe certain separate matters related to the RHC Program that impact or could impact the revenue earned by the Company. As of September 30, 2021, the Company had net accounts receivable from the RHC Program of approximately $119 million, which is included within Trade and other receivables in the condensed consolidated balance sheets.

The Company disclosed, in additional detail, the following items related to GCI Holdings' involvement in the RHC Program in its Annual Report on Form 10-K for the year ended December 31, 2020:

The FCC reduced the rates charged to RHC customers by approximately 26% for the

? funding year that ended June 30, 2018. An Application for Review is currently

with the FCC.

The FCC approved the cost-based rural rates GCI Holdings historically applied

? for the funding years that ended on June 30, 2019 and June 30, 2020. GCI

Holdings collected $175 million in accounts receivable relating to these two

funding years during 2021.

GCI Holdings submitted cost studies for the funding year ended June 30, 2021,

? which require approval by the FCC. Those studies remain pending before the FCC

and we cannot predict when the FCC will act upon them.

The RHC Program has a funding cap for each individual funding year that is

annually adjusted for inflation, and which the FCC can increase by carrying

? forward unused funds from prior funding years. In recent years, including the

current year, this funding cap has not limited the amount of funding received

by participants; however, management continues to monitor the funding cap and

its potential impact on funding in future years.

GCI Holdings received a letter of inquiry and request for information from the

Enforcement Bureau of the FCC (the "Enforcement Bureau") in March 2018 relating

? to the period beginning January 1, 2015 and including all future periods. GCI

Holdings has also received other related inquiries to which it is in the

process of responding.

GCI Holdings became aware of potential RHC Program compliance issues related to

? certain of its currently active and expired contracts with certain of its RHC

customers.

The FCC released an order adopting changes to the RHC Program that will revise

the manner in which support issued under the RHC Program will be calculated and

approved. On January 19, 2021, the Wireline Competition Bureau of the FCC

? issued an Order that waives the requirement to use the database for health care

providers in Alaska for the two funding years ending June 30, 2022 and June 30,

2023. The Order requires GCI Holdings to determine its rural rates based on

previously approved rates or under reinstitution of the rules currently in

effect through the funding year ended on June 30, 2021.

The Company does not have any significant updates regarding the items noted above except as discussed in the remainder of this paragraph and below. On April 8, 2021, the Wireline Competition Bureau issued an Order further extending the January 19, 2021 waiver to carriers nationwide and eliminating the ability or requirement to use the database to establish the healthcare provider payments for services subsidized by the RHC Telecom Program. On April 21, 2021, representatives of the Department of Justice informed GCI Holdings that a qui tam action has been filed in the Western District of Washington arising from the subject matter under review by the Enforcement Bureau. The Department of Justice is investigating whether GCI Holdings submitted false claims and/or statements in connection with GCI's participation in the FCC's RHC Program. GCI Holdings is working with the Department of Justice and the Enforcement Bureau related to this matter; however, given the confidentiality of the qui tam process, the Company is unable to assess the ultimate outcome of this action and whether any type of fine or penalty would ultimately be assessed as is permitted under the applicable law.

On May 24, 2021, the FCC approved the cost studies submitted by GCI Holdings for the funding year ended June 30, 2021.

                                      I-32

  Table of Contents

Charter

In 2021 and 2020, the COVID-19 pandemic significantly impacted how Charter's customers use its products and services, how they interact with Charter, and how Charter's employees work and provide services to customers. Customer activity levels remain below normal which contributed to lower operating expense from reduced service transactions and lower bad debt in the first nine months of 2021, however, Charter expects trends to return to pre-COVID-19 levels as the economy continues to reopen and normal activities resume.

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, Charter remains focused on driving customer relationship growth by deploying superior products and services packaged with attractive pricing. In October 2021, Charter announced and implemented new Spectrum Mobile multi-line pricing designed to drive more mobile line sales per customer, and in turn, drive more broadband sales and the associated retention benefits. Further, Charter expects to continue to drive customer relationship growth through sales of bundled services and improving customer retention despite the expectation for continued losses of video and wireline voice customers.

