Ladies and gentlemen, thank you for standing by. Welcome to the GCI Liberty 2018 Q4 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 today, February 28th. 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. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent Forms 10-K and 10-Q filed with the SEC. These forward-looking statements speak only as of the date of this call and GCI Liberty and Liberty Broadband expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in GCI Liberty or Liberty Broadband 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 and adjusted OIBDA margins. Information regarding the comparable GAAP metrics along with 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. Now, I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.

Thank you, Courtnee and welcome to all of you joining us this afternoon. Today, speaking on the call besides myself, we'll have GCI Liberty's CFO, Mark Carleton; and GCI CFO, Pete Pounds. Also during the Q&A, we will be available to answer questions related to Liberty Broadband if there are any. So, starting with GCI Liberty, at the corporate level, we continued share repurchases. Between November 1st and January 31st, we repurchased over $100 million worth of stock. We aim to take advantage of a double discount at GCI Liberty, the low -- and the low Charter price. That double discount is because you look through with the discount GCI Liberty has to Liberty Broadband and in turn, Liberty Broadband has to Charter. To date, if you look at that double discount, we've effectively repurchased a Charter on average look-through price of around $270 and that look-through price today is up to $290, and obviously, Charter itself is considerably higher. So, we're excited about trying to take advantage of both, the growth in Charter and that double discount. Turning to GCI, 2018 was undoubtedly a challenging year. We operated in a difficult business environment and a difficult regulatory environment. Nonetheless, GCI completed several critical business initiatives we believe will set us up better for the future and we look forward to a more favorable business environment in 2019. You'll hear more about that from Pete Pounds shortly. Over at Liberty Broadband, Charter finished the year strong and performed well in 2018. Charter's footprint is now upgraded to all digital and has access to the spectrum Internet gig service. We saw strong residential growth across residential, commercial, and advertising. We ended the year with our -- after our launch of mobile with 134,000 mobile lines and we expect to accelerate that dramatically in 2019. Charter repurchased $5 billion of its own shares in 2018 at an average price of $309. Notably, CapEx is expected to decline to $7 billion in 2019, a dramatic decrease over what we spent over the last couple of years. All in line with our thesis in the long-term, Charter can have the most attractive and CapEx profiles in the industry. Charter remains and we're excited about the fact it is a levered free cash flow story with a potential for significant equity shrink. So, with that, let me turn it over to Mark Carleton to discuss the financials in some more detail at the GCI Liberty level.

Thank you, Greg. At quarter end, GCI Liberty had consolidated cash of $491 million, which includes $100 million of cash at GCI. The value of the public equity securities of GCI Liberty as of today's close was $6.7 billion, which includes our over $1.8 billion interest in Charter, $3.8 billion interest in Liberty Broadband, and $1 billion interest in LendingTree. GCI Liberty has a $900 million margin loan outstanding against its Liberty Broadband shares. At quarter end, GCI Liberty had a total principal amount of debt of $3 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, as defined in its credit agreement, was 5.2 times compared to a maximum allowable leverage of 6.5 times. In December, GCI, LLC refinanced its revolving senior credit facility and term loan A. This resulted in extended maturity to December 2023 and improved leverage covenants. As you see, our 10-K gets filed later today. You'll notice that GCI's remitting two material weaknesses in its internal controls over financial reporting. The first issue relates to access in IT general controls and the second, to manual and IT controls around the payroll process. We, along with the GCI management, have certainly increased the level of scrutiny and focus on controls and processes since we acquired GCI last year. We have implemented remediation activities to correct both of these problems, and we'll continue to focus on strengthening the control environment going forward. We note that the issues were not an external breach and did not result in any material misstatements in our reported financial results. And with that, I will turn it over to the Pete Pounds.

Thank you, Mark. As Greg mentioned, 2018 was a challenging year for GCI. The launch of our new billing system, the stalled economy in the state, and reductions in our Rural Health Care service revenues were significant challenges. However, the billing platform has simplified our business and is improving our customer experience. Additionally, we see continued signs that the economy in Alaska is turning around. Oil and tourism, in particular, are showing signs of life. We look forward to capitalizing on these developments in 2019. I'll start with an update on Rural Health Care. There are two appeals related to GCI that are currently pending. The first is in response to the October 10th letter that we received from the FCC, whereby they notified us of their decision to reduce our funding for the year ended June 30th, 2018, by $27.8 million. We appealed that decision on November 9th, 2018. The second relates to an RHC customer of GCI's who was denied funding by the Universal Service Administrative Company, or USAC, for the same funding year. This letter was received by the customer on November 30th, 2018, and they appealed to USAC on January 29th, 2019. I don't have any updates on those appeals at this point, but more detail on the background of these matters can be found in our press release and 10-K. Operating results, all of the results I'm going to discuss here are pro forma unless otherwise noted. Revenues were down in the full year 2018 as compared to 2017, primarily due to the RHC rate reduction, but there were also declines in the time and materials business. When comparing the fourth quarter results, 2018 revenue was up 1% over last year based on growth in consumer data. Adjusted OIBDA was down approximately 6% for the…

Greg?

Greg, do we have you?

Sorry, yes. Yes, sorry, I was muted. Thank you, Mark and thank you, Pete. We have set our annual Investor Day meeting in New York for Thursday, November 21st and we hope to see many of you on the listening audience there that day. We do appreciate your continued interest in GCI Liberty. I'd now like to open it up for questions. Operator, if you would please.

