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Liberty Broadband Corp (LBRDA)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue rose 9% year over year to $262M; operating income increased to $30M, while diluted EPS was $0.99 versus $1.10 in Q3 2023 as higher net realized/unrealized losses on financial instruments offset stronger operations .
  • GCI delivered commercial momentum: business revenue +16% y/y to $146M, consumer data +4% y/y; Adjusted OIBDA grew 12% to $100M with margin expansion to 38.2% (+110 bps y/y) on improved mix and execution in Alaska schools and healthcare .
  • Liberty Broadband reiterated FY24 GCI net capex guidance at approximately $200M, supporting rural Alaska network expansion (Bethel and AU-Aleutians fiber) across Q1–Q3 without change .
  • Strategic catalyst: active discussions regarding a proposed all-stock combination with Charter to rationalize the dual corporate structure and enhance trading liquidity; further updates only if definitive terms are agreed .
  • Consensus estimates unavailable via S&P Global on request today; estimate comparison not possible. Values from S&P Global unavailable.

What Went Well and What Went Wrong

What Went Well

  • Strong GCI execution: revenue +9% y/y to $262M; Business segment +16% y/y driven by upgrades in schools and healthcare in remote Alaska; Adjusted OIBDA +12% y/y to $100M with margin up 110 bps to 38.2% .
  • Corporate deleveraging actions: issued $860M 3.125% exchangeable debentures due 2054 and repaid $540M Charter margin loan; repurchased $300M of 2053 exchangeables, leaving $1.15B available capacity on the margin loan .
  • Strategic optionality: Liberty Broadband and Charter’s special committee discussing an all‑stock combination to streamline structure and improve liquidity; maintained 26% fully diluted equity interest in Charter through monthly share sales aligned with Charter buybacks .

Quotes:

  • “Proposed transaction would rationalize dual corporate structure and provide enhanced trading liquidity. Additional updates will be provided only if and when definitive terms are agreed.”
  • “Liberty Broadband cash increased $95 million in the third quarter primarily due to proceeds from Charter share sales.”

What Went Wrong

  • EPS stepped down sequentially: diluted EPS $0.99 in Q3 2024 vs $1.36 in Q2 2024, reflecting higher net losses on financial instruments and lower ‘Other, net’ contributions despite better operating metrics .
  • Consumer cable modem subscribers declined y/y and q/q (156,400 at Q3 vs 158,000 in Q2 and 159,800 in Q1), partially reflecting ACP expiration impacts and competitive dynamics .
  • Operating and SG&A expenses increased, driven by higher distribution costs to healthcare, education, consumer customers and labor/software subscription costs, partially offset by lower lease expense .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$245 $246 $262
Operating Income ($USD Millions)$28 $21 $30
Adjusted OIBDA – Liberty Broadband ($USD Millions)$85 $80 $93
Diluted EPS ($USD)$1.69 $1.36 $0.99

Q3 YoY comparison:

MetricQ3 2023Q3 2024
Revenue ($USD Millions)$240 $262
Operating Income ($USD Millions)$21 $30
Diluted EPS ($USD)$1.10 $0.99
GCI Adjusted OIBDA Margin (%)37.1% 38.2%

Segment breakdown (GCI):

Segment Revenue ($USD Millions)Q1 2024Q2 2024Q3 2024
Consumer$117 $117 $116
Business$128 $129 $146
Total$245 $246 $262

KPIs (GCI operating metrics):

KPIQ1 2024Q2 2024Q3 2024
Cable Modem Subscribers159,800 158,000 156,400
Wireless Lines in Service199,000 201,900 200,300

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GCI Net Capital Expenditures ($USD)FY 2024≈$200M (May) ≈$200M (Aug) Maintained
GCI Net Capital Expenditures ($USD)FY 2024≈$200M (Aug) ≈$200M (Nov) Maintained
LBRD Share Repurchase Authorization RemainingThrough Apr 30, 2024≈$1.7B ——
LBRD Share Repurchase Authorization RemainingThrough Aug 1, 2024—≈$1.7B Maintained
LBRD Share Repurchase Authorization RemainingThrough Oct 31, 2024—≈$1.7B Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
ACP expiration impactAnticipated headwinds; retention offers (Internet Assist, Internet 100, mobile) at Charter to mitigate churn Majority of broadband losses due to ACP; trends improved by June; mobile profitability milestone Consumer cable modem subs down; business strength offsets; EPS impacted by financial instruments Stabilizing operationally; lingering subsidy expiration pressures
Debt reduction focusNear-term proceeds prioritized to reduce LBRD debt; slower buybacks Exchangeables issuance; margin loan repayment; extended maturity to 2027 Margin loan capacity $1.15B post repayment; corporate debt relatively flat q/q Continued deleveraging actions
Charter mobile momentum8M lines; mobile service revenue +38%; Spectrum One performance Mobile reached profitability; 557k net adds; Unlimited Plus ARPU tailwinds — (Q3 LBRD release references Charter highlights indirectly) Sustained growth driver for Charter
Fiber/competitor dynamicsBalanced approach to extension vs. FCF; mitigating ACP ARPU hits Fiber JV activity validates fixed-line strategy; less broad fiber build activity —Supportive for Charter’s fixed + MVNO positioning
NAV discount/structurePathways: repurchases and potential structural resolution via combination with opco —Proposed all-stock combination discussions with Charter Clearer structural catalyst forming

