Liberty Broadband Company (NASDAQ:LBRDK) This autumn 2021 Earnings Convention Name February 25, 2022 11:15 AM ET
Firm Individuals
Courtnee Chun – Chief Portfolio Officer
Gregory Maffei – President and Chief Government Officer
Brian Wendling – Chief Accounting Officer and Principal Monetary Officer
Ron Duncan – Chief Government Officer and Co Founder, GCI
Convention Name Individuals
Michael Rollins – Citi
James Ratcliffe – Evercore ISI
Ben Swinburne – Morgan Stanley
Operator
Girls and gents, thanks for standing by. Welcome to the Liberty Broadband 2021 This autumn Earnings Name. [Operator Instructions] As a reminder, this convention is being recorded at February 25.
I might now like to show the convention over to Courtnee Chun, Chief Portfolio Officer. Please go forward.
Courtnee Chun
Thanks and good morning. Earlier than we start, we would prefer to remind everybody that this name consists of sure forward-looking statements inside the that means of the Personal Securities Litigation Reform Act of 1995. Precise occasions or outcomes might differ materially as a result of various dangers and uncertainties, together with these talked about in the latest Kinds 10-Ok and 10-Q filed by Liberty Broadband and Liberty TripAdvisor with the SEC. These forward-looking statements communicate solely as of the date of this name, and Liberty Broadband and Liberty TripAdvisor expressly disclaim any obligation or endeavor to disseminate any updates or revisions to any forward-looking assertion contained herein to replicate any change in Liberty Broadband or Liberty TripAdvisor’s expectations with regard thereto or any change in occasions, circumstances or circumstances on which any such assertion relies.
On right this moment’s name, we are going to focus on sure non-GAAP monetary measures for Liberty Broadband, together with adjusted OIBDA. Info concerning the comparable GAAP metrics, together with the required definitions and reconciliations together with preliminary word and schedules one and two may be discovered within the earnings press launch issued right this moment in addition to earnings releases for prior intervals, which can be found on Liberty Broadband’s web site.
Now I would like to show the decision over to Greg Maffei, Liberty’s President and CEO.
Gregory Maffei
Thanks, Courtnee. Good morning. Immediately talking on the decision we may also have Liberty Broadband’s Chief Accounting Officer and Principal Monetary Officer, Brian Wendling. Ron Duncan CEO of GCI; and Pete Kilos, CFO of GCI may also be out there to reply questions. Additionally throughout Q&A, we will likely be out there to reply questions associated to Liberty TripAdvisor. So first beginning with Liberty Broadband, we proceed to promote on a cost buyback and from November 1st of 2021 via the thirty first of January of 2022, we acquired $1.3 billion of proceeds from Constitution. Over the identical time interval, we repurchased $1.4 billion LBRDA AND LBRDK shares at a mean per share value of $157.95, which is a glance via value on the underlying Constitution of about $520.
I might word that Liberty has ample cushion beneath the 26% totally diluted possession cap that in January that we had no time promoting to Constitution’s buyback for that one month in January. Taking a look at Constitution, we tried to generate one other quarter of sturdy income development and money move to development as effectively. Income was up 4.7% and EBITDA was up 7.7% over the prior yr. In 2021, Constitution generated $8.7 billion of free money move, which was up 23% over 2020. Regardless of an all-time low churn and low transfer surroundings, Constitution had strong broadband development. There have been 120,000 extra internet additions, subscriber additions within the fourth quarter throughout residential and SMB, bringing the complete yr whole internet provides to 1.2 million.
Constitution had an enormous quarter for cell, including 380,000 new traces via many 1,000 new traces within the fourth quarter alone, the perfect quarter to this point for the product. Constitution cell internet provides had been 13% of all trade postpaid telephone internet provides within the fourth quarter, an amazing share in our territory. We added 1.2 million new cell traces in 2021. And Constitution’s cell go-to-market and pricing construction is resonating within the cell market and we’re optimistic in regards to the ongoing alternative. This yr Constitution may also start to leverage the CBR spectrum property that we purchased final yr with preliminary deployment of small cell radios. This hybrid M&O and alternative is a capital environment friendly technique of enhancing the associated fee construction of our cell enterprise, which clearly pairs very effectively with our thrilling broadband enterprise.