In May 2021, the FCC introduced the Emergency Broadband Benefit ("EBB") program to help households pay for Internet service. The EBB program provides eligible low-income households with up to $50 per month towards Internet service. Although Congress may extend the EBB program funding as currently proposed in an infrastructure bill, Charter expects the FCC to run out of funding under the current EBB program allocation sometime in early 2022. If funding is not extended by Congress, Charter's customers in the current EBB program will generally roll out of that program, continue to be Charter's customers and be serviced consistent with Charter's business practices regarding collections, disconnect process and bad debt. Many of these customers were serviced prior to the EBB program consistent with normal business practices. However, Charter cannot predict how such an expiration of the EBB program would ultimately impact its experience with disconnects and bad debt for customers currently in the EBB program.

Results of Operations-Consolidated-September 30, 2021 and 2020

General. We provide information regarding our consolidated operating results and other income and expenses, as well as information regarding the contribution to those items from our reportable segments in the tables below. The "Corporate and other" category consists of those assets or businesses which do not qualify as a separate reportable segment. See note 11 to the accompanying condensed consolidated financial statements for more discussion regarding our reportable segments. GCI Holdings' results are only included in the Company's consolidated results beginning on December 18, 2020. For a more detailed discussion and analysis of GCI Holding's results, see "Results of Operations-GCI Holdings" below.


                                      I-33

  Table of Contents

Consolidated operating results:


                            Three months ended       Nine months ended
                               September 30,           September 30,
                              2021        2020       2021         2020

                                       amounts in thousands
Revenue
GCI Holdings               $  245,688          -     725,760           -
Corporate and other             4,532      4,219      13,278      12,437
Consolidated               $  250,220      4,219     739,038      12,437

Operating Income (Loss)
GCI Holdings               $   16,444          -      62,766           -
Corporate and other             8,793   (16,328)   (140,500)    (33,435)
Consolidated               $   25,237   (16,328)    (77,734)    (33,435)

Adjusted OIBDA
GCI Holdings               $   88,800          -     273,515           -
Corporate and other           (8,372)   (14,270)    (34,987)    (26,658)
Consolidated               $   80,428   (14,270)     238,528    (26,658)


Revenue

Revenue increased $246.0 million and $726.6 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases in revenue were primarily due to revenue from GCI Holdings as a result of the Combination on December 18, 2020. See "Results of Operations - GCI Holdings, LLC" below for a more complete discussion of the results of operations of GCI Holdings.

Revenue for Corporate and other increased slightly due to increased revenue at Skyhook from both existing and new customers.

Operating Income (Loss)

Consolidated operating income increased $41.6 million and consolidated operating loss increased $44.3 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods.

Operating income for Corporate and other increased $25.1 million for the three months ended September 30, 2021, primarily due to insurance recoveries of $24.5 million related to the litigation settlement (see note 10 in the accompanying condensed consolidated financial statements for additional discussion), as well as decreased professional service fees for the three month period, partially offset by increased corporate compensation expenses. Operating loss for Corporate and other increased $107.1 million for the nine months ended September 30, 2021, primarily due to a litigation settlement, net of recoveries of $86.5 million during the nine months ended September 30, 2021, as well as an increase in professional service fees and corporate compensation expenses.

Operating income increased at GCI Holdings as a result of the Combination on December 18, 2020. See "Results of Operations - GCI Holdings, LLC" below for a more complete discussion of the results of operations of GCI Holdings.

Stock-based compensation

Stock-based compensation expense increased $8.6 million and $25.3 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increase in stock-based compensation expense was primarily due to upfront grants per our CEO's employment agreement, along with the impact of the Combination.

                                      I-34

  Table of Contents

Adjusted OIBDA

To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure. We define Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, transaction costs, separately reported litigation settlements, restructuring, and impairment charges. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our 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 us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles. The following table provides a reconciliation of Operating income (loss) to Adjusted OIBDA.


                                                      Three months ended       Nine months ended
                                                        September 30,            September 30,
                                                       2021         2020        2021        2020

                                                                  amounts in thousands
Operating income (loss)                             $   25,237    (16,328)    (77,734)    (33,435)
Depreciation and amortization                           68,130          56     198,766       1,041
Stock-based compensation                                10,581       2,002      31,016       5,736
Litigation settlement, net of recoveries              (23,520)           -      86,480           -
Adjusted OIBDA                                      $   80,428    (14,270)     238,528    (26,658)



Adjusted OIBDA improved $94.7 million and $265.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases in Adjusted OIBDA were primarily due to the results of operations of GCI Holdings as a result of the Combination, as discussed above. Corporate and other Adjusted OIBDA improved for the three months ended September 30, 2021 and declined for the nine months ended September 30, 2021 due to the fluctuations in operating income (loss) as discussed above.