Thank you. [Operator Instructions] We'll take our first question with James Ratcliffe from Evercore. Please go ahead.

Hi, good afternoon. Thanks for taking the question. Two if I could, one on GCI and one on Liberty Broadband. On the GCI front, the -- could you get into -- a little more into the one-time expenses that were in 4Q? And the way it's phrased in the release, it sounds like EBITDA would have been up year-on-year absent those. I just want to make sure I understand that correctly. And secondly, regarding Liberty Broadband and Charter, in particular, can you -- Greg, can you sort of talk about how you see the wireless business working with Charter going forward, both potentially as a wireless provider or potentially as a source of network capacity at the wireless providers? Thanks.

Sure. I can go first, while you guys make sure you have the answers to the question of how the comparability would look on Liberty Broadband. I think the way that Charter thinks about that business is, first and foremost, it will help to drive that bundle with wireless, will be an attractive pricing vehicle, which will help to drive broadband share. We have a superior broadband network, and given the MVNO relationship we have, we believe we can be a price taker in the mobile space as well and bundle that offering together and make a very attractive offering for consumers. In some circumstances, could -- somewhere down the road, could we be reverse MVNO? Perhaps, but that's not really in front of us today. That -- in front of us today is to try and take advantage of the contract we have and the strength of our fixed line network combined with the wireless and Wi-Fi capabilities we have to provide a very attractive consumer offering. I don't know if that's helpful on the Liberty Broadband mobile side, if there's any more you'd like.

No, that's great. Thanks.

Okay. On comparability of Q4 for GCI?

Yes. So, looking at year-over-year, we were down just a little over $4 million. Taking a look at the onetime items, the biggest item really is the write-off of capital projects and that amounted to roughly $3 million in the fourth quarter. Severance and earthquake would have gotten you a little more than the difference, so we would been up slightly on OIBDA, but for those three items that I noted there. On the earthquake, most of the damage that you'll see to the financials really come from a write-off of capital assets as opposed to operating expenses, albeit there were some meaningful operating expenses in the fourth quarter there.

I'm looking at this correctly, if it hadn't been for those and the RHC price cut, your EBITDA would have been up close on 10% year-on-year.

The RHC is affected on a pro forma basis there. So, when you look at the adjusted OIBDA in the fourth quarter of 2017 of $65.5 million, that really came in about $7 million higher before the RHC rate reduction, so call it, $72.5 million before RHC, but pro forma -- is included here. So, I would look at it, absent those three items, we would have been up 1% or 2% on OIBDA.

Okay. Thank you.

We'll take our next question from Zack Silver with B. Riley. Please go ahead.

Okay, great. Thanks for taking the question. First one with the one-year anniversary of GCI ventures merger coming up, it would be great to get an update on, number one, if you've been covered? Any opportunities for cost efficiencies between leveraging the relationship that GCI has with Charter? And then number two, if you have any updated thoughts on the potential to clean up sort of a redundancy of having two public companies in GCI Liberty and Liberty Broadband.

Well, I'll address those and I'd first say we really are not addressing Charter efficiencies as much as GCI has its own programs, both GCI 400 and some further cost reductions it's really undertaking to optimize its business. And Pete, when I'm done, you can certainly comment and add to that if you'd like. But I think the focus is not on cross sharing given the ownership structure, the way it is, with Charter but instead, at the moment, looking at its own efficiencies. The deal is not quite a year old. You're close, got a couple more weeks. And we, of course, would never consider anything, have had no conversations or imagined yet that those might be eliminated. And obviously, before a year occurs, we wouldn't think about looking at that kind of a combination.

Got it.

Pete, do you want to add anything on the cost efficiencies?

No, Greg, I think your comment's right that we're looking internally on cost efficiencies here. We'd obviously like a little bit of tailwinds on the economy and not so much headwinds on the regulatory front. But the focus has been internal at this point.

Okay. And then just one quick follow-up. This customer issue of not getting funding on the RHC -- this RHC customer, can you size maybe the revenue and OIBDA impact based on what you know now? Or is that not the right way to interpret that?

Yes, you can look in our 10-K when it gets filed, but it's roughly $13 million a year.

Got it. Thank you very much.

And our last question comes from Mike Kerrane with SunTrust. Please go ahead.

Hi guys. It's Mike Kerrane from SunTrust. Pete, I had a question for you about CapEx at GCI. I know that the level of CapEx, you said, in 2019 would be $160 million again, the same as 2018. I recall, a few years ago, you guys purposely took that level down in response to the economy in Alaska and the budget deficits there. You said that the economy looks like it was doing a little bit better. Is that level of CapEx the run rate that you see going forward? I know, in the past, it's been above $200 million. Or as the economy improves, should we model CapEx to go higher?

I guess I would say that we don't give forward-looking guidance at this point beyond the next year. I would note that at the point that, that came out; we were talking of CapEx at the level of $210 million on probably, I would guess, $880 million or so of revenues. And so I think that's pretty clear that at 23%, 24% of revenues, that was an unsustainable rate for the long-term. And I guess there's really nothing that would indicate that there's so much fundamentally different from GCI that on the long-term basis we should deviate substantially from the industry.

Great, that's helpful. Thanks.

Great. Well, thank you very much operator and to the listening audience. I think that's all we have today. Appreciate your continued interest in GCI Liberty as we said and look forward to speaking with you on the next call if not before. Thank you very much this afternoon.

Once again that does conclude today's conference. Thank you for your participation. You may now disconnect your phone lines.