Ladies and gentlemen, thank you for standing by. Welcome to the GCI Liberty 2019 Third Quarter Earnings Call. During the presentation, all parties will be in a listen-only mode, and afterwards we will conduct a question-and-answer session. As a reminder, this conference is being recorded today, November 11, 2019. I would now like to turn the conference over to Courtnee Chun, Chief Portfolio Officer and Senior Vice President of Investor Relations. Please go ahead, ma'am.

Thank you. Before we begin, we'd like to remind everyone, 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'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'll discuss certain non-GAAP financial measures, including adjusted OIBDA and adjusted OIBDA margin. 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, which is available on our website. Now, I'd like to turn the call over to Liberty's President and CEO, Greg Maffei.

Thank you. Courtnee, and good afternoon to all of you on the line. Today, speaking on the call, we will have GCI Liberty's Principal Financial Officer, Brian Wendling; and GCI's CFO, Pete Pounds. Also during Q&A, we will be available to answer questions, if there are any, related to Liberty Broadband. So, starting with GCI Liberty. And GCI's third quarter had a series of solid results. Revenue and adjusted OIBDA grew as the team began to see benefits of the strategic changes they made to focus on driving value in the core Alaska business. GCI moved customers up the stack to higher bandwidth data products and improve their wireless cable modem, and video offerings. Business data revenue grew, in part driven by higher sales to schools and libraries and healthcare customers, and the 5G build out that we are under way with Ericsson and Anchorage is moving with expected completion of mid-2020. Looking now at LendingTree and the third quarter results there. They experienced record levels of revenue, variable marketing margin and adjusted EBITDA. The mortgage business continued to gain momentum and returned to growth and the insurance business continued to move forward in a good fashion. The diversification in the portfolio has allowed the team to weather segment challenges, while continuing to invest in improving the marketing machine and leading to increased guidance for the year.

Thanks, Greg. At quarter-end, GCI Liberty had consolidated cash and cash equivalents of $410 million, which includes $82 million of cash that's held directly at the GCI level. The value of the public equity securities at GCI Liberty as of today's close was $8.7 billion, which includes our $2.5 billion interest in Charter, $5 billion interest in Liberty Broadband, and a $1.2 billion interest in LendingTree. At quarter-end, GCI Liberty had total principal amount of debt of $3 billion, which includes a $900 million margin loan outstanding against its Liberty Broadband shares, the Charter exchangeable debentures and $1.6 billion of debt, including financing leases and -- finance leases and tower obligations at GCI. GCI's leverage as defined in its credit agreement was 6 times at quarter end compared to a maximum allowable leverage of 6.5 times. As discussed in previous quarters, GCI exceeded the incurrence-based maximum leverage threshold in the terms of its senior notes and therefore was unable to access additional funding under the revolving portion of the senior credit facility. As noted in the 10-Q, GCI now has the ability to access additional funding under the revolving portion of the senior credit facility, so long as GCI is in compliance with the senior credit facility covenants after giving effect to any additional borrowing. Based on the current leverage of 6 times, GCI has the ability to access $67 million under the revolver. With our cash on hand at quarter-end and availability under the revolver in the broadband margin loan, we are very comfortable with our liquidity position. Now, I'll turn it over to Pete.

Thanks, Brian. Starting with our five band 5G upgrade. In the second quarter, we announced our partnership with Ericsson to build the first 5G network in Alaska. That network is currently being built, and the CapEx for this year is included in our 2019 guidance. We expect the Anchorage bill to be completed in mid-2020. In the meantime, customers are already starting to see improvements as each new site gets turned on.

Thank you for that, Pete. We -- as has been noted several times today, we have our investor meeting next week. We look forward to seeing many of you there. There is a link to register for that on our homepage. We appreciate your continued interest in GCI Liberty. And with that, operator, I'd like to open up for questions.

First, we will hear from James Ratcliffe with Evercore ISI.

Great. Thanks for taking the question -- three, if I could. First of all, Pete, on the GCI side, if you decide at some point or the appeals fail on the RHC customer where funding has been canceled, how much OpEx is associated with providing that service to that customer, and how much benefit could you see on that? Secondly, Greg, this is I guess the second call in a row that you've actually sort of mentioned the operating performance of Tree. In the past, you've seemed to have regarded that more as a potential monetization source. Should we read anything into that about your views on that stake? And third, you've seen the -- with the Liberty Broadband and by -- GCI Liberty spreads versus Charter move out pretty substantially in the last month or six weeks. Any thoughts on what might be driving that? Thanks.

Pete, do you want to go first?

Sure. So, first, on the question of OpEx savings potentially due to the customer that did not get funded for RHC, really the significant cost there is the massive capital expenditure to build the network; and secondarily, it is to maintain that network. That is a network that will stay in place. So, there is no earth stations or microwave towers that will be turned down as a part of that. And so, I would not expect to see a meaningful reduction of SG&A, if those circuits were turned down.

