Ladies and gentlemen, thank you for standing by and welcome to the GCI Liberty 2018 Q3 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded November 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 would 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 Healthcare Program, the Alaskan recession, market and regulatory conditions, new service, system 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 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 statement contained herein to reflect any change in GCI Liberty's expectations with regard there to or any change in events, conditions, or circumstances on which any such statement is made. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, including preliminary note and Schedules 1 through 3 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 a statement. 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 statement contained herein to reflect any change in Liberty Broadband's expatiations with regard there to or any change in events, conditions, or circumstances under which any such statement is made. Now, I'd like to turn the call over to GCI Liberty President and CEO Greg Maffei.

Thank you, Courtnee and thank you all of you out there this afternoon for joining us. Today, speaking on the call besides myself, we'll have GCI Liberty CFO, Mark Carleton, and GCI CFO, Pete Pounds. During the Q&A session which follows, we will be able to answer questions about Liberty Broadband as well as GCI Liberty. So starting at GCI Liberty, during that quarter, we initiated share repurchase at GCI Liberty and from the period of August 1 to October 31, we repurchased over $50 million worth of stock. We are doing this to take advantage of what we call the double-discount on Charter, assuming the full discount that Liberty Broadband and GCI Liberty, and you look through to where Charter is trading, the discount is in the low 20% range. And when you look at the Charter look through price as of today's close, it was about $260 a share of Charter. So we consider it pretty attractive to be buying GCI Liberty at these prices. Looking at GCI itself, you'll hear more from Pete Pounds on this in a minute. They continue to execute on their strategy of driving, operating, and cost synergies while expanding and improving coverage in the Alaska region. Notably, during the quarter, they completed the migration to their new billing system. Looking over at Liberty Broadband itself and our ownership in that, I'd like to start by kicking us up a few levels and reviewing why we are like Charter and what the investment thesis is behind it. Charter is the only pure play scale cable operator. The integration of the businesses of Charter, Time Warner, and Bright House is quickly moving behind them and they have the ability to grow penetration very cost-efficiently from here. They continue to drive high-speed data at attractive prices with an opportunity I suspect to price as time moves on. The video story, which has been declining for years, is less relevant to their future free cash flow and EBITDA but we remain optimistic we'll be able to do things to stabilize it. We do intend to exploit our extensive network through the introduction of an attractive incremental wireless service. CapEx we expect to come down meaningfully in 2019 and beyond, with free cash flow growing commensurately. Longer term, we believe Charter can have the most attractive and CapEx profiles in the business. Combine that with leverage and the free cash flow story that it is with significant equity share shrink, this is what Liberty likes to invest in and we are very optimistic about the long-term story. In the latest quarter, Charter did continue to execute further on all of the above elements and if you listen to their conference call, you can hear some of that success that they had. With that, let me turn it over to Mark Carleton to discuss the financials of GCI Liberty in some more detail.

Thank you, Greg. At quarter end, GCI Liberty had consolidated cash of $690 million, which includes $42 million of cash at GCI. The value with of public equity securities at GCI Liberty as of today's close was $6.2 billion, which includes our $1.7 billion interest in Charter, $3.6 billion interest in Liberty Broadband, and around $900 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 $3.1 billion, which includes the aforementioned margin loan, the Charter exchangeable debentures and $1.6 billion of debt, including capital leases and tower obligations at GCI. GCI's leverage is defined in its credit agreement as 5.3x, compared to a maximum allowable leverage of 5.95x. One point, as noted in the 10-Q, GCI exceeded the maximum leverage threshold in terms of its senior notes. So we are restricted on additional debt incurrence. Currently, however, we have sufficient resources given our liquidity at corporate to fund all the business opportunities we've got going forward. With that, I'll welcome Mr. Pete Pounds, GCI's CFO, to talk about GCI's operations.

Thank you, Mark. First, I'll start with three material updates. First of all, rural healthcare. As we noted in our press release on October 10, we received a letter from the Wireline Competition Bureau of the FCC reducing our rural healthcare funding by approximately $28 million or 26% for the year ended June 30, 2018. We disagree with this and will pursue all available remedies. If this decision stands, we may be left with no choice, but to narrow our focus in rural areas to meeting our maintenance obligations and the obligations of federal programs. This would pivot our future business investments to urban areas, where the rules are more reliable. The impact to this decision on the financials is that all quarters of the 2017 funding year shown in the press release have been updated to include reductions in revenues, operating income, and adjusted OIBDA of approximately $7 million per quarter. The restated prior quarter pro forma figures can be found in Schedule 3 of our earnings release. In the absence of any new information, we will continue to adjust our financials in a similar manner for the 2018 funding year, which ends June 30, 2019. Billing system upgrade. We completed our billing system conversion in the third quarter. As expected, we encountered a few issues that have been fixed and there are still a few outstanding issues to work through. However, this new system will allow us to generate efficiencies and serve customers faster and better. There was a one-time revenue operating income and adjusted OIBDA hit of approximately $4 million that we took as we moved from bill in arrears to bill in advance on certain services. We elected not to have the first bill from the new system result in a double bill to our customers.…

Thank you, Mark. Thank you, Pete. As a reminder to those listening, we will be holding our annual investor meeting on November 14 in New York. There will be videos. If you'd like to register and see the agenda, please use the link on our homepage. We appreciate your continued interest in GCI Liberty. And with that, operator, I'd like to open the floor for questions.

