Ladies and gentlemen, thank you for standing by. Welcome to the Liberty Broadband 202 Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, November 4. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer. Please go ahead. .

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K and 10-Q filed by Liberty Broadband and Liberty TripAdvisor with the SEC. .

These forward-looking statements speak only as of the date of this call, and Liberty Broadband and Liberty TripAdvisor expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Broadband or Liberty TripAdvisor's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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On today's call, we will discuss certain non-GAAP financial measures for Liberty Broadband, including adjusted OIBDA.

Information regarding the comparable GAAP metrics, along with the required definitions and reconciliations including preliminary note and schedules 1 and 2 can be found in the earnings press release issued today as well as earnings releases for prior periods, which are available on Liberty Broadband's website. .

Now I'd like to turn the call over to Greg Maffei, Liberty's President and CEO. .

Thank you, Courtnee, and good morning to all of you. Today speaking on the call, we will have Liberty Broadband's Chief Accounting Officer and Principal Financial Officer, Brian Wendling; Ron Duncan, CEO of GCI; and Pete Pounds, CFO of GCI, will also be available to answer questions.

Also during the Q&A, we will answer questions related to Liberty TripAdvisor. But please do note TripAdvisor has not yet reported Q3 results, so we will be unable to comment on the current quarter. .

So looking at Liberty Broadband, we continue to receive meaningful cash flow from the participation in Charter's buyback holding our fully diluted ownership at 26%. From the first of August to the end of October, we received $1.2 billion of proceeds from Charter.

We do believe the market reaction to the Q3 results was overblown and Charter is well positioned against competition, including that from fiber overbuilders.

And we remain bullish reflected in our own repurchases from August 1 to October 31, we repurchased 5.3 million in LBRD shares or $935 million over the same period at an average price per share of $177.50.

If you look at the look-through price to Charter, that's approximately $5.89 per share over this period, and year-to-date purchases have been at an average look-through price of $5.47 per share, which compares favorably to yesterday's close of $6.92 per share. .

Since LBRD began selling into the charter buyback earlier this year, we have received total proceeds of $3.2 billion, representing 35% of our $9.1 billion investment in Charter. Let me note that, that $9.1 billion reflects the conversion of our legacy Time Warner Cable shares into Charter as well.

Liberty Broadband has repurchased 20 million shares for $3.3 billion at $164.52 per share year-to-date, and therefore, has retired over 10% of its outstanding shares. .

Looking at the NAV accretion, the LBRD NAV per share is up 6.6% year-to-date compared to Charter up 4.3%. I do want to remind you that the tax rate on our Charter share sales for 2021 is about 5% to 7%. Looking at Charter itself, it delivered outstanding financial results in the third quarter.

Revenue was up 9.2% and EBITDA was up 14% over the prior year. Free cash flow increased 41%, an increase of over $700 million versus the prior year. .

Charter reported more free cash flow in the third quarter than it reported in all of 2018. And LTM Charter has generated $8.5 billion of free cash flow. Charter had good subscriber growth in the quarter, adding 265,000 broadband customers despite a relatively low churn environment, which provided fewer sales opportunities.

We like when people move because we think we get an opportunity to sell them, and we sell them more effectively and gain market share. So when periods of low movement, low customer activity, we do well financially but have less opportunity to sell them new services. .

Turning to mobile. Charter added 244,000 new mobile lines in the third quarter, and we continue to believe there poised to take more share. Last month, Charter launched new pricing programs for multiline accounts at $30 per line for an unlimited family plan, Charter offers best value in the industry for consumers.

I'd note that, that compares against pricing for large MNOs, which can result in savings as high as $20 to $40 per line for accounts with 2 to 3 lines. .

With that, let me turn it over to Brian to discuss the results. .

Thanks, Greg. Let's first take a look at the balance sheet. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $319 million, which includes $37 million of cash at GCI. The value of our Charter investment based on our shares held as of November 1 and Charter share price as of yesterday's close was $38 billion.