Other Income and Expense

Components of Other income (expense) are presented in the table below.


                                              Three months ended        Nine months ended
                                                September 30,             September 30,
                                               2021         2020        2021        2020

                                                         amounts in thousands
Other income (expense):
Interest expense                            $ (28,155)     (3,719)    (90,032)     (14,711)

Share of earnings (losses) of affiliates 314,563 188,586 752,390 408,396 Gain (loss) on dilution of investment in affiliate

                                      (1,693)    (35,284)    (98,446)    (140,610)
Realized and unrealized gains (losses)
on financial instruments, net                 (26,839)    (39,324)    (52,555)     (39,324)
Other, net                                      14,788           8      29,382          199
                                            $  272,664     110,267     540,739      213,950


Interest expense

Interest expense increased $24.4 million and $75.3 million during the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year. The increases were driven by additional amounts outstanding on the Margin Loan Facility (as defined in note 7 to the accompanying condensed consolidated financial


                                      I-35

Table of Contents

statements), the 2.75% Exchangeable Senior Debentures due 2050 that were issued in August 2020 and the 1.25% Exchangeable Senior Debentures due 2050 that were issued in November 2020, as well as interest associated with all the debt instruments assumed by the Company as a result of the Combination.

Share of earnings (losses) of affiliates

Share of earnings of affiliates increased $126.0 million and $344.0 million during the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year. The Company's Share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $58.4 million and $25.5 million, net of related taxes, for the three months ended September 30, 2021 and 2020, respectively, and $180.8 million and $107.3 million, net of related taxes, for the nine months ended September 30, 2021 and 2020, respectively, due to the increase in amortization of the excess basis of assets with identifiable useful lives and debt, which was primarily due to the acquisition of GCI Liberty's Charter shares in the Combination, as well as Charter's share buyback program. The change in the share of earnings of affiliates in the three and nine months ended September 30, 2021, as compared to the corresponding periods in the prior year, was the result of the corresponding change in net income at Charter.

The following is a discussion of Charter's results of operations. In order to provide a better understanding of Charter's operations, we have included a summarized presentation of Charter's results from operations.



                                              Three months ended       Nine months ended
                                                 September 30,           September 30,
                                                2021        2020        2021        2020

                                                          amounts in millions
Revenue                                      $   13,146     12,039      38,470      35,473
Operating expenses, excluding stock-based
compensation                                    (7,851)    (7,414)    (23,503)    (21,972)
Adjusted OIBDA                                    5,295      4,625      14,967      13,501
Depreciation and amortization                   (2,270)    (2,370)     (7,065)     (7,295)
Stock-based compensation                           (98)       (83)       (332)       (263)
Operating income                                  2,927      2,172       7,570       5,943
Other expenses, net                             (1,173)    (1,063)     (3,240)     (3,296)
Net income (loss) before income taxes             1,754      1,109       4,330       2,647
Income tax (expense) benefit                      (347)      (177)       (844)       (372)
Net income (loss)                                 1,407        932       3,486       2,275
Less: Net income attributable to
noncontrolling interests                          (190)      (118)       (442)       (299)
Net income (loss) attributable to Charter
shareholders                                 $    1,217        814       3,044       1,976



Charter net income increased $475 million and $1,211 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year.

Charter's revenue increased $1,107 million and $2,997 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year, primarily due to increases in the number of residential Internet, mobile and commercial customers and price adjustments.

During the three and nine months ended September 30, 2021, operating expenses, excluding stock-based compensation, increased $437 million and $1,531 million, respectively, as compared to the corresponding periods in the prior year. Operating costs increased primarily due to increased programming and mobile costs, as well as increased regulatory, connectivity and produced content costs for the nine month period. Operating costs for the nine months ended September 30, 2021 also increased due to increased litigation settlements, including the tentative settlement with Sprint Communications Company L.P. and T-Mobile USA, Inc. for $220 million.

Programming costs increased as a result of $163 million of estimated rebates from sports programming networks as a result of canceled sporting events due to COVID-19 which reduced programming costs during the three and nine months


                                      I-36

Table of Contents

ended September 30, 2020, as well as contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent offset by fewer customers and a higher mix of lower cost video packages within Charter's video customer base. Charter expects programming rates per customer will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming. Charter has been unable to fully pass these increases on to its customers and does not expect to be able to do so in the future without a potential loss of customers.

