GCI Liberty Reports Third Quarter 2019 Financial Results
-
GCI(2) total revenue grew 3% compared to the third quarter 2018
- GCI Consumer revenue grew 5%, with Consumer data revenue up 8%
- GCI Business revenue flat
-
GCI operating income down
$1 million , Adjusted OIBDA(3) up 5%
“We are starting to see the benefits of improvements in efficiencies and new products that we mentioned during the second quarter,” said GCI CEO,
Discussion of Results
Unless otherwise noted, the following discussion compares financial information for the three months ended
The pro forma financial information presented herein for the three months ended
GCI
GCI receives support from various
Separately, on
On
The following table provides GCI’s operating metrics and pro forma financial results for the third quarter of 2018 and 2019.
(amounts in thousands, except operating metrics) |
|
|
3Q18 |
|
|
3Q19 |
|
% Change |
|||
GCI Consolidated Financial Metrics |
|
|
|
|
|
|
|
|
|||
Revenue |
|
|
|
|
|
|
|
|
|||
Consumer |
|
$ |
105,377 |
|
|
$ |
110,322 |
|
|
5 |
% |
Business |
|
|
110,259 |
|
|
|
110,706 |
|
|
— |
% |
Total Revenue |
|
$ |
215,636 |
|
|
$ |
221,028 |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|||
Operating Income |
|
$ |
4,643 |
|
|
$ |
3,663 |
|
|
(21 |
)% |
Operating Income Margin (%) |
|
|
2.2 |
|
% |
|
1.7 |
% |
(50 |
)bps |
|
|
|
|
|
|
|
|
|
|
|||
Adjusted OIBDA(1) |
|
$ |
68,391 |
|
|
$ |
71,960 |
|
|
5 |
% |
Adjusted OIBDA Margin(1) (%) |
|
|
31.7 |
|
% |
|
32.6 |
% |
90 |
bps |
|
|
|
|
|
|
|
|
|
|
|||
GCI Consumer |
|
|
|
|
|
|
|
|
|||
Financial Metrics |
|
|
|
|
|
|
|
|
|||
Revenue |
|
|
|
|
|
|
|
|
|||
Wireless |
|
$ |
38,552 |
|
|
$ |
41,929 |
|
|
9 |
% |
Data |
|
|
39,652 |
|
|
|
42,920 |
|
|
8 |
% |
Video |
|
|
22,276 |
|
|
|
21,198 |
|
|
(5 |
)% |
Voice |
|
|
4,897 |
|
|
|
4,275 |
|
|
(13 |
)% |
Total Revenue |
|
$ |
105,377 |
|
|
$ |
110,322 |
|
|
5 |
% |
Operating Metrics |
|
|
|
|
|
|
|
|
|||
Wireless Lines in Service(2) |
|
|
197,800 |
|
|
|
188,400 |
|
|
(5 |
)% |
Data - Cable Modem Subscribers(3) |
|
|
125,300 |
|
|
|
124,600 |
|
|
(1 |
)% |
Video |
|
|
|
|
|
|
|
|
|||
Basic Subscribers(4) |
|
|
90,300 |
|
|
|
82,200 |
|
|
(9 |
)% |
Homes Passed |
|
|
253,400 |
|
|
|
253,400 |
|
|
— |
% |
Voice - Total Access Lines in Service(5) |
|
|
45,800 |
|
|
|
40,800 |
|
|
(11 |
)% |
|
|
|
|
|
|
|
|
|
|||
GCI Business |
|
|
|
|
|
|
|
|
|||
Financial Metrics |
|
|
|
|
|
|
|
|
|||
Revenue |
|
|
|
|
|
|
|
|
|||
Wireless |
|
$ |
24,392 |
|
|
$ |
24,393 |
|
|
— |
% |
Data |
|
|
69,592 |
|
|
|
70,813 |
|
|
2 |
% |
Video |
|
|
4,927 |
|
|
|
4,115 |
|
|
(16 |
)% |
Voice |
|
|
11,348 |
|
|
|
11,385 |
|
|
— |
% |
Total Revenue |
|
$ |
110,259 |
|
|
$ |
110,706 |
|
|
— |
% |
Operating Metrics |
|
|
|
|
|
|
|
|
|||
Wireless Lines in Service(2) |
|
|
22,000 |
|
|
|
21,100 |
|
|
(4 |
)% |
Data - Cable Modem Subscribers(3) |
|
|
9,200 |
|
|
|
9,000 |
|
|
(2 |
)% |
Voice - Total Access Lines in Service(5) |
|
|
36,600 |
|
|
|
34,800 |
|
|
(5 |
)% |
- See reconciling schedule 1.