At quarter end, Liberty Broadband had a total principal amount of debt of $4 billion. We drew down $350 million on the Charter margin loan during the quarter and available capacity at quarter end is $800 million. .

The drawdown was largely to fund share repurchases at LBRD, given the timing differences and when we received proceeds from Charter share sales and to fund the escrow payment that is discussed in the earnings release. GCI continue to delever, driven by strong results and an additional $65 million paid down on the revolver during the quarter.

Leverage as defined in its credit agreement, was 3.0x at quarter end. Subsequent to quarter end, GCI refinanced its Term Loan B with a new Term Loan A and a $150 million revolver draw. This will save GCI about $8 million per year in interest expense.

Pro forma for this drawdown, GCI's leverage was still at 3x and available capacity under its revolver was $367 million. .

Note the amounts -- the above amounts exclude the indemnification obligation and preferred stock. Turning to GCI's financial results. GCI continues to post positive results.

Revenue of $246 million was flat year-over-year as growth in data across both consumer and the business segments was offset by the loss of revenue from GCI's broadcast media business that was sold in Q3 of 2020 and the loss of revenue from its time and materials business that has been deemphasized in order to focus on GCI's core Alaska network.

Q3 2020 revenue was also especially strong due to heavy political advertising. OIBDA of $89 million was down marginally 3% year-over-year, primarily due to company health care expenses, which were abnormally low in Q3 last year due to the COVID-19 pandemic. .

GCI's core business continues to perform very well with consumer cable modems and wireless subscribers, up 7% and 5%, respectively, on a year-over-year basis. Looking at a 2-year comp to Q3 2019, revenue was up 11% and OIBDA was up 23%. With that, I'll turn the call back over to Greg. .

Thanks, Brian. We look forward to seeing you soon on Thursday, November 18 at our Annual Investor Meeting. The full experience to be offered in person at the New York Times Center and virtually. The link to register can be found on our home page. Please note, all in-person attendees must be fully vaccinated against COVID-19.

We appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor. And with that, operator, I'd like to open the line for questions. .

[Operator Instructions] We'll take our first question from Ben Swinburne with Morgan Stanley. .

Greg, I'm with you on the Charter reaction, but maybe just to play devil's advocate and think about the risks. What gives you guys confidence that as we see the fiber builds ramp from, call it, 1/3 of the country to half the country.

And I think Charter -- I think Frontier's biggest overbuild kind of footprint target is Charter, combined with sort of some of the fixed wireless folks entering the market, whether it's Starlink or T-Mobile that we're not just going to enter a period of pretty significantly slower net adds on the broadband side.

Or maybe you just think even if that's the case, the free cash flow, the free cash flow, you don't care.

But I'd be curious how you think about the competitive environment over the next couple of years?.

And what Charter can do to try to make sure it continues to perform well from a product perspective, looking out over time?.

Yes. First of all, I think there are fiber competitors who are good operators, but they tend to be small. If you look at our overlap, our largest overlap by far is with AT&T and then Verizon, then it scales down from there. And we have looked at the data about how we perform against those guys and even against how fiber overbuilders.

And surely, we'll acknowledge when people do fiber overbuild, we probably grow less slowly, more slowly, but we still grow. And as you rightly note, I think there is a lot of free cash flow capabilities here in this business regardless. And we have seen how some people have actually rolled out and where they compete.

And we know that we can continue to have success against them. .

So I remain quite optimistic on the financial performance of Charter even in the face of potential fiber overbuilders. .

Any thoughts -- updated thoughts on the fixed wireless side? I mean, we got some disclosure from Verizon on their millimeter wave T-Mobile's added some. I mean, they're not huge numbers, but the market is mature so material.

How do you feel about that threat over the course of time as well?.

I find it interesting how little Verizon now talks about millimeter wave and deemphasize it because I don't think that can be viewed as a success to date. I think Starlink is a fascinating product and in certain places where you're unable to get a better alternative, it may work.

