GCI Liberty, Inc. (NASDAQ:GLIBA) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 05:00 pm ET


GCI Liberty, Inc. (NASDAQ:GLIBA) Q4 2019 Earnings Conference Call - Final Transcript


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Greg Maffei

to Liberty Broadband. It was a great year for Charter. They created over 1.1 million new customer relationships and net added over 1.4 million Internet customers. They added over 900,000 mobile lines and plan to begin offering 5G in Q1. For the full year, cable adjusted EBITDA grew 6.6% despite it being a non-political advertising year and cable free cash flow grew by over 100%. We expect the cable EBITDA growth will, combined with declining capital intensity and a disciplined capital deployment strategy, will continue to drive continued strong free cash flow, particularly on a per share basis. We do expect cable capex intensity in 2020 to continue to decline from the 15% in 2019.

So, with that let me turn it over to Brian to further discuss the financials.

Brian J. Wendling

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. Value of the public equity securities at GCI Liberty as of today's close was $9.4 billion, which includes our $2.8 billion interest in Charter, $5.7 billion interest in Liberty Broadband and $1 billion interest in LendingTree. At quarter-end, GCI Liberty had 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 quarter, GCI Liberty increased borrowings under the Liberty Broadband margin loan by $400 million. Proceeds were used 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 ones on the release.

Our 10-K is filed later. You will notice that GCI's remedying a material weakness in its internal controls over financial reporting. Material weakness resulted from an aggregation of issues identified in IT general controls of our access to various systems as well as issues in the design and operation of business process controls. While our control issues persist, we are working toward remediation and are implementing various activities to strengthen the control environment going forward, putting process redesign, enhanced training and personnel development. We know that the issues were not an external bridge, and did not result in any material misstatements in our reported financial results.

Before I hand it over to Pete, there are two significant Rural Health Care events that impacted GCI's 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 the loss of approximately $17 million to SG&A in the fourth quarter. We continue to work with the FCC to resolve this issue, and