[Operator Instructions] We'll go first to James Ratcliffe with Evercore ISI. Please go ahead.

Hi. Thanks for taking the question. One for GCI and one for GCI Liberty, if I could. On the GCI front, Pete, I just want to make sure I understand, the RHC price reduction, that's a straight out price reduction. So $8 million essentially comes off the EBITDA line. And in the release in your commentary, you talked about narrowing your activities. If you do that, how much cost would come out as well? So essentially, what's the EBITDA improvement potential of if you do end up narrowing activities given this price regime? And regarding GCI Liberty, Greg, if you could just talk about further capital return prospects, and if there are options to continue to buyback stock and if there is anything governing that. Thanks.

Pete, I'll let you go first.

Sure. So first on the $28 million hit, those are services that we already provided during the year ended June 30, 2018. So a reduction in revenue doesn't change anything with the cost structure. So it is a dollar for dollar dropping from revenue to OIBDA there. In terms of the narrowing of our focus, we don't really have any comments at this point on any magnitude of changes there.

Just to follow-up, does this price decrease apply to the 2018 to 2019 year as well?

This is Tina Pidgeon. I'm GCI's general counsel. At this point, that's our best guess at the relative similar effect in future years and we're doing some addition work to understand what the FCC's methodology actually is.

Great. Thank you.

Great. James, as I said, we did a little over $50 million in the quarter. We have more capacity with the cash flow we have in corporate. Obviously, we're somewhat reduced in our flexibility by the rural healthcare reduction. But nonetheless, with the available cash we have at corporate and the free cash flow that GCI will still generate, we have capacity and I would expect to see the same kind of pace continue over the next several quarters.

Great. Thank you.

Thank you. Our next question will come from Matthew Harrigan with Buckingham Research. Please go ahead.

Thanks. Greg, I guess, echoing this morning, pivoting to your investor persona from your executive persona, your executive persona clearly since all the deal books, how do you feel about all seven valuations these days? Is there any rationale for a cable operator like Charter to own a selective RSN in a particular market or is that pretty much by the wayside when you look at the scale of these content companies these days? Thanks.

Thank you, Matthew. I think RSNs are complicated assets, something that we at Liberty have had a long history with. As you may recall, we helped Fox set up those originally and then we owned a series more when we did the exchange with Fox. We ended up owning three RSNs that went with DirectTV and eventually to AT&T. They are very interesting as local content and they're potentially interesting, I think, for a distributor. But they're also not without a substantial amount of risk, both on what are the distribution can be achieved if you were to own RSNs and what is the underlying contract look like with the baseball teams, the sports teams involved, primarily baseball. We're quite familiar with that. On the other side, obviously, is in owning the Braves and one of the more profitable RSNs out there because of the nature of the contract we inherited when we bought the Braves from Time Warner is the Sports South and Sports Southeast RSNs largely because of what we would view as underpricing of the content costs. So there are a lot of moving pieces. As I said, I think it's something that at the right price can be helpful as a distributor, but the moving pieces plus the longer trends of potentially the fact that inherent in a lot of these RSNs is an overbuy. There are customers who are subscribed to that who if they were given an a-la-carte choice would not choose to subscribe. That's true of a lot of cable network, but probably few as acutely priced as an RSN. That may not appeal to as broad an audience. So you've got some risk around that and you've got some risk that the OTT rights still sit back at MLB or some other underlying leagues and as OTT grows, that puts further pressure on a-la-carte and other ways to distribute this product. So all of those say while these can be interesting businesses, they're ones that you would be cautious about what you would pay for them and it would be very much depended on, as I said, distribution in the market potential and the underlying rights that you are purchasing.

Thanks, Greg.

Thank you.

Thank you. Our next question will come from Mike Kerrane with SunTrust. Please go ahead.

I just wanted a follow-up question on the RHC program funding. In your press release, you talk about pursuing all available remedies with the FCC. I'm just wondering if you could give us more color on what kind of remedies you can pursue and if there's any precedent that you can talk about there.

This is Tina Pidgeon again, Mike. I'll address that question. Because the decision that we've issued related to our rates was made at the staff level, we have appeal processes available to us to get a full commission review of that issue, and that's the most immediate step that's in front of us right now.

Is there any kind of timing also you could talk about?

The appeal is due 30 days after the letter was issued. So that would be tomorrow. And I can't really give any further color of what the FCC's timing is. I don’t have. There are no dates around that.

Got it. Thanks for your help.

Thank you. Our final question today will come from Luis Hernandez, a Private Investor. Please go ahead.

Yes, hello. Good afternoon. Thanks for taking the question. The first one, I just wanted to have sort of an idea of what is GCI's EBITDA for next year, maybe 2020 also to have a little visibility.

Yes, we haven't provided any guidance for out-year OIBDA.

I think we generally are not in the business of providing forward guidance, but ask investors to make their own judgements based on trends and other information that was given. End of Q&A

So thank you all for your question and thank you for your interest in GCI Liberty. As I said, we look forward to seeing a number of you in New York next week. Thank you, operator.

Thank you. That will conclude today's conference. Thank you all once again for your participation, and you may not disconnect.