Welcome to the Liberty Broadband 2024 Q2 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded today, August 8, 2024. I would now like to turn the call over to Clare Adams, Senior Manager, Investor Relations. Please go ahead.

Good morning. 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 Form 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 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 introduce Greg Maffei, Liberty's President and CEO.

Thank you, Clare, and good morning to all our listeners. Today, speaking on the call, we will have Liberty Broadband's Chief Accounting and Principal Financial Officer, Brian Wendling; Ron Duncan, CEO of GCI; and Pete Pounds, CFO of GCI will also be available to answer questions. And during Q&A, we will answer questions if there are any related to Liberty TripAdvisor. So beginning first with Liberty Broadband. In July, we issued $860 million of the 3.125% Charter exchangeables. We used the proceeds from that offering to repay $540 million under our Charter Margin loan and repurchased $300 million of our existing 3.125% exchangeables. We've also extended the margin loan maturity to 2027, and our 2026 debt maturities are now spread through 2028. As a result of these actions, we expect substantial interest savings. We resumed our sales at Liberty Broadband into Charter's buyback in June. With the proceeds, we will continue to take a prudent approach about retiring debt, and that is our current focus. We will also evaluate those LBRD buyback as cash build from Charter share repurchases. Looking to Charter of the underlying company, they had well received strong results in the quarter against the competitive backdrop and the expiration of the ACP program. They reported a net subscriber loss of 149,000 broadband subs, but the majority of those were due to ACP. The Broadband trends did improve throughout the quarter with the lowest net loss in June. Charter reported solid EBITDA growth of 2.6% versus the prior year and 100 basis point margin improvement. Management did a great job of expense management working with the growing realization impacts of that in the second quarter. They continue to manage the cost structure without sacrificing growth. Mobile achieved its profitability for the time, an important milestone that reinforces the…

Thank you, Greg. At quarter end, Liberty Broadband had consolidated cash and cash equivalents of $73 million, which includes $47 million of cash at GCI. Value of our Charter investment based on our shares held as of August 1 and Charter share price as of yesterday's close was $16.2 billion. And at quarter end, Liberty Broadband had a total principal amount of debt of $3.7 billion, including the debt at GCI. Note that this excludes the preferred stock. Looking quickly at GCI. Revenue was up $1 million over the prior year, driven by continued strength in data sales, particularly to our rural health care and school customers, partially offset by declines in wireless and other revenue. Adjusted OIBDA decreased $6 million due to higher operating costs as well as increased SG&A expense from labor-related costs and increased professional service fees. Over the last year, adjusted for the reclassification from GCI Business, GCI consumer saw a decline of 1,000 revenue-generating wireless subs; cable modem subscribers declined by 2,500, mostly driven by the expiration of the ACP program. During the quarter, GCI distributed $150 million to Liberty Broadband, funded with cash on hand and drawing under its revolver. These proceeds were used to pay down the Charter margin loan and were, therefore, net-net neutral to Liberty Broadband. At quarter end, GCI's leverage was at 3.2x with sufficient cushion in relation to the 6.5x maximum net leverage covenant threshold stipulated in the credit facility. We had $347 million of undrawn capacity under the GCI revolver, net of letters of credit. With that, I'll turn the call back over to Greg.

Thanks, Brian. Our Annual Investor Day will be Thursday, November 14 in New York. Now we move to a new location, see you at the Jazz at Lincoln Center. Save the date. Additional details will be forthcoming soon. We hope to see many of you there. And with that, operator, open the line for questions.

[Operator Instructions] Our first questions come from the line of Barton Crockett with Rosenblatt Securities.

There were a couple of things I was kind of interested in. See if we can address them here. One is I'm curious about the wireless business at GCI and then perhaps a longer-term thought for Charter. So my question is this, to what degree is GCI really focused on subsidizing kind of device purchases, just update us on that, if we go into what may be a bigger kind of upgrade cycle with the AI presence on the iPhone 16? And also if you have any thoughts about what you expect there in terms of the size of that cycle for GCI? And then for Charter, and I guess over to Greg, just more broadly, I mean, obviously, Charter is not doing the device subsidies at the level that the major wireless carriers are today. But one could imagine over time, as the Charter and the cable peers get bigger in wireless that they will want to compete in more kind of toe-to-toe on that basis. and I was just wondering, Greg, if you agree that that's going to be the general direction? And if so, any thoughts about how the road there might progress slowly, quickly? Any steps that could kind of transition you over there?

Thanks, Barton. Ron, do you want to take the GCI Wireless part of that?