And as far as the operating -- talking about the operating performance of Tree, I think, it's somewhat the reality that Tree, not only because it's now inside a smaller entity, GCI Liberty, but also more importantly, it's grown so much in value. I think, we discussed it at the bottom when we inherited in the ‘09 recession, I think, our stake was worth $17 million now; it's, well, well, well over $1 billion. Credit to the team there. So, it's important to both because of their own efforts and where it sits are more noticeable. They're going to be at our Investor Day. We certainly have no plans to use it as a source of capital. We're happy being a major shareholder at Tree and enjoying the benefits.

And moving on, we'll hear a question from Zack Silver with B. Riley FBR.

Okay, great. Thanks for taking the question. First one for Pete. Over the summer, you mentioned that the FCC had announced some changes to the RHC reforms. You said, it was too early to tell directionally what impact that would have. I'm curious, three months later, if you have any idea how that's going to break for you guys.

Hi. This is Tina Pidgeon, GCI's General Counsel. It is still early to tell there is a process that has to be undertaken by the Universal Service Administrative Company. The idea of setting rates at a median is one that we’re looking very closely at. But, really that data has to be collected and involves some additional decisions that have to be made in the details before I think anyone would know what the outcome of that new process is going to be.

Great. Thank you, Tina. And then for Greg, I hate to ask two questions on repurchase in the same day. But, on GCI, it's been I guess since May that the buybacks have been paused there. I'm just curious as to what's driving that and how should we think about buybacks going forward?

Certainly, we look at buybacks, and as the prior caller noted, there is a spread there between the value of what we think GCI is worth on the underlying Charter, et cetera. I think, that pause has been somewhat related to where our financing sits at GCI and the fact that we've been restricted from some of the -- access to some of those flows in our lines we've had. We did some refinancings, which stabilize the situation but didn't necessarily give us access to the incremental lines and free cash flow being generated. So, we're being probably cautious on that front, even with the discounts there. This is one where that opportunity probably is going to exist for a little while. So, we'll see how we’re able to take advantage of that in the future.

And the next question will come from Michael Rollins with Citi.

Hi. Good afternoon. Two questions. First, could you just describe if there are opportunities for GCI and Charter to leverage each other, whether it’s for technology, purchasing power as well as marketing best practices? And then second, in the quarter itself for GCI, did the increase in the USF factor for pass-through charges had any impact on the revenues across the segments?

So, I'll take it, kind of the first one, and anyone from GCI who would like to add, please do. I think, there has been ongoing dialogue about when GCI -- probably more when GCI has issues or where they're headed or what technologies they want to utilize. They've been trying to leverage expertise at Charter and experience, because in many cases given Charter's scale, they either done more work on it or they may have done earlier work on it, and that dialogue has gone on, on several topics. I expect that's going to continue. On the other hand, Charter -- while they're friendly, they're not clear why they would extend or have the ability to extend discounts on purchasing or something like that. They don't have a common ownership. They have some common parentage, and do not commonly own in the same way. Right? So, that's more of a friendly relationship; I think, one than a contractual or a ownership relationship, which generates those kind of benefits. But, I don't know if anybody from GCI would like to comment further.

No, nothing further on that one, Greg. I would note on the question on the USF contribution factor changes. Those happen typically on a quarterly basis, and none of that would have risen to the level of any changes of note on the publicly filed information.

Our next question will come from Matthew Harrigan with Benchmark.

Thank you. Three questions. One, you’re unique I guess among the U.S. MSOs and being integral to 5G build with Ericsson and Anchorage. Have you drawn any surprises from that in terms of the applicability of the cable topology for 5G and small cells? I mean, that's actually an area where you could instruct your ideas to a number of other people. Secondly, on the seasonality, last year, your revenues were up in Q4 but your expenses were up significantly more. Would that apply this year as well or is there just some noise in the numbers? And then, I guess thirdly for Greg, with all the political mess in the U.S. are you getting increasingly nervous and possible risk to telecom regulation over a longer period of time?

This is Ron Duncan. I guess, I'll take the first piece on 5G and will let Greg back clean up on the politics. We're early in the process to really be able to demonstrate the benefits of combining a 5G wireless network with the extensive hybrid fiber coax plant that we have. We'll know a lot more about how well that actually works by the first half of next year. But clearly, our vision is to leverage the small cells of 5G with the extensive spectrum holdings that we have and the virtually unlimited backhaul that we're able to deploy throughout our communities, all the way down to the subscriber residents level. So, we see a real synergy there in marrying the two on a production front. We also believe there are important synergies in tying those products together from a consumer perspective. But, in terms of whether we're ready to teach that class, I'd say, we have to see how it plays out in the first half of next year. Pete, do you want to deal with seasonality?

Yes. On seasonality, I would say that historically we've been very seasonal on the revenues, but that has declined fairly significantly over the last few years. So, the revenue side, I wouldn't expect much seasonality there. The expenses, you do see a little bit of