Mobile costs were comprised of mobile device costs and mobile service, customer acquisition and operating costs. The increase is attributable to an increase in the number of mobile lines.

Regulatory, connectivity and produced content increased during the nine months ended September 30, 2021, as compared to the corresponding period in 2020, primarily due to higher sports rights costs as a result of more National Basketball Association ("NBA") and Major League Baseball ("MLB") games during 2021 as compared to the corresponding period in 2020 as the prior period had cancelation of MLB games and the current period had additional games due to the delayed start of the 2020 - 2021 NBA season as a result of COVID-19.

Charter's Adjusted OIBDA for the three and nine months ended September 30, 2021 increased for the reasons described above.

Depreciation and amortization expense decreased $100 million and $230 million during the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year, primarily due to certain assets acquired in acquisitions becoming fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

Charter's results were also impacted by other expenses, net which increased $110 million and decreased $56 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year. The changes in other expenses, net were primarily due to changes in gain (loss) on financial instruments, increased net periodic pension benefits and changes in gain (loss) on equity investments, net for the periods, including an impairment on equity investments of approximately $165 million during the nine months ended September 30, 2021.

Income tax expense increased $170 million and $472 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year. Income tax expense increased during the three and nine months ended September 30, 2021 as compared to the corresponding periods in the prior year, primarily as a result of higher pretax income.

Gain (loss) on dilution of investment in affiliate

The loss on dilution of investment in affiliate decreased by $33.6 million and $42.2 million during the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year, primarily due to a gain on dilution related to Charter's repurchase of Liberty Broadband's Charter shares during the three and nine months ended September 30, 2021, partially offset by increases in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband's book basis per share. As Liberty Broadband's ownership in Charter changes due to exercises of Charter stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.


                                      I-37

  Table of Contents

Realized and unrealized gains (losses) on financial instruments, net

Realized and unrealized gains (losses) on financial instruments, net are comprised of changes in the fair value of the following:


                                  Three months ended       Nine months ended
                                     September 30,           September 30,
                                    2021        2020        2021        2020

                                             amounts in thousands

Indemnification obligation $ (8,366) - (48,935) - Exchangeable senior debentures (18,473) (39,324) (3,620) (39,324)

                                 $ (26,839)   (39,324)     (52,555)   (39,324)


The changes in these accounts are primarily due to market factors and changes in the fair value of the underlying stocks or financial instruments to which these related. The losses during the three and nine months ended September 30, 2021 were primarily related to the assumption of the indemnification obligation by the Company as a result of the Combination (see note 4 in the accompanying condensed consolidated financial statements for additional discussion). The changes for the three and nine months ended September 30, 2021 were additionally impacted by the changes in fair value of the 2.75% Exchangeable Senior Debentures due 2050, the 1.25% Exchangeable Senior Debentures due 2050 and the 1.75% Exchangeable Senior Debentures due 2046 related to changes in market price of underlying Charter stock (see notes 4 and 7 in the accompanying condensed consolidated financial statements for additional discussion).

Other, net

Other, net increased $14.8 million and $29.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods in the prior year. The increases in 2021 were primarily due to a tax sharing receivable with Qurate Retail that resulted in gains of $2.2 million and $15.6 million for the three and nine months ended September 30, 2021, respectively, as well as a gain of $11.5 million on the sale of an investment during the third quarter of 2021. See more discussion about the tax sharing agreement with Qurate Retail in note 1 to the accompanying condensed consolidated financial statements.

Income taxes


Earnings (losses) before income taxes and income tax (expense) benefit are as
follows:


                                         Three months ended        Nine months ended
                                            September 30,            September 30,
                                          2021         2020        2021          2020

                                                     amounts in thousands

Earnings (loss) before income taxes $ 297,901 93,939 $ 463,005 180,515 Income tax (expense) benefit

             (61,073)    (24,979)     (117,784)    (47,183)
Effective income tax rate                   20.5%       26.6%         25.4%       26.1%



There was effectively no difference between the effective income tax rate of 20.5% and the U.S. Federal income tax rate of 21% for the three months ended September 30, 2021. The difference between the effective income tax rate of 25.4% and the U.S. Federal income tax rate of 21% for the nine months ended September 30, 2021 was primarily due to a non-deductible litigation settlement and the accrual of non-deductible equity distributions related to the indemnification agreement between Liberty Broadband and Qurate Retail, partially offset by tax benefits from a change in effective tax rate used to measure deferred taxes on certain Charter shares.

