Liberty TripAdvisor Holdings, Inc. (NASDAQ:LTRPA) Q3 2023 Earnings Call Transcript
Liberty TripAdvisor Holdings, Inc. (NASDAQ:LTRPA) Q3 2023 Earnings Call Transcript November 3, 2023
Operator: Welcome to the Liberty Broadband 2023 Third Quarter Earnings Call. During the presentation all participants will be in a listen-only mode. Afterword we will conduct the question and answer session. [Operator Instructions] As a reminder, this conference will be recorded, November 3. I would now like to turn the call over to Shane Kleinstein, Vice President, Investor Relations. Please go ahead.
Shane Kleinstein: 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 statements 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.
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 required definitions and reconciliations, including preliminary note in 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 introduce Greg Maffei, Liberty's President and CEO.
Greg Maffei: Thank you, Shane, and good morning to all. Today, speaking on the call, we will also have Liberty Broadband's Chief Accounting and Principal Financial Officer, Brian Wendling. GCI management will be available to answer questions. Also during Q&A, we will be available to answer questions related to Liberty TripAdvisor, but please note TripAdvisor has not yet reported their third quarter results. So we will obviously not be able to comment on the current quarter. So beginning with Liberty Broadband. We did resume selling into the Charter buyback in October. We received $48 million of proceeds, and we deployed $13.1 million into Liberty Broadband buyback at an average cost of $88.18 per share. We anticipate that we will continue to buy back LBRDA and K shares with the substantial majority of the after-tax proceeds we received from Charter throughout the rest of the year.
And now looking at Charter. Charter did report solid operating and financial results despite a tougher market and the Disney Exchange. Charter added 63 broadband net adds. We continue to benefit from rural expansion with 31,000 subsidized rural net adds in the third quarter, and we are already achieving 50% penetration after 12 months of those net adds into customer cohorts well above the case that those were underwritten upon. We believe this reinforces the rural investment opportunity, which we think is an attractive use of capital allocation. There is high demand for Charter services, both broadband and mobile in those markets. Mobile strength does also continue. We added 594,000 mobile lines during the third quarter. We will begin to see the benefit of those in the fourth quarter as Spectrum One pricing opportunities roll off and we begin to see closer pricing on those.
These free lines will begin to convert into paid lines during the fourth quarter. And as you may have heard from management last week, we've seen low churn on those conversions from our trial cohorts. We did have a successful resolution with Disney, and we believe the new agreement is beneficial for both parties and does provide a path forward for both linear and over-the-top to work together with our network partners as a carriage provider, and that's a model we think can be good for all parties going forward. I'd also note that Zomo went live a month ago, our video platform, which allows convenient access to both linear and DTC content with unified search and excellent discovery interface. We're excited for it. The distribution of Zomo across both Charter and Comcast, we think could be a winner.
Finally, '23 has been an important year of investment. We believe this investment is excellent in establishing the foundation for our ongoing growth and there are opportunities which will be attractive heading forward, both upgrading and expanding our network, and we are pleased with the progress that was made across all these initiatives and confident that these investments will drive long-term results for Charter shareholders. Let me turn to Liberty TripAdvisor. As I noted, TripAdvisor hasn't reported their third quarter results, so I'm not going to comment on that. But we do feel good about the business in a strategic direction. Liberty TripAdvisor did move to OTC trading on October 30. This was due to compliance -- noncompliance with some of the NASDAQ listing requirements.
We did look at the range of alternatives and believe transitioning to OTC was the best course of action, and we do not anticipate this will have an impact or change Liberty Trip's business operations or strategy. And with that, let me turn it over to Brian to discuss the financials.
Brian Wendling: Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $88 million. This includes $38 million of cash at GCI. As of November 2, the value of our Charter investment was $19.4 billion. And at quarter end, Liberty Broadband had a total principal amount of debt of $3.9 million. Note, this excludes the preferred stock and the remaining indemnification obligation. After quarter end, the remaining LI LLC Charter exchangeable debentures will be redeemed, and a final indemnification payment will be made to Qurate Retail. Looking at GCI. Revenue was down 3% for the quarter and adjusted OIBDA was relatively flat. Strength in business data revenue was offset by declines in video and voice revenue and lower handset sales year-over-year, which impacts revenue but not -- does not significantly impact margins.
We also had the impact of a 3-month fiber break in June that affected GCI's data, video and wireless services provided on the North Slope and Western Alaska. The fiber break impacted both consumer and business revenue, and in the aggregate, negatively impacted revenue by approximately $5 million, with a modest impact on adjusted OIBDA. The fiber break has since been fully repaired, which is good news. GCI has also been successful in moving consumers to its converged GCI+ product offering, which combines GCI's flagship data product with their wireless offering and provides significant savings to the customers. This has negatively impacted GCI's ARPU, but benefits churn as GPI customers who bundle Internet and mobile have nearly 50% lower churn than stand-alone customers.
We expect and GCI expects margins on the products to increase over time as customers upgrade their services. Over the last year, GCI has added 3,800 revenue-generating wireless subscribers and 2,100 revenue-generating cable modem customers. Year-to-date, Liberty Broadband has received $65 million in dividends from GCI. Leverage as defined in its credit agreement was 3 times at quarter end, and GCI has $397 million of undrawn capacity on its revolver. And with I'll turn the call back over to Greg.
Greg Maffei: Thanks, Brian. We look forward to seeing many of you next week at our Annual Investor Day on Thursday, November 9, in New York. Additional information is available on our website. John Malone and I will be hosting our annual Q&A, if you would like to submit questions in advance, you can e-mail investorday@libertymedia.com. We appreciate your continued interest in Liberty Broadband and Liberty TripAdvisor. And with that, operator, I would open the line for questions.
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