Ladies and gentlemen, thank you for standing by. Welcome to the GCI Liberty 2018 Q2 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, August 8. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. 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, including statements about business strategies, market potential, stock repurchases, future financial performance, matters relating to the Universal Service Administrative Company and Rural Health Care Program, market and regulatory conditions, new service and product launches and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, the availability of acquisition opportunities, competitive issues, regulatory issues and continued access to capital on terms acceptable to GCI Liberty. These forward-looking statements speak only as of the date of this call, and GCI Liberty expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in GCI Liberty'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, including adjusted OIBDA. The required definitions and reconciliations, including preliminary note in Schedules 1 and 2, can be found in the earnings press release issued today, which is available on our website. This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty Broadband. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These forward-looking statements speak only as of the date of this call, and Liberty Broadband expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Now I'd like to turn the call over to Greg Maffei, President and CEO.

Thank you, Courtnee, and thank you out there to all our listeners who are kind enough to join this afternoon. Today, speaking on the call, besides myself, we have GCI Liberty CFO, Mark Carleton; GCI's CFO, Pete Pounds; and in addition, GCI's CEO, Ron Duncan, will be available during the Q&A. Also during the Q&A, if you have interest, we'll be available to answer questions regarding Liberty Broadband. So beginning with GCI Liberty. We raised $477 million in cash through the sale of exchangeable senior debentures. We set a portion of that cash raise over Qurate Retail to sell out an indemnification associated with their repurchase of Charter exchangeables. We also completed our reincorporation in Delaware, which caused the dividend on our preferred stock to rise from 5% to 7%. Turning now to GCI. The company continues to execute on its strategy of exploiting operating synergies while expanding and improving coverage. It launched its new billing system in the last few days, and we believe that will greatly improve customer service. GCI Liberty has a double discount on Charter, as we've noted before. The look-through Charter price is trading, depending on your view of GCI's own trading price, at about a discount in the range of 20%. Do expect us to take advantage of that discount over time. Turning now briefly to Liberty Broadband and Charter. I would note that Charter posted solid Q2 results with a strong beat on net ads for residential broadband. We believe, as many observers do, cable continues to offer the best connectivity on a growing set of digital services. On June 30, Charter launched Spectrum mobile, and we expect that to be an important component of its offering going forward. We are on track at Charter, have the integration nearly complete by year-end, unified product marketing and service infrastructure. Charter remains a growth story, which we believe will accelerate when that integration is completed, have especially attractive free cash flow characteristics, which will only get better as cash flow intensity -- the capital -- CapEx intensity decline over the next several years. We also repurchased the Charter's 6.4 million shares for approximately $1.9 billion. With that, I'd like to turn it over to Mark Carleton to discuss the financials further.

Thank you, Greg. At quarter end, GCI Liberty had consolidated cash of $768 million, which includes $31 million of cash at GCI. And this includes the impact of the $133 million indemnification payment that Greg referred to just a few seconds ago. The value of the public equity method securities at GCI as of today's close was $5.8 billion, which includes our $1.6 billion interest in Charter, our $3.3 billion interest in Liberty Broadband and an $800 million interest in LendingTree. GCI Liberty has a $1 billion margin loan outstanding against its Liberty Broadband shares. At quarter end, GCI Liberty had a total principal amount of debt of approximately $3.1 billion, which includes the aforementioned margin loan, and $1.6 billion of debt, including capital leases and tower obligations at GCI. GCI's leverage as defined in its credit agreement was 4.9 times compared to a maximum allowable leverage of 5.95 times. And with that, I'll turn it over to Pete Pounds.

Thank you, Mark. Well, first, I'll start with 3 material updates. First, rural health care. As we announced last quarter, the funding request for the RHC Program exceeded the program cap, which at the time was $400 million. This led to the FCC imposing funding reductions of 15.6%, which resulted in a $6 million reduction in pro forma revenues, operating income and OIBDA in the first quarter of 2018. On June 5, 2018, the FCC increased the size of the fund from $400 million to $571 million and agreed to continue to adjust the fund for inflation as well as carry forward unused funding from past years. This is great news for GCI and our RHC customers. At this point, we continue to work with the FCC on a rate review. As you might imagine, delivering services in remote Alaska is significantly more expensive than typical rural locations. We are continuing to work diligently with the FCC on this, but until we have resolution to this open rate review, we have maintained a total net reduction of approximately $6 million to the RHC Program support receivable. The next item is our billing system upgrade. On August 4, our new billing system went live after years of planning and hard work, and we shut down our two legacy billing systems, both of which were over a decade old. I expect that we will have the normal bumps that come with any major new IT system. However, to date, the process has been relatively smooth. There are a number of benefits that we are expecting, although some of them may be delayed a couple of months as we integrate the new system. These include a single bill for our customers; a single view of the customer for our customer service representatives, faster…

Thanks, Mark and Pete. As a reminder to all of you on the call, we will be holding our Annual Investor Meeting on November 14 in New York. As we get closer to that date, please refer to our website for additional information. Thank you for your continued interest in GCI Liberty. And I'd now like to open the call for questions. Operator?