The difference between the effective income tax rate of 26.6% and 26.1% and the U.S. Federal income tax rate of 21% for the three and nine months ended September 30, 2020, respectively, was primarily due to the effect of state income taxes.


                                      I-38

  Table of Contents

Net earnings (loss)

The Company had net earnings of $236.8 million and $69.0 million for the three months ended September 30, 2021 and 2020, respectively, and net earnings of $345.2 million and $133.3 million for the nine months ended September 30, 2021 and 2020, respectively. The change in net earnings (loss) was the result of the above-described fluctuations in our revenue, expenses and other income and expenses.

Liquidity and Capital Resources

As of September 30, 2021, substantially all of our cash and cash equivalents are invested in U.S.Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.

The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), monetization of our investments (including Charter Repurchases (as defined in note 5 to the accompanying condensed consolidated financial statement and discussed below)), outstanding or anticipated debt facilities (as defined in note 7 to the accompanying condensed consolidated financial statements), debt and equity issuances, and dividend and interest receipts.


As of September 30, 2021, Liberty Broadband had a cash and cash equivalents
balance of $319 million.


                                                                Nine months ended September 30,
                                                                     2021                 2020

                                                                      amounts in thousands
Cash flow information
Net cash provided (used) by operating activities              $           135,968         (36,812)
Net cash provided (used) by investing activities              $         2,568,890         (14,952)
Net cash provided (used) by financing activities              $       (3,693,230)          402,308




The increase in cash provided by operating activities in the nine months ended September 30, 2021, as compared to the corresponding period in the prior year, was primarily driven by increased activity in working capital accounts due to the Combination and the collection of accounts receivable from the RHC Program for the funding years that ended on June 30, 2019 and June 30, 2020.

During the nine months ended September 30, 2021, net cash flows provided by investing activities were primarily related to the sale of 3,962,155 shares of Charter Class A common stock to Charter for $2,643 million to maintain our fully diluted ownership percentage of Charter at 26%. In February 2021, Liberty Broadband entered into a letter agreement in order to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the Equity Cap (see more information in note 5 to the accompanying condensed consolidated financial statements). The Company expects the Charter Repurchases to be a significant source of liquidity in future periods.

During the nine months ended September 30, 2021, net cash flows used in financing activities were primarily repurchases of Series A and Series C Liberty Broadband common stock of $2,911 million, as well as net debt repayments of $500 million of outstanding Revolving Loans (as defined in note 7 to the accompanying condensed consolidated financial statements) under the Margin Loan Facility and repayment of $275 million by GCI, LLC on its revolving credit facility.

The projected uses of our cash for the remainder of 2021 are the potential buyback of common stock under the approved share buyback program, capital expenditures of approximately $40 million, approximately $30 million for interest payments on outstanding debt, approximately $3 million for preferred stock dividends, funding of any operational needs of our subsidiaries, to reimburse Liberty Media Corporation for amounts due under various agreements and to fund potential investment opportunities. We expect corporate cash and other available sources of liquidity to cover corporate expenses for the foreseeable future.


                                      I-39

  Table of Contents

Results of Operations-GCI Holdings, LLC

As described in notes 1 and 3 to the accompanying condensed consolidated financial statements, Liberty Broadband acquired GCI Holdings in the Combination on December 18, 2020. As GCI Holdings' results are only included in the Company's results since December 18, 2020, we believe a discussion of GCI Holdings' results for a comparative two year period promotes a better understanding of GCI Holdings' operations. For comparison and discussion purposes the Company is presenting (a) the results of GCI Holdings for the three and nine months ended September 30, 2021, as included in the condensed consolidated financial statements of the Company and (b) the actual historical results of GCI Holdings for 2020, exclusive of the effects of acquisition accounting since the period is prior to the Combination. The most significant effect of acquisition accounting is an increase to depreciation and amortization as compared to prior periods as a result of an increase in fair values of depreciable and amortizable assets. This historical financial information of GCI Holdings 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 Holdings 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 Holdings for any future periods.

GCI Holdings provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska. The following table highlights selected key performance indicators used in evaluating GCI Holdings.




