Ladies and gentlemen, thank you for standing by. Welcome to the GCI Liberty 2019 Q4 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. As a reminder, this conference is being recorded, February 26. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer and Senior Vice President of Investor Relations. Please go ahead, Courtnee.

Thank you. Before we begin, we'd like to remind everyone, 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 our most recent forms 10-K filed with the SEC.

Thank you. Courtnee, and good afternoon to all of you out there on the call. Today, speaking on the call, besides myself we’ll have GCI Liberty's Chief Accounting Officer, Brian Wendling; GCI's CFO, Pete Pounds. During Q&A, we’ll be available to answer questions also related to Liberty Broadband. So, starting first with GCI Liberty. As Ron noted in the release, we had a solid operational quarter. There were pluses and minuses on the regulatory front, but overall it resulted in a benefit in the fourth quarter of $4 million as Brian will discuss further in a moment. For the full year despite a challenging business environment, there were stable consumer revenue, as there were gains in data from sub growth and consumers moving up the stack, offset losses in video and voice. We also generated expense savings from operational efficiencies and a focus on the core Alaska business. GCI continues work on the Anchorage 5G build which we expect will be completed later this year. Turning to LendingTree which reported its Q4 results yesterday, they added over $3.6 million users to My LendingTree during 2019 bringing the total number of customers to 14.3 million. LendingTree continues to diversify its business effectively. Insurance is now the largest business and grew 37% pro forma versus Q4 last year. The Home and Consumer segments also grew double digits over the prior year. Yesterday as I noted on, they had their earnings call and Tree issued 2020 guidance for another year of double-digit revenue and adjusted EBITDA growth. Turning over to Liberty Broadband. It was a great year for Charter. They created over 1.1 million new customer relationships and net added 1.4 million Internet customers. They added over 900,000 mobile lines and planned to begin offering 5G in Q1.

Thank you, Greg. At quarter end GCI Liberty had consolidated cash and cash equivalents of $570 million, which includes $61 million of cash at GCI. The value of the public equity securities at GCI Liberty as of today is close was $9.4 billion, which includes our $2.8 billion interest in Charter, $5.7 billion interest in Liberty Broadband, and a $1 billion interest in LendingTree. At quarter-end, GCI Liberty had total principal amount of debt of $3.2 billion, which includes a $1.3 billion margin loan outstanding against its Liberty Broadband shares, the Charter exchangeable debentures and $1.4 billion of debt, including finance leases and tower obligations at GCI. In the fourth qua GCI Liberty increased borrowings under the Liberty Broadband margin loans by $4 million, proceeds were to repay a portion of the GCI senior credit facility and for general corporate purposes. GCI’s leverage at quarter end is defined in its credit agreement was 5.1 times compared to a maximum allowable leverage of 6.5 times. Note that the above amounts exclude the indemnification obligation and preferred stock which are separately identified in the cash and debt table on the release. And our 10-K was filed later, you will notice that GCI is remedying a material weakness in its internal controls over financial reporting, material weakness results from an aggregation of issues identified in I.T. general controls over access to various systems, as well as issues in the design and operation of business process controls. Our control issues persist. We are working toward remediation, are implementing various activities to strengthen the control environment going forward, including process redesign, enhance training and personnel development. We know that the issues were not an external breach and did not result in any material misstatements in our reported financial results. Before I hand it over Pete, there are two significant Rural Health Care events that impacted GCIs results in the fourth quarter that I'd like to walk through. First, in December of 2019 GCI became aware of compliance issues on certain active and expired RHC contracts, because of these issues we have accrued a loss of approximately $17 million to SG&A in the fourth quarter. We continue to work with the FCC to resolve this issue and you can find much more disclosure around this in our 10-K.

Thank you, Brian. Revenue was down in the full year 2019 as compared to 2018, primarily due to reductions in consumer video and voice, as well as business wireless and video revenues. When comparing the fourth quarter results, 2019 Q4 revenue was down 1%, primarily based on reduced business video revenue from a lack of political advertising revenue in a non-election year. Adjusted OIBDA was down $10 million or 4% for the year. Excluding the RHC matters Brian noted, it would have increased $7 million or 3%. For the fourth quarter we showed strong adjusted OIBDA year-over-year growth of $13 million or 21%. Adjusted OIBDA would have been up $9 million or 15% percent even without the benefit of the RHC matters Brian discussed. This adjusted OIBDA improvement is mostly due to our focus on cost efficiencies. Moving on to consumer. We're just starting to see signs of life in the Alaskan economy after a few years of flat cable modem subscribers. We finally had two great quarters in a row of sequential cable modem subscriber growth. In the fourth quarter we grew 2400 data subscribers and continued to move customers up the product stack which helped us reach a 5% and 6% growth rate in consumer data revenue on a quarterly and annual basis respectively. Consumer wireless revenue was up slightly due to increased handset sales. We continue to make our Anchorage 5 band 5G upgrades which we expect to complete this summer. On the business side, revenue was down slightly in the fourth quarter and full year with losses in wireless, voice and video offsetting good performance in business data. The decline in wireless was due to lower backhaul and roaming revenue. The video losses were due to non-election year advertising revenue declines.