- A wireless line in service is defined as a revenue generating wireless device.
- A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber.
- A basic subscriber is defined as one basic tier of service delivered to an address or separate subunits thereof regardless of the number of outlets purchased.
- A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.
GCI revenue increased during the third quarter driven by an increase in Consumer revenue. Operating income decreased primarily due to higher depreciation and amortization expense. Adjusted OIBDA increased due to the growth in revenue and operational efficiencies, which reduced selling, general and administrative expenses.
GCI Consumer
Consumer revenue was up 5% due to increases in wireless and data revenue. Data revenue grew as subscribers continued to move to higher bandwidth products. Growth in wireless revenue was driven by the free month of service given in the third quarter of 2018 to certain customers due to the billing system conversion. During the transition to the new system, GCI moved all monthly recurring fees from bill in arrears to bill in advance. To ease the transition for existing customers, GCI chose to forgive one month of service fees for those customers who would have otherwise received an invoice for two months of service. The wireless and data revenue increases were partially offset by declines in voice and video revenue.
GCI Business
Business revenue was flat in the quarter with growth in data offsetting declines in video. Data revenue increased primarily due to higher sales to health care customers. Video revenue declined due to lower political advertising revenue.
Capital Expenditures
Year to date, GCI has spent
Share Repurchases
FOOTNOTES
-
GCI Liberty’s President and CEO,
Greg Maffei , will discuss these headlines and other matters onGCI Liberty's earnings conference call which will begin at5:00 p.m. (E.S.T.) onNovember 11, 2019 . For information regarding how to access the call, please see “Important Notice” later in this document. -
GCI Liberty’s principal asset is
GCI Holdings, LLC (“GCI” or “GCI Holdings”),Alaska's largest communications provider. Other assets include its interests inCharter Communications, Inc. ("Charter") andLiberty Broadband Corporation , as well as its interest inLendingTree and subsidiary Evite. - For a definition of Adjusted OIBDA and Adjusted OIBDA margin and applicable reconciliations, see the accompanying schedules.
GCI LIBERTY GAAP FINANCIAL METRICS |
||||||||
(amounts in thousands) |
|
|
3Q18(1) |
|
|
3Q19 |
||
Revenue |
|
|
|
|
|
|
||
GCI Holdings |
|
$ |
205,047 |
|
|
$ |
221,028 |
|
Corporate and other |
|
|
5,099 |
|
|
|
6,016 |
|
Total GCI Liberty Revenue |
|
$ |
210,146 |
|
|
$ |
227,044 |
|
|
|
|
|
|
|
|
||
Operating Income |
|
|
|
|
|
|
||
GCI Holdings |
|
$ |
(8,859 |
) |
|
$ |
3,663 |
|
Corporate and other |
|
|
(11,010 |
) |
|
|
(7,837 |
) |
Total GCI Liberty Operating Income (Loss) |
|
$ |
(19,869 |
) |
|
$ |
(4,174 |
) |
|
|
|
|
|
|
|
||
Adjusted OIBDA |
|
|
|
|
|
|
||
GCI Holdings |
|
$ |
57,945 |
|
|
$ |
71,960 |
|
Corporate and other |
|
|
(7,205 |
) |
|
|
(5,382 |
) |
Total GCI Liberty Adjusted OIBDA |
|
$ |
50,740 |
|
|
$ |
66,578 |
|
-
GCI Holdings GAAP financial statements for the third quarter of 2018 differ from
GCI Holdings pro forma financial statements due to the impact of acquisition accounting, including deferred revenue adjustments, depreciation and amortization of intangible and tangible assets, RHC Program revenue adjustments and other adjustments.