Let me flip to TripAdvisor and word that the journey restoration continued via 2021. So tendencies had been slowed by Omicron in December, however these headwinds are actually receding. We count on leisure journey will flip to 2019 ranges by later this yr, and 2020 will profit from the return of worldwide journey, and far superior journey planning. TripAdvisor’s model worth is as sturdy as ever. And Journey reached over 1 billion critiques and opinions on the platform within the quarter. Journey is balancing its efforts on development and acceptable funding throughout its portfolio to place the enterprise effectively for long-term success. In one of many areas during which we’re investing is Experiences and Eating had the strongest restoration within the portfolio, lafourchette income reached 90% of the 2019 degree within the fourth quarter. And we proceed to spend money on the phase each on product provide, know-how and increasing into the geographic attain.
We’re additionally evaluating methods to crystallize the worth of our R&D segments, particularly viator. And we did file for a sub IPO of that asset. Then again, Journey Plus did not get the supposed traction that we noticed in 2021. And our focus now’s rescaling that funding alternative acceptable with the present sizes that we see. We imagine within the potential of a subscription enterprise, however we’ll acknowledge that development extra steadily. I might word we’re additionally progressing effectively within the CEO search with a number of thrilling candidates. And with that, let me flip it over to Brian to debate the financials in additional element.
Brian Wendling
Thanks, Greg. At quarter finish Liberty Broadband have consolidated money and money equal of $191 million, which incorporates $34 million of money at GCI. The worth of our Constitution funding as of yesterday’s shut was $31 million. At quarter finish, Liberty Broadband had whole principal quantity of debt of $3.8 million. Throughout the quarter we repay $200 million beneath our Constitution margin mortgage which we had drawn in Q3 partly to fund share repurchases at Broadband given the timing variations and after we acquired proceeds from the Constitution share gross sales. Be aware the above quantities exclude the indemnification obligation and most well-liked inventory.
Taking a look at GCI, 2021 was an amazing yr for the corporate. GCI generate a strong free money move and proceed to delever. For the complete yr, GCI’s internet debt declined $314 million as a result of strong OIBDA, development reductions within the RHC associated receivables, average CapEx and refinancing in October, which is able to save roughly $8 million in curiosity expense per yr. Leverage is outlined in its credit score settlement was 3x on the finish of the yr, which is right down to full time period from final yr. And GCI has $397 million of undrawn capability beneath its revolver.
For the complete yr, income grew 2%, adjusted OIBDA grew 3% to $354 million, the corporate’s highest ever adjusted OIBDA quantity, pushed primarily by knowledge demand. Within the fourth quarter, income declined barely 3% and adjusted income declined 10%. This was pushed by the absence of political promoting this yr, in addition to the accounting results of the extension of a big wi-fi roaming contract that GCI entered into within the fourth quarter. The revise phrases of the contract had been headwind to income in This autumn will likely be a headwind in 2022. However importantly, the settlement is MPV constructive over the multi-year growth and supplies for continued backhaul providers for GCI’s community even as soon as the brand new contract expires a number of years out from now.
Operationally, GCI added over 10,000 shopper cable modem subscribers and eight,000 shopper wi-fi clients. The community was improved by the expansion within the 5G Wi-fi Community, improve satellite tv for pc capability and progress on the fireplace bell to Dutch Harbor.
With that I am going to flip the decision again over to Greg.
Gregory Maffei
Thanks, Brian. And to our listening viewers, we recognize your continued curiosity in each Liberty Broadband and Liberty TripAdvisor and look ahead to 2022 with you. And with that, operator, I would prefer to open the road for questions.
Query-and-Reply Session
Operator
[Operator Instructions]
And our first query comes from Michael Rollins with Citi.
Michael Rollins
Thanks. Good morning. I used to be curious to get your ideas on Constitution and particularly whenever you determined to take part into Constitution’s buyback to remain at or under that 26% possession degree. It appeared such as you’re balancing a number of components, together with the low cost to NAV at which you estimated Liberty Broadband was buying and selling at, as Constitution shares have are available worth, have your issues about promoting into that Constitution buyback modified? And would you relatively maintain on to extra of your Constitution shares? Thanks.
Gregory Maffei
Thanks for the query, Michael. No, I do not suppose the calculus has actually modified as a result of the low cost has remained comparatively fixed. So our alternative to pay a comparatively modest tax price and purchase the discounted Constitution shares by shopping for via Liberty Broadband has solely made the entire alternative extra engaging. The connection between Broadband and Constitution has remained comparatively fixed. And but the underlying is subsequently much more attractively priced. So we’re enthused about Constitution’s buyback and but extra enthused about our personal buyback.