Thank you, Brian and thank you Pete. We have scheduled our 2020 investor meeting for Thursday, November 19th in York. So please mark your calendars. As always, we appreciate your continued interest in GCI Liberty and we look forward to chatting with you next quarter if not before. And with that operator, I'd like to open up for questions.

Thank you, sir. Our first question comes from Michael Rollins, Citi.

Hi. Thanks for taking the questions. I'm curious if you could discuss at the GCI level, what's the most appropriate target leverage ratio should be for the company and the capacity you'd have to either increase investments or repurchase stock or consider other uses for the capital?

Pete, will take that. Laura why don’t you talk about where we are in terms of leverage, both in the constraints we currently have at the GCI level, given covenants.

Sure.

This is Laura Baldi, our Treasurer

So, GCI operates under both a credit agreement and some public bonds. With respect to the credit agreements, we are at roughly a 5.1 times total leverage ratio, using that metric, on the bonds covenant we are approximately 5.5 times versus a 6 times covenant. Obviously, we've seen some fluctuations in it – excuse me, see some fluctuations in the leverage covenants due to the write-offs and then the reversals of the RHC issues and we are working towards reducing those covenants of - I mean, the calculations over time. Please note that the RHC issues that were effective in first quarter ‘19 will begin to anniversary off this quarter, the first quarter, sorry, and that will improve these calculations going forward.

I think - thank you, Laura. And I think to note what is the right level, given the fluctuations, potentially our regulatory matters we have been conservative against what this might be and probably at the levels and we try and build a little cushion of particularly, you know, at various times, we had incurrence issues. We’re out of that now, but want to make sure that we don't have those issues and the regulatory fluctuations that make that harder.

And then just an operating question, in Alaska do you find that there's a greater sensitivity to natural resource pricing, for example like the oil market, where it's on the business side or the consumer side of the cable business. Just curious how to think about some of the sensitivities over time?

Well, if I understand your question correctly, you're basically asking how much does the price of oil drive business activity in Alaska. And I think there are people on it from GCI side who could certainly be more articulate, but the answer is quite a lot, particularly with some lag on what projects get started and what things get built out and what – particularly in areas like the Northern slope, what people do is very much tied to where they think, where oil has been, where oil will be. I don't know, Pete or if Ron you want to comment further.

This is Ron. I'll just add, there's a substantial damper between current fluctuating oil prices in the climate in Alaska. Most oil revenue in Alaska comes to us by being recycled by the state governments. So, oil prices have an impact on state budget deficits that really aren't reflected immediately in the economy. And the companies that are investing on the North Slope are using a very long-term horizon, which is unlikely to be influenced by short term perturbations in the per barrel price in oil. Obviously if it stays down where it is, that has a long-term impact. If this is a three- or six-month cycle, we won’t see much results from it.

Thank you.

Next up we'll hear from James Ratcliffe, Evercore ISI.

Thanks for taking the question. And I have two if I could. There's a comment in the release that there’s an impairment loss of $167 million related to wireless licenses. And can you just talk about what drove that reassessment about long term wireless revenue? And secondly, on Liberty Broadband side, the new house proxy is coming up next May. It looks though like if I'm doing the math right, that you should be pretty close to, if not over 25% by then anyway at least for the GCI Liberty's help, but if you could just - any thoughts of how you plan to approach that? Thanks.

Sure, James. I'll take the second question first and let – we’ll divvy among who’s - I think it's going to be Brian is going to answer on the wireless question. But on the Liberty Broadband question, I think you rightly note that proxy will expire. I think there are several potential remedies to ensure that we don't have regulatory issues around the Investment Act of 1940.

And then on the wireless impairment question, you know, as required by GAAP that at the end of each year you're required to look at all your various non-amortizing intangibles, so it's a standard process that we went through. We won't disclose or go into too many of the details on the various variables that drive that valuation. But there was increased uncertainty related to certain customers that flow through the valuation process, which resulted in the impairment.

Great. Thank you.

Our next question today will be from Zack Silver, B. Riley FBR.