NOTES
The following financial information with respect to
Fair Value of
(amounts in millions) |
|
6/30/2019 |
|
9/30/2019 |
||||
Charter(1) |
|
$ |
2,118 |
|
|
$ |
2,208 |
|
Liberty Broadband(1) |
|
|
4,448 |
|
|
|
4,468 |
|
LendingTree(2) |
|
|
1,447 |
|
|
|
1,069 |
|
Total |
|
$ |
8,013 |
|
|
$ |
7,745 |
|
-
Represents fair value of the investments in Charter and
Liberty Broadband . A portion of the Charter equity securities are considered covered shares and subject to certain contractual restrictions in accordance with the indemnification obligation, as described below. -
Represents fair value of the investment in
LendingTree . In accordance with GAAP, this investment is accounted for using the equity method of accounting and is included in the balance sheet ofGCI Liberty at$168 million and$167 million atJune 30, 2019 andSeptember 30, 2019 , respectively.
Cash and Debt
The following presentation is provided to separately identify cash and liquid investments and debt information.
(amounts in millions) |
6/30/2019 |
|
9/30/2019 |
|||||
Cash and Cash Equivalents: |
|
|
|
|
|
|||
GCI |
$ |
76 |
|
|
|
$ |
82 |
|
Corporate and other |
|
347 |
|
|
|
328 |
|
|
Total GCI Liberty Consolidated Cash |
$ |
423 |
|
|
|
|
410 |
|
|
|
|
|
|
|
|||
Debt: |
|
|
|
|
|
|||
Senior Notes |
$ |
775 |
|
|
$ |
775 |
|
|
Senior Credit Facility |
|
714 |
|
|
|
713 |
|
|
Finance Leases and Other(1) |
|
114 |
|
|
|
112 |
|
|
Total GCI Debt |
$ |
1,603 |
|
$ |
1,600 |
|
||
|
|
|
|
|
|
|||
Margin Loan |
$ |
900 |
|
|
$ |
900 |
|
|
1.75% Exchangeable Senior Debentures due 2046 |
|
477 |
|
|
|
477 |
|
|
Total Corporate Level Debt |
$ |
1,377 |
|
|
$ |
1,377 |
|
|
|
|
|
|
|
|
|||
Total GCI Liberty Debt |
$ |
2,980 |
|
|
|
$ |
2,977 |
|
Premium on debt and deferred financing fees |
|
100 |
|
|
|
118 |
|
|
Finance leases and tower obligation (excluded from GAAP Debt) |
|
(107 |
) |
|
|
(105 |
) |
|
Total GCI Liberty Debt (GAAP) |
$ |
2,973 |
|
|
$ |
2,990 |
|
|
|
|
|
|
|
|
|||
Other Financial Obligations: |
|
|
|
|
|
|||
Indemnification Obligation(2) |
$ |
133 |
|
|
$ |
137 |
|
|
Preferred Stock(3) |
|
178 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|||
GCI Leverage(4) |
|
6.2x |
|
|
6.0x |
- Includes the Wells Fargo Note Payable and current and long-term obligations under finance leases and communication tower obligations.
-
Indemnity to Qurate Retail, pursuant to an indemnification agreement (the "indemnification agreement"), with respect to the
Liberty Interactive LLC ("LI LLC ") 1.75% exchangeable debentures due 2046 (the "Charter exchangeable debentures"), as described below. -
Preferred shares have a 7% coupon,
$25 /share liquidation preference plus accrued and unpaid dividends and 1/3 vote per share. The redemption date is the first business day following the twenty-first anniversary of theMarch 8, 2018 auto conversion. The preferred stock is considered a liability for GAAP purposes. - As defined in GCI's credit agreement.