Sure. I can do that. And obviously, Barton, GCI is a mobile network operator, not an MVNO like Charter. So we have a different cost structure. We've got a much higher gross margin and EBITDA percentage because we own the network. We're not paying somebody else for it. And we've also got a much higher market share at this point than Charter does. We're probably 40% of the Alaska mobile market overall, and it's one of our 2 core businesses along -- for consumer businesses along with consumer data. As such, we pretty much have to match or at least be competitive with the majors and our principal competitors, AT&T, Verizon is not a material player in the market up there. So we pretty much have to match AT&T device subsidies in order to avoid losing subs to them when there's a refresh cycle. In the last couple of years, we've extended the device subsidies from 2-year contracts to 3-year contracts. That's given us a little lower turnover and a little more stability. We're evaluating right now, but we think that if there's an accelerated device cycle, this fall as a result of AI features, particularly in the Apple phones, it may be an opportunity to grab some more share. We've got a better network in anchorage and most of Alaska and AT&T does. People choose us for that reason. And we're trying to figure out whether enhancing device subsidies a little bit would allow us to gain more share. If we weren't relatively competitive with AT&T, we'd keep the low margin or the low cost portion of the customer base, but we wouldn't be able to maintain the 40% statewide market share. Greg, back to you.

Thanks, Ron. So I think, as you rightly know, Charter has not had to offer the kind of subsidies for handsets that many other competitors in the local space have. I think that's largely because of the attractive pricing of the Spectrum Plus offering, particularly obviously, the year free line, but even post that, the relative savings of being a charter subscriber and having Spectrum Plus for your mobile as well is very attractive compared to the alternative. So I don't see Charter -- you can't predict how the market will go entirely, but I don't see Charter offering or needing to offer the kind of subsidies that other people have because they're attracting us with a combined offering.

Our next questions come from the line of Ben Swinburne with Morgan Stanley.

Greg, I wanted to get your thoughts just generally on some of the action we're seeing competitively in telecom in the U.S., particularly T-Mobile's acquisition of -- or JV, I guess, I should say, with Lumos and Metronet. And how that impacts sort of your perspective on Charter, both when we think about kind of private and public market multiples, which obviously are pretty far apart right now? And this just competitively, whether you think the level of fiber and converged competition is something that is going to be potentially a headwind for Charter over time?

Yes. Thanks for the question, Ben. I think the actions of T-Mobile and really of many of the mobile players talking about offering fiber -- increased fiber activity is a validation of the need for fixed lines and that mobile alone is a less attractive proposition. And the combined offering that Charter has with its broadband network and its MVNO relationship is very attractive. When you look at these things that they're doing, they're mostly kind of around the edges. They're not big time entrants. And in general, we've seen less activity in fiber build-outs, whether it's because the easy pickings are done or because some of the players who were more levered players have slowed down or just competitive in the markets, we've not seen big upticks. What we are seeing, though, is interest from those players of being a broadband -- of having a broadband fixed line. So I think it's a validation of Charter's strategy to be first and foremost, a fixed line provider and then off that MVNO, which is very attractive. And it's a much more nimble around the edge is for people like T-Mobile with the JV that they're doing.

Makes sense. And I just had one follow-up to Ron since he mentioned it, I was going to ask anyway. What's your view on sort of the AI phone cycles? That's another big debate. Do you think this is something consumers are going to be eager to acquire? Or are you taking sort of the opposite that maybe the market's a little ahead of itself on optimism here?

I think there's probably more optimism than is merited, but we're expecting a bigger-than-usual upgrade cycle this time around, in part because there really haven't been that many earthshaking changes to the iOS app in the last several cycles. So the difference between 12 and 15 wasn't all that significant, and we've definitely seen reduced upgrades. As I said, we've seen our average cycle, our average turnover in the customer go from 2 years to something close to 3 years. I think there's enough buzz around the AI that regardless of how good the product really is more people will try at this time, whether it's a 50% increase over the last time, I don't know. We're trying to assess that and prepare for how much inventory. But I definitely think that even if it's not real a buzz, we'll create more consumer interest and more people may try it.

Last time being the 5G upgrade cycle that you're referring to?

Yes.

Our final questions will come from the line of Alex Nordhagen with Balyasny Asset Management.

I have a question specifically regarding Liberty TripAdvisor. And that's with respect to the Series A preferred stock. Is the current expectation to this instrument will simply just remain outstanding past the end of March next year and accrue its dividend at the penalty rate of 12% versus the current 8%?

Yes. I think we're -- as we've said, we're in discussions with TripAdvisor and with Certares about transactions that might arise. So it's -- I can't comment on whether that will be the result. All I can tell you is that there are active discussions between Certares, TripAdvisor and ourselves.

Okay. Great. And just a follow-up, if I may. Would you like share the opinion that somehow that just the Liberty TripAdvisor kind of holding structure of the Trip shares ways on TripAdvisor's stock?

I would -- I think at this point, the potential issues around Liberty TripAdvisor are probably a cloud on the TripAdvisor's stock. That's probably a fair statement, yes. Thank you to our listening audience for your interest in Liberty Broadband and Liberty TripAdvisor. We hope to speak with you next quarter, if not sooner.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.