And I do acknowledge that Starlink will have appeal to a certain segment for the -- those remote locations and because of its brand. .

But given the choice, I don't think consumers are going to choose those slower speeds, particularly as it fills up performance can be pretty good if you're the only game in town, only guy on the pipe, the satellite pipe, but it is going to change over time. So I don't -- I think Starlink is an interesting niche.

I do not see this as a hugely competitive product for against higher speed alternatives, and that would include cable or fiber. You're going to choose that. I suspect if you have a choice over Starlink or any of the other satellite alternatives. .

I think we will continue to see progress on our products, getting better, our ability to do more in the home, our ability to make our WiFi smarter. I think you'll see us all of those things helping.

And I think you'll see the path as we upgrade our ability after DOCSIS 3.1 to continue to upgrade that path, ensures a long-term financial health and a network that is resilient for cable. .

We'll take our next question from Michael Rollins with Citi. .

Two questions, if I could.

The first is when you think about just broadband industry penetration in the upper 80s, who doesn't have broadband demographically? And if they haven't gotten it through the pandemic, what are the catalysts to get penetration for the 90s or even 100% over the next few years?.

And then secondly. Just curious if you could talk about on the Liberty Broadband side.

Are there any assets or valuations that you look for that would change the strategy from buying back Liberty Broadband stock to actually buying assets at the Liberty Broadband level?.

Can I start with the -- I didn't understand the second part of that question, behind access -- assets?.

Assets. .

I was just -- I didn't hear. Look, I think penetration will continue to rise. I think some of the government programs are going to continue to rise. Where have people not been penetrated.

I think it's largely in places where they were unable to get adequate high-speed capacity or where an older audience who is not as tech savvy or doesn't feel the need or where there are financial constraints. .

And frankly, the money that's being spent on broadband probably attack #1 and #3. And there will be a changing in demography over time on #2. So I do think all of those factors point to increase penetration. I don't think it happens in a week.

And 1 of the realities is the pace of installers, the pace of modems, the pace of everything about broadband means it's not going to move that dramatically that quickly, despite the amount of money that is being thrown at it is a lot of money.

But I think it will continue to rise for all those reasons, both the supply side and the demand side and changing demographics will continue to push penetrations up. .

As far as what we would look at other assets. I think we would look at it when we thought that there were other alternatives that we liked better than buying back Liberty Broadband stock at a 20% discount-ish to the underlying Charter.

So you hear us being optimistic on Charter and therefore, even more optimistic on the ability to buy back discounted Charter via Liberty Broadband. .

We're not adverse to looking at other alternatives, we need to think the market would give us credit, but there probably would be a few hiccups if we went and did something big. But we're willing to hold out for that possibility.

But while we wait, we look and say, "boy, it's pretty darn attractive to buy something you already like a lot at a 20% discount." So I think that's our plan. We never say no to an alternative, but we like the hand we have right now. .

We'll take our next question from James Ratcliffe with Evercore ISI. .

Charter's wireless focus seems to have been on lower service pricing, Greg, as you noted, rather than the handset promos that are dominating the offers from the big 3. I mean lower service pricing, you get lower upfront capital for handsets, but it's kind of harder to turn off over time. .

Greg, I'd love to hear your thoughts on those different strategies.

What mix is appropriate for Charter? And either Ron or Pete, also interested to hear what your experience has been with working on promos of service price or equipment, particularly given that right now, it looks like your mix looks a lot more like the 3 incumbent carriers with high handset subsidies?.

Yes, I'll start and say I like our strategy. I think the Charter management team has articulated it well. We can offer mobile pricing that's very attractive, but still profitable for us and coupled with our broadband opportunities. And as you noted, less capital upfront.

It's unclear to me what some of the MNO deals will really look like on a free cash flow basis over time and when given that handset outlay. I like our hand. We know what we're getting upfront and yet we're continuing to pull profitable broadband lines with it.