Pursuant to an indemnification agreement,
Important Notice:
This press release includes certain forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, future financial prospects, capital expenditures, the launch of new products and services, matters relating to the Universal Service Administrative Company and Rural Health Care program, indemnification by
NON-GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our financial results, this press release includes a presentation of Adjusted OIBDA, which is a non-GAAP financial measure, for
SCHEDULE 1
The following table provides a reconciliation of GCI’s operating income to its Adjusted OIBDA for the three months ended
GCI HOLDINGS ADJUSTED OIBDA RECONCILIATION
(amounts in thousands) |
|
|
3Q18 |
|
|
3Q19 |
||
GCI Holdings |
|
|
|
|
|
|
||
Operating Income |
|
$ |
4,643 |
|
|
$ |
3,663 |
|
Depreciation and amortization |
|
|
62,081 |
|
|
|
65,762 |
|
Stock compensation expense |
|
|
1,667 |
|
|
|
4,017 |
|
Insurance proceeds and restructuring, net |
|
|
— |
|
|
|
(1,482 |
) |
Adjusted OIBDA |
|
$ |
68,391 |
|
|
$ |
71,960 |
|
SCHEDULE 2
The following table provides a reconciliation of operating income (loss) calculated in accordance with GAAP to Adjusted OIBDA for
GCI LIBERTY ADJUSTED OIBDA RECONCILIATION
(amounts in thousands) |
|
|
3Q18 |
|
|
3Q19 |
||
GCI Liberty |
|
|
|
|
|
|
||
GCI Liberty Operating Income (Loss) |
|
$ |
(19,869 |
) |
|
$ |
(4,174 |
) |
Stock-based compensation |
|
|
7,761 |
|
|
|
5,768 |
|
Insurance proceeds and restructuring, net |
|
|
— |
|
|
|
(1,482 |
) |
Depreciation and amortization |
|
|
62,848 |
|
|
|
66,466 |
|
Consolidated GCI Liberty adjusted OIBDA |
|
$ |
50,740 |
|
|
$ |
66,578 |
|
GCI Holdings |
|
$ |
57,945 |
|
|
$ |
71,960 |
|
Corporate and other |
|
|
(7,205 |
) |
|
|
(5,382 |
) |
GCI LIBERTY, INC. AND SUBSIDIARIES BALANCE SHEET INFORMATION (unaudited) |
||||||
|
September 30, |
|
December 31, |
|||
|
2019 |
|
2018 |
|||
|
Amounts in thousands, except share amounts |
|||||
Assets |
|
|
|
|||
Current assets: |
|
|
|
|||
Cash and cash equivalents |
$ |
410,130 |
|
|
491,257 |
|
Trade and other receivables, net of allowance for doubtful accounts of $18,248 and $7,555, respectively |
190,779 |
|
|
182,600 |
|
|
Current portion of tax sharing receivable |
7,813 |
|
|
36,781 |
|
|
Other current assets |
43,222 |
|
|
40,100 |
|
|
Total current assets |
651,944 |
|
|
750,738 |
|
|
Investments in equity securities |
2,213,589 |
|
|
1,533,517 |
|
|
Investments in affiliates, accounted for using the equity method |
168,839 |
|
|
177,030 |
|
|
Investment in Liberty Broadband measured at fair value |
4,467,508 |
|
|
3,074,373 |
|
|
Property and equipment, net |
1,110,080 |
|
|
1,184,606 |
|
|
Intangible assets not subject to amortization: |
|
|
|
|||
Goodwill |
855,837 |
|
|
855,837 |
|
|
Cable certificates |
305,000 |
|
|
305,000 |
|
|
Wireless licenses |
191,697 |
|
|
190,000 |
|
|
Other |
16,500 |
|
|
16,500 |
|
|
|
1,369,034 |
|
|
1,367,337 |
|
|
Intangible assets subject to amortization, net |
399,043 |
|
|
436,006 |
|
|
Tax sharing receivable |
76,812 |
|
|
65,701 |
|
|
Other assets, net |
188,454 |
|
|
71,514 |
|
|
Total assets |
$ |
10,645,303 |
|
|
8,660,822 |
|
|
|
|
|
|||
Liabilities and Equity |
|
|
|
|||
Current liabilities: |
|
|