                                                      September 30,
                                                     2021       2020
Consumer
Wireless:
Revenue generating wireless lines in service1       188,800    179,600
Non-revenue generating wireless lines in service2     1,200      2,700
Wireless lines in service                           190,000    182,300
Data:
Cable modem subscribers3                            147,800    138,200
Video:
Basic subscribers4                                   62,200     76,000
Voice:
Total local access lines in service5                 34,800     37,300

Business

Wireless:

Revenue generating wireless lines in service1 21,500 25,200 Data: Cable modem subscribers3

                             13,700     12,800

Voice:

Total local access lines in service5                 29,000     33,400


1 A revenue generating wireless line in service is defined as a wireless device with a monthly fee for services.

2 A non-revenue generating wireless line in service is defined as a data-only line with no monthly fee for services.

3 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.

4 A basic subscriber is defined by the purchase of basic video service.

5 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.



                                      I-40

  Table of Contents

GCI Holdings' operating results for the three and nine months ended September 30, 2021 and 2020 are as follows:


                                                     Three months ended        Nine months ended
                                                       September 30,             September 30,
                                                      2021         2020        2021        2020

                                                                amounts in thousands
Revenue                                            $  245,688     244,266      725,760     698,408
Operating expenses (excluding stock-based
compensation included below):
Operating expense                                    (67,661)    (67,053)    (199,249)   (198,873)

Selling, general and administrative expenses (89,227) (85,596) (252,996) (243,478) Adjusted OIBDA

                                         88,800      91,617      273,515     256,057
Stock-based compensation                              (4,273)     (3,285)     (12,129)     (6,829)
Depreciation and amortization                        (68,083)    (60,284)    (198,620)   (183,188)
Operating income (loss)                            $   16,444      28,048       62,766      66,040


Revenue

The components of revenue are as follows:


                    Three months ended       Nine months ended
                       September 30,           September 30,
                      2021        2020        2021       2020

                               amounts in thousands
Consumer
Wireless           $   45,901     43,749     135,045    126,849
Data                   53,608     47,852     158,494    137,562
Video                  18,277     23,931      55,919     65,154
Voice                   3,999      3,795      11,493     11,643
Business
Wireless               20,162     21,440      60,425     64,964
Data                   92,626     90,377     270,339    248,347
Video                     904      2,277       2,586     10,726
Voice                  10,211     10,845      31,459     33,163
Total revenue      $  245,688    244,266     725,760    698,408



Consumer wireless revenue increased $2.2 million and $8.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases were primarily due to increased plan service fee revenue of $2.1 million and $5.5 million for the three and nine month periods, respectively, driven by an increase in the number of subscribers and subscribers' selection of plans with higher recurring monthly charges that offer higher usage limits. Additionally, equipment and accessories sales revenue increased $2.6 million for the nine month period, driven by an increase in the number of handsets sold in 2021.

Consumer data revenue increased $5.8 million and $20.9 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases were driven by an increase in the number of subscribers and the subscribers' selection of plans with higher recurring monthly charges that offer higher speeds and higher usage limits.

Consumer video revenue decreased $5.7 million and $9.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The decreases were due to a $2.5 million and $7.9 million decrease in plan service fee revenue for the three and nine month periods, respectively, driven by a decrease in the number of subscribers. Additionally, there was a decrease of $2.8 million and $0.3 million in advertising revenue for the three and nine month periods, respectively, driven by a reduction in advertising sales due to the absence of a major political election in 2021.


                                      I-41

  Table of Contents

Consumer voice revenue was relatively flat for both the three and nine months ended September 30, 2021, as compared to the corresponding prior year periods.

Business wireless revenue decreased $1.3 million and $4.5 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The decreases were primarily due to decreases in grant and roaming revenue.

Business data revenue increased $2.2 million and $22.0 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases were due to $6.6 million and $42.0 million increases in data and transport revenue for the three and nine month periods, respectively, driven by increased sales to education and medical customers for service upgrades. The increases were partially offset by decreases of $4.3 million and $11.0 million in professional services revenue driven by a reduction in time and materials project work for the three and nine month periods, respectively. Additionally, the increase for the nine month period was partially offset by the absence of $9 million recorded in the first quarter of 2020 for a RHC customer whose funding was initially denied.

Business video revenue decreased $1.4 million and $8.1 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The decreases were primarily due to the sale of the Company's broadcast television station in the third quarter of 2020.

Business voice revenue decreased $0.6 million and $1.7 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The decreases were driven by a reduction in conference calling, long distance minutes, and local service lines.