So we remain very optimistic on the mobile opportunity for Charter and really for all of cable. .

I'll let Ron or Pete, why don't you guys want to comment on the second part?.

You're right. We're very much more lined up with the MNO version of the wireless space than Charter's MVNO. And we do play in the thick of the handset subsidies. We're not the most aggressive, we're probably more like Verizon a little bit laid back. We're confident that there are good free cash flows in those deals.

We're primarily selling in the market up here based on the network. We've got a clear network advantage with our 5G rollout, and that's patently discernible to our customers. I think that's what's driving our our wireless growth.

But it's important for us to continue to play since we're already at a 30% to 40% market share in the market up here, it's important for us to continue to play in the mainstream, which requires the the handset subsidies. .

I know that AT&T is reducing its allocated handset subsidy cost over -- by extending the life of its customers. I don't know how long that is going to continue, but we're confident even with our prior 2-year average customer life that there's free cash flow on those deals. .

Our last question comes from Matthew Harrigan with Benchmark. .

Really just an extension of Ben's question, but if you look at broadband, I mean, as long as people are rational on pricing, I mean, you could practically stop growing units right now and the shares would still look reasonably attractive at the level of the installed basis, people are consuming 25%, 30% more a year.

I mean it's a very high utility service. How much do you worry about getting real price disruption and not Starlink, but some of the real upstarts like Star A are talking about very, very low costs coming out of the blocks.

Is there anything that gives you pause like that that's unnerving?.

And also, do you have any issues or any comments on GG Zone being named to the FCC, which is a little bit of a disappointment for some folks?.

Look, I think we always worry about -- thank you for the question, Matthew. We always worry about technological challenges and you don't dismiss them. And certainly, price competition is 1 thing.

But I do as I said before, I feel very good about our opportunity in the territories we operate and with the competition that we have, our ability to upgrade relatively low cost through 3.1. Our ability to move forward with new builds partly fueled by RDOF, I feel good about our growth path. .

And again, I don't want to be dismissive of technological competition that's out there. But I do not believe it will radically change the profile for Charter. As far as GG Zone, we'll see what happens. Obviously, she's got somebody who's questioned the industry.

I do think the appointment of Jessica Rosenworcel as a permanent Chair is a great step forward, a lot of respect for what Ms. Rosenworcel has done, and we're excited to operate with the FCC going forward. .

There's 1 more question out there. One more question, I think. .

Our last question comes from Michael Bunyaner with TLF Capital. .

I'm just trying to understand a little bit what your thoughts are about the economics of the following. We have about 55% penetration of the broadband business in Charter and that's roughly at $60 of ARPU, and that's competing versus $120 per month in wireless. So [ Mr.

Ratcliffe ] alluded to this, that we essentially have less than 30% of the dollars available to us in terms of competition. Is the economics of what we can do with gaining market share is as good as what we have today? Or is this incremental profitability is very different versus the basic cable business.

Can you just share your thoughts on sort of what this can?.

Yes. I think the mobile business is a business which we will not have the same stand-alone profitability that we have in the broadband business. But I think a couple of things. First, that profitability increase with scale.

Second, we will have the ability to go to buyer economics versus MVNO relationships on a market-by-market basis to further increase that profitability.

But most importantly, this is incremental profitability to their broadband business and particularly the way we operate it, where you are as a customer, being both a broadband and a mobile customer, it's only a positive.

Not only do we get the incremental revenue and margin from your mobile lines, we hopefully drive incremental business with more broadband lines, and we reduce churn because customers who buy multiple products are less likely to churn. .

So I think it's a win in at least 3 ways. There are probably some other ways I can't remember this morning, but I think it's a win all the way around, particularly when you look at it as really remembering this is all on the margin. .

With that, operator, I think we're done. Thank you for your interest in Liberty Broadband. As I said, we look forward to seeing you on our Investor Day on November 19 in person or virtually. And until then, be well. .

This concludes today's call. Thank you for your participation. You may now disconnect..