Thank you. [Operator Instructions] And we'll take our first question from James Ratcliffe from Evercore.

Thanks for taking the question. Two, if I could. First of all, on the GCI specific side of things, there's a number of substantial Spectrum auctions coming up later in this year, including -- and some of them will have licenses in Alaska. What's your thought on that in your Spectrum position overall? And then secondly, regarding the outstanding exchangeables. Do you have a position about whether you'd prefer to retire all of the old 1.75s? Or are you comfortable having them outstanding on a go-forward basis? Thanks.

Ron or Pete, do you guys want to take a cut at the Spectrum question first?

Sure. We will be watching those auctions and looking at what opportunities might exist. GCI is fairly Spectrum-rich today, and we don't have any pressing Spectrum needs. But certainly, with respect to 3.5 and some of the higher bands that may have unique applications in 5G, we will be monitoring that closely. And if there are good opportunities, we may move to capitalize on those. We also have to be careful with Spectrum cap because we're pretty much at the cap today.

Great. James, I think you're referring to the 1.75s that are actually sitting over Qurate rather than 1.75s we just issued. Just want to make sure we're on the same page.

Yes, the old ones, I mean.

Yes. I think we will be opportunistic in settling those out. This is not really putting on a Qurate hat. Qurate will be opportunistic in selling those out as they find the time. But I don't think there's any pressing obligation to do that. They were paid for that obligation by LVNTA as the GCI Liberty was formed as an integrated company. But we'll make a case-by-case basis. But I think you're right to point out they're -- obviously, they're now at the time after September 30, the indemnity runs out and they're sitting with an un-hedged Charter exposure.

September 10.

September 10, excuse me. Thank you, Mark. September 10.

Great. Thank you.

And we'll take our final question from Barton Crockett from B. Riley FBR.

Hey, guys. This is Zack Silver on for Barton. I just have two questions. Number one, for Pete or Ron, your Internet ARPU was higher than peers in the lower 48. Clearly, caused more to deliver services in Alaska and maybe there's some accounting allocation driving this, but I'm curious as to how you're driving that kind of ARPU growth and how sustainable do you think that growth is. And the second one is for Greg. Noticing you're up at TREE stake in July and this is a smaller part of the story, and I think your ownership percentage is somewhat capped. But just curious on your longer-term plan for TREE, particularly since it doesn't fit in very clearly if eventually you were to combine the Liberty Broadband and Charter down the road.

I'll take the one first on the ARPU for broadband. A large part of that is the fact that we were materially ahead of the lower 48 with respect to 1 gig offerings. We rolled 1 gig in the Anchorage market over 3 years ago. We did it using DOCSIS 3.0. We didn't wait for 3.1. And today, 95% of our footprint has 1 gig available to us. What we discovered was that 1 gig was kind of a magic product that not only so much more strongly in and of itself than we expected, but it also dragged everybody behind it up a tree. So we've seen a substantial increase in speeds and in the data allowances that come with each speed level, driven by the 1 gig thing but extending to the tiers as well beyond [indiscernible] gig. So the difference is much more than just pricing levels, it's really got to do with the 1 gig penetration. And we are very, very strong on that level. So that's what drives it. I think that there's continued room to expand on that. We're also looking at products that will integrate the data allowance between wired and wireless and add wireless value on top of our wired data products. I think that's an additional place to drive the overall ARPU between wireless and high-speed data. Greg, I think the other one is yours.

Yes. Thanks, Ron. I'll comment on TREE. TREE has been one of the more unlikely positive surprises around here in the sense that I think it's the bottom of the recession in '09, I think the stock -- our value in our stock was $17 million. And due to the really good efforts of Doug Lebda and his team, they have done a heck of a job. When they come in here and present, I'm continually impressed by their -- not only their execution in their existing business, but how they're moving forward. And so we're presented with a really high-quality problem. We have a big tax gain. We have something that wasn't necessarily core to our business that's been a huge home run and appears to have more room to go. So we'll monitor it closely. You've seen in general, our strategy has been to try and put together a logical company to a degree that we could and logical pairings of assets, but we are -- we're a collection of things that we inherited in some cases. This has been a very nice inheritance, even though it doesn't necessarily fit with the other furniture. It's turned out to be pretty attractive on its own, and it still has more to go. So we're going to watch it closely.

Okay, great. Thank you very much for taking the questions.

And it appears there are no further questions. That concludes today's conference. Thank you for your participation. You may now disconnect.

Thank you all for joining us.