Operator
Our subsequent query comes from James Ratcliffe with Evercore ISI.
James Ratcliffe
Nice, thanks, two, if I might, initially, Greg you simply talked about the tax affect going ahead, what’s your tax drag? Ought to we be fascinated with to your gross sales of the Constitution inventory? And secondly, are you able to speak a little bit bit in regards to the revised roaming deal, GCI and what kind of affect you mainly anticipating that to have going ahead? Thanks.
Gregory Maffei
So I am going to contact on the primary after which let Ron or Pete addressed the second. For 2022, I believe we’re taking a look at a 5% drag or 7% drag going as much as one thing like 9 over time. So we’ll see. Sooner or later we’re going to run out of foundation. So that is going, that relationships going to alter. However we’re okay for this yr. Ron, do you wish to go — do you wish to chat about your roaming?
Ron Duncan
Certain, we had an association with a big roaming buyer beneath which they had been arising on an elective termination. And we negotiated a multi-year extension, as Brian talked about at an NPV, Web Current Worth substantial constructive and deal for the long run on the corporate. And what you are actually seeing is the accounting results of the best way that contract is handled, the contract is required to take the revenues over the anticipated lifetime of the contract and amortize them equally over the variety of years within the contract. The money beneath the contract would not really change within the rapid future. However what you are seeing is primarily an accounting impact from an extension of the contract additional out with decrease revenues sooner or later interval, which drags down the accounting impact up entrance of acknowledged revenues. And, Brian, if I acquired that flawed, you may wish to soar in there earlier than it goes too far.
Brian Wendling
No, you bought it. Effectively mentioned.
Operator
And our final query comes from Ben Swinburne with Morgan Stanley.
Ben Swinburne
Thanks. Good morning. Greg, one other factor that is modified during the last a number of quarters has been all items share value. I am positive you have seen. I used to be simply curious as you consider cable consolidation, which we used to speak about extra. However perhaps that is time to speak about once more, in the event you suppose there is likely to be a chance there between Constitution and Altice, do you suppose the regulatory surroundings has gotten a lot more durable, in order that turns into something of dimension will get more durable? And I simply wished to comply with up in your foundation level after your reply.
Gregory Maffei
So I believe my mates at Constitution, who had been typically, effectively, the Altice favor goes to be the strategy for all success going ahead in cabler, feeling fairly good in regards to the Constitution method. And the questions on Altice’s alternative versus Constitution has just about ceased. In order that’s been constructive. I believe Constitution’s acquired an amazing plan of its personal, you rightly level out a few of the regulatory points, I believe a few of the territories that Altice has are engaging, significantly southern hyperlink territories, however they do not seem like sellers of that, there have been all these rumors that they could promote these and go non-public on the steadiness, who is aware of. However I believe Constitution and could be at the moment taking a look at any property that had been making an attempt to be bought, clearly that firm is successfully managed, so that they’ll make their choices about what they will do. However I believe Constitution is fairly pleased with the expansion plan it has and also you rightly level out the regulatory challenges so.
Ben Swinburne
So sure, sounds such as you suppose New York could be powerful most likely there, state or federal or each standpoint.
Gregory Maffei
Do not you suppose so dwelling there?
Ben Swinburne
Sure. I do. After which simply, I hadn’t thought in regards to the tax foundation level you simply made, so simply is there any method you’ll be able to assist us take into consideration what your — is it so simple as trying again at your unique foundation and Constitution shares and type of as soon as you have bought sufficient inventory to cowl that tax therapy modifications, and so issues have to alter with the Constitution relationship, or it is most likely extra difficult than that. However in the event you will help us take into consideration the mathematics there.
Gregory Maffei
It’s roughly, Ben, that is roughly right calculation. I believe that is a great way to consider it.
Gregory Maffei
And thanks to all of our listeners and questioners. That is it for right this moment. Once more, we hope to see you subsequent quarter, if not sooner, and thanks to your continued curiosity in each Liberty TripAdvisor and Liberty Broadband. And with that, operator, I believe we’re finished.
Operator
Thanks. As soon as once more, that does conclude right this moment’s convention. We thanks to your participation. It’s possible you’ll now disconnect.