Management Commentary

  • “Proposed transaction would rationalize dual corporate structure and provide enhanced trading liquidity. Additional updates will be provided only if and when definitive terms are agreed.” – LBRD Q3 earnings release .
  • “Liberty Broadband cash increased $95 million in the third quarter primarily due to proceeds from Charter share sales.” – LBRD Q3 earnings release .
  • “We used [exchangeable] proceeds to repay $540 million under our Charter Margin loan and repurchased $300 million of our existing 3.125% exchangeables…we expect substantial interest savings.” – Q2 call, Gregory Maffei .
  • “Mobile achieved its profitability for the time…anytime upgrade program is driving ARPU…Spectrum Mobile…very effective.” – Q2 call, Gregory Maffei .
  • “We remain under the 26% fully diluted ownership cap…we expect to resume sales into Charter’s buyback this summer…greater focus on debt reduction.” – Q1 call, Gregory Maffei .

Q&A Highlights

  • Device subsidies and AI phone cycle: GCI must stay competitive with AT&T subsidies; evaluating enhanced subsidies to gain share amid a potentially larger AI-related upgrade cycle; extended from 2-year to 3-year contracts to reduce turnover (Ron Duncan) .
  • Charter competitive landscape: Fiber JV activity by T-Mobile validates fixed-line + MVNO strategy; broad fiber build slowing; Charter positioned to continue EBITDA growth with cost initiatives (Greg Maffei) .
  • Leverage vs buybacks: Near-term preference to reduce Liberty Broadband debt; Charter moving leverage toward mid-point of 4–4.5x target (Greg Maffei) .
  • NAV discount resolution: Primary tool is repurchase; ultimate resolution often via spin/merge with opco; synergies would include overhead elimination and improved purchasing at GCI in a combination scenario (Greg Maffei) .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q3 2024 were not retrievable today; comparison vs Street is unavailable. Values retrieved from S&P Global unavailable.
  • Given revenue of $262M and Adjusted OIBDA uplift, sell-side models focused on GCI margins may need to reflect stronger business segment momentum and higher distribution costs; EPS was pressured sequentially by financial instrument losses despite improved operating income .

Key Takeaways for Investors

  • GCI’s business segment strength (education/healthcare upgrades) is driving mix and margin expansion; expect sustained rural Alaska network ROI as FY24 capex guidance remains ≈$200M .
  • Consolidated EPS can be volatile due to equity method results, dilution gains/losses, and realized/unrealized financial instrument marks; watch for sequential variability even amid operational improvement .
  • Deleveraging actions enhance flexibility: exchangeables issuance, margin loan repayment, extended maturities, and ample margin loan capacity support balance sheet resilience into 2025 .
  • Structural catalyst: an all-stock combination with Charter would likely reduce holdco discount and overhead, and may unlock improved liquidity; track 13D/A disclosures and any definitive terms .
  • Consumer broadband softness tied to ACP expiration persists; however, Charter’s mobile profitability and cost discipline remain offsets at the underlying affiliate level per recent calls .
  • Subscriber KPIs trending lower in consumer cable modem subs; business revenue growth and OIBDA margins offset; monitor sustainability of education/healthcare demand and distribution cost trends .
  • With Street consensus unavailable today, focus near-term on operational momentum at GCI, leverage trajectory, and the strategic path with Charter as primary stock narrative drivers .

Additional source notes:

  • Q3 Earnings release and 8-K (Item 2.02 and Exhibit 99.1): Liberty Broadband Corporation, Nov 7, 2024 .
  • Q2 Earnings release and call: Aug 8, 2024 .
  • Q1 Earnings release and call: May 8, 2024 .
  • Q3 2024 call scheduling press release: Oct 10, 2024 .