|
|||
Accounts payable and accrued liabilities |
$ |
83,959 |
|
|
100,334 |
|
Deferred revenue |
28,520 |
|
|
31,743 |
|
|
Current portion of debt, net of deferred financing costs |
902,368 |
|
|
900,759 |
|
|
Other current liabilities |
71,679 |
|
|
47,958 |
|
|
Total current liabilities |
1,086,526 |
|
|
1,080,794 |
|
|
Long-term debt, net, including $579,291 and $462,336 measured at fair value, respectively |
2,088,015 |
|
|
1,985,275 |
|
|
Obligations under finance leases and tower obligations, excluding current portion |
99,158 |
|
|
122,245 |
|
|
Long-term deferred revenue |
59,136 |
|
|
65,954 |
|
|
Deferred income tax liabilities |
1,272,302 |
|
|
793,696 |
|
|
Preferred stock |
177,532 |
|
|
177,103 |
|
|
Derivative instrument |
78,061 |
|
|
— |
|
|
Indemnification obligation |
136,833 |
|
|
78,522 |
|
|
Other liabilities |
140,971 |
|
|
50,543 |
|
|
Total liabilities |
5,138,534 |
|
|
4,354,132 |
|
|
Equity |
|
|
|
|||
Stockholders’ equity: |
|
|
|
|||
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 101,211,071 shares at September 30, 2019 and 102,058,816 shares at December 31, 2018 |
1,012 |
|
|
1,021 |
|
|
Series B common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 4,439,460 shares at September 30, 2019 and 4,441,609 shares at December 31, 2018 |
44 |
|
|
44 |
|
|
Series C common stock, $.01 par value. Authorized 1,040,000,000 shares; no shares issued |
— |
|
|
— |
|
|
Additional paid-in capital |
3,225,883 |
|
|
3,251,957 |
|
|
Accumulated other comprehensive earnings (loss), net of taxes |
(489 |
) |
|
168 |
|
|
Retained earnings |
2,270,837 |
|
|
1,043,933 |
|
|
Total stockholders' equity |
5,497,287 |
|
|
4,297,123 |
|
|
Non-controlling interests |
9,482 |
|
|
9,567 |
|
|
Total equity |
5,506,769 |
|
|
4,306,690 |
|
|
Commitments and contingencies |
|
|
|
|||
Total liabilities and equity |
$ |
10,645,303 |
|
|
8,660,822 |
|
GCI LIBERTY, INC. AND SUBSIDIARIES STATEMENT OF OPERATIONS INFORMATION (unaudited) |
||||||
|
Three months ended |
|||||
|
September 30, |
|||||
|
2019 |
|
2018 |
|||
|
Amounts in thousands, except per share amounts |
|||||
Revenue |
$ |
227,044 |
|
|
210,146 |
|
Operating costs and expenses: |
|
|
|
|||
Operating expense (exclusive of depreciation and amortization shown separately below) |
72,637 |
|
|
64,684 |
|
|
Selling, general and administrative, including stock-based compensation |
93,597 |
|
|
102,483 |
|
|
Insurance proceeds and restructuring, net |
(1,482 |
) |
|
— |
|
|
Depreciation and amortization expense |
66,466 |
|
|
62,848 |
|
|
|
231,218 |
|
|
230,015 |
|
|
Operating income (loss) |
(4,174 |
) |
|
(19,869 |
) |
|
Other income (expense): |
|
|
|
|||
Interest expense (including amortization of deferred loan fees) |
(38,353 |
) |
|
(37,614 |
) |
|
Share of earnings (losses) of affiliates, net |
1,921 |
|
|
10,856 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
156,165 |
|
|
495,509 |
|
|
Tax sharing agreement |
2,362 |
|
|
2,492 |
|
|
Other, net |
(540 |
) |
|
(834 |
) |
|
|
121,555 |
|
|
470,409 |
|
|
Earnings (loss) before income taxes |
117,381 |
|
|
450,540 |
|
|
Income tax (expense) benefit |
(28,087 |
) |
|
(133,284 |
) |
|
Net earnings (loss) |
89,294 |
|
|
317,256 |
|
|
Less net earnings (loss) attributable to the non-controlling interests |