Operating expenses increased $0.6 million and $0.4 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases for the three and nine month periods are primarily due to $7.8 million and $16.7 million increases for the three and nine month periods, respectively, in costs to operate our network driven by the increase in demand from education and medical customers. Additionally, the nine month period was impacted by a $0.9 million increase in wireless handset costs. The increases discussed above are partially offset by decreases of $3.1 million and $8.2 million for the three and nine month periods, respectively, in professional services costs driven by a reduction in time and materials project work and decreases of $3.4 million and $9.7 million for the three and nine month periods, respectively, in video costs driven by the sale of the Company's broadcast television station in the third quarter of 2020, as well as a decrease in costs paid to content producers driven by a decrease in video subscribers.

Selling, general and administrative expenses increased $3.6 million and $9.5 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases for the three and nine month periods were primarily due to $2.4 million and $11.1 million increases, respectively, in labor related costs driven by increases in healthcare costs as employees have returned to normal healthcare interactions and employee incentive compensation. Additionally, the nine month period was impacted by a $1.5 million increase in software costs driven by an increase in software as service arrangements and a $1.0 million increase in travel and training costs driven by a return to more normal activity levels. The increase for the nine month period is partially offset by a $1.9 million decrease in bad debt expense, $2.7 million decrease in legal and compliance costs and a $1.2 million decrease in lease costs.

Stock-based compensation increased $1.0 million and $5.3 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. Stock-based compensation increased for the three and nine month periods due to the fair value assigned to converted awards as part of the modification as a result of the Combination. Additionally, stock-based compensation expense for the nine months ended September 30, 2020 included the reversal of expense for performance-based awards that did not vest due to a shortfall in certain financial metrics and qualitative criteria.

Depreciation and amortization increased $7.8 million and $15.4 million for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding prior year periods. The increases were primarily due to an increase in assets placed in service since January 1, 2020 and higher amortization expense because of an accelerated recognition pattern for amortizing intangibles as a result of the Combination.


                                      I-42

Table of Contents

© Edgar Online, source Glimpses

All news about LIBERTY BROADBAND CORPORATION
05/19TRANSCRIPT : Liberty Broadband Corporation Presents at MoffettNathanson Annual Media & Com..
CI
05/17LIBERTY BROADBAND CORP : Regulation FD Disclosure, Financial Statements and Exhibits (form..
AQ
05/17Pivotal Research Adjusts Liberty Broadband's Price Target to $160 From $205, Reiterates..
MT
05/16Liberty Broadband Corporation to Hold Virtual Annual Meeting of Stockholders
BU
05/12Liberty Broadband Corporation to Present at MoffettNathanson Media & Communications Sum..
BU
05/10Deutsche Bank Adjusts Liberty Broadband's Price Target to $158 From $196, Maintains Buy..
MT
05/06LIBERTY BROADBAND CORP Management's Discussion and Analysis of Financial Condition and..
AQ
05/06Liberty Broadband Q1 Earnings, Revenue Rise
MT
05/06LIBERTY BROADBAND : Q1 Earnings Snapshot
AQ
05/06Liberty Broadband Reports First Quarter 2022 Financial Results
BU
More news
Analyst Recommendations on LIBERTY BROADBAND CORPORATION
More recommendations
Financials (USD)
Sales 2022 961 M - -
Net income 2022 987 M - -
Net Debt 2022 4 109 M - -
P/E ratio 2022 18,6x
Yield 2022 0,46%
Capitalization 19 165 M 19 165 M -
EV / Sales 2022 24,2x
EV / Sales 2023 23,0x
Nbr of Employees 122
Free-Float 94,6%
Chart LIBERTY BROADBAND CORPORATION
Duration : Period :
Liberty Broadband Corporation Technical Analysis Chart | LBRDK | US5303073051 | MarketScreener
Technical analysis trends LIBERTY BROADBAND CORPORATION
Short TermMid-TermLong Term
TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 6
Last Close Price 118,46 $
Average target price 173,33 $
Spread / Average Target 46,3%
EPS Revisions
Managers and Directors
Gregory Ben Maffei President, Chief Executive Officer & Director
Brian J. Wendling Vice President & Controller
John Carl Malone Chairman
Renee L. Wilm Chief Legal & Administrative Officer
Richard R. Green Independent Director
Sector and Competitors