Okay, great. Thanks for taking the question. I know that there are a lot of moving pieces on the RHC in both the plus and the minus you guys disclosed today. But wondering if you could sort of directionally give us a sense of how that may impact OIBDA in 2020?

You know, I think you would expect all else being equal, that we should be receiving positive impacts of that. The contracts that were suspect, we took the $17 million reserve on, there is a potential, we could end up with a larger reserve on that. But I think we're comfortable we have the right reserve based on the facts and circumstances we know. You've seen that we reverse the 21, there is more roughly $3 million a quarter that we were undertaking, that is sitting stored on our balance sheet for record three quarters in order. So, there is $9 million more that is sitting there in suspense. The variables around that are what reimbursement rate we get from the FCC. If we were to get the same reimbursement rate that we received on the ‘17 revenues, we would recognize all of that money. So, on the margin today you'd have to think that we are more likely than not to receive revenue, rather than – or receive revenue off the balance sheet from those FCC issues, rather than would not incur new issues. I don't know if anyone else Brian, Ron or Pete wants to add to my answer there.

Well summarized.

Yeah, that's helpful. And then you know, more of a higher level one, just given you know, the T-Mobile, Sprint decision recently, big horizontal merger. We'd love to hear your take on it Greg or Ron or whoever, implications for M&A, a large-scale M&A at Charter. You know, does this precedent with this decision to open the door for you know things that you may have not thought would have been possible before?

Brian, do you want to add any comments or?

I think that was more targeted toward the Charter level with T-Mobile. The T-Mobile deal is clearly good for GCI by - T-Mobile is our largest roaming partner and we get a lot of benefit from them. We will have access to additional spectrum, it comes to us through their merger with Sprint which we will be able to deploy in Alaska and it also will have a near-term revenue effect to replace some roaming revenues that we were going from Sprint. So, from a GCI perspective it's a big win.

Interesting.

Looking at the larger issues about what it might mean for Charter, you know, I think on the margin it was probably a slight negative, not enormous, just because you know, you have a stronger competitor. But on the other hand, it may have meant that you know Alaska is slightly less competitive environment, it maybe an opportunity for Charter, so you weigh all those – those two pieces, it's hard to know for certain. What it did say about - what are some other implications without claiming to have complete presence by any means. The fact of the states would be back is probably a positive for imagining other large-scale deals. The fact that people were very interested in seeing 5G rolled out and what that might mean about other combinations and willingness to overlook potential detriments in the deal or potential problems with the deal in pursuit of all of enabling 5G that might portend things that we could do otherwise. But I'm not sure it's a massive impact one way or another. We'll see does a stronger T-Mo - is the stronger T-Mo real threat. I think that's the biggest issue.

Yeah, that makes sense. Thank you, guys.

Next up we'll hear from John Malone of SunTrust.

Hey. This is Mike Kerrane from SunTrust. Most my questions have been asked and answered. But I just want to ask you if I could get more color on the $400 million of additional margin loans. What’s the - if you could remind me of like what's the rate that you get on those mortgage loans and what I'm just trying to figure out is whether it makes sense to pay down more debt with those types of loans, whether it's revolver or the 67 X to 25?

Hi. Its Laura Baldi again. This growth that we pay a spread of LIBOR plus 185 on the margins from this and we can partially by LLC facility which is...

We did that and the presence of this loan is for some part - some regulatory reasons.

Understood. Thanks for it. Thanks for the answer.

And our final question today comes from Matthew Harrigan, Benchmark.

Thank you. Apologies for asking the same slightly indelicate question as last quarter, but you still have to cope with the still fairly hefty discounts on the LBRDA and GLIB.A. You can't get a letter ruling from the IRS anymore. Is there anything in Washington given all the uncertainty that would make it desirable to collapse the Russian ball structure this year, particularly as the Alaskan asset has shown, you know, clearly better performance, although I imagine you probably couldn't even necessarily complete a regulatory review before there was a change in Washington - if there was a change in Washington?

That - we clearly obviously have no plan or intent on that, but we have certainly read that others have suggested it and some of the logic for that might be just reducing overhead, taking advantage of various discounts, consolidating some of our holdings in one spot, that would obviously be subject to some issues around tax, some issues around probably investment company. I do not believe and the way you're sort of suggesting Matthew, I don't believe, it's right to be surprised that there'll be significant FCC or DOJ type issues, antitrust. I think mostly issues would be largely around IRS and SEC to work through.

Thanks, Greg.

Thank you very much to everyone who was on the call. Thank you to our friends up in Anchorage who - for their comments. Thank you to everyone here in Colorado and we as I said we look forward to speaking with you all again next quarter if not sooner.

Ladies and gentlemen, that does conclude today's conference. Thank you all for your participation. You may now disconnect.