(28 |
) |
|
(127 |
) |
|
Net earnings (loss) attributable to GCI Liberty, Inc. shareholders |
$ |
89,322 |
|
|
317,383 |
|
Basic net earnings attributable to Class A and Class B GCI Liberty, Inc. shareholders per common share |
$ |
0.85 |
|
|
2.95 |
|
Diluted net earnings attributable to Class A and Class B GCI Liberty, Inc. shareholders per common share |
$ |
0.84 |
|
|
2.91 |
|
GCI LIBERTY, INC. AND SUBSIDIARIES STATEMENT OF CASH FLOWS INFORMATION (unaudited) |
||||||
|
Nine months ended |
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|
September 30, |
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|
2019 |
|
2018 |
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|
amounts in thousands |
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Cash flows from operating activities: |
|
|
|
|||
Net earnings (loss) |
$ |
1,226,824 |
|
|
(156,955 |
) |
Adjustments to reconcile net earnings (loss) to net cash from operating activities: |
|
|
|
|||
Depreciation and amortization |
200,035 |
|
|
143,257 |
|
|
Stock-based compensation expense |
18,153 |
|
|
20,926 |
|
|
Share of (earnings) losses of affiliates, net |
2,443 |
|
|
(18,714 |
) |
|
Realized and unrealized (gains) losses on financial instruments, net |
(1,844,863 |
) |
|
4,328 |
|
|
(Gain) loss on lease modification |
(6,468 |
) |
|
— |
|
|
Deferred income tax expense (benefit) |
478,850 |
|
|
36,347 |
|
|
Other, net |
3,625 |
|
|
10,121 |
|
|
Change in operating assets and liabilities: |
|
|
|
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Current and other assets |
39,289 |
|
|
(73,601 |
) |
|
Payables and other liabilities |
(35,774 |
) |
|
72,854 |
|
|
Net cash provided (used) by operating activities |
82,114 |
|
|
38,563 |
|
|
Cash flows from investing activities: |
|
|
|
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Cash and restricted cash from acquisition of GCI Holdings |
— |
|
|
147,958 |
|
|
Capital expended for property and equipment |
(108,633 |
) |
|
(89,376 |
) |
|
Purchase of investments |
— |
|
(48,581 |
) | ||
Proceeds from derivative instrument |
105,866 |
|
|
— |
|
|
Settlement of derivative instrument |
(105,866 |
) |
|
— |
|
|
Other, net |
6,340 |
|
|
2,699 |
|
|
Net cash provided (used) by investing activities |
(102,293 |
) |
|
12,700 |
|
|
Cash flows from financing activities: |
|
|
|
|||
Borrowings of debt |
325,000 |
|
|
1,527,250 |
|
|
Repayment of debt, finance lease, and tower obligations |
(334,275 |
) |
|
(88,543 |
) |
|
Repurchases of GCI Liberty common stock |
(43,910 |
) |
|
(23,893 |
) |
|
Contributions from (distributions to) parent, net |
— |
|
|
(1,122,189 |
) |
|
Indemnification payment to Qurate Retail |
— |
|
|
(132,725 |
) |
|
Derivative payments |
— |
|
|
(80,001 |
) |
|
Other financing activities, net |
(7,802 |
) |
|
(14,957 |
) |
|
Net cash provided (used) by financing activities |
(60,987 |
) |
|
64,942 |
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
(81,166 |
) |
|
116,205 |
|
|
Cash, cash equivalents and restricted cash at beginning of period |
492,032 |
|
|
574,148 |
|
|
Cash, cash equivalents and restricted cash at end of period |
$ |
410,866 |
|
|
690,353 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20191111005586/en/
Source:
GCI Liberty, Inc.
Courtnee Chun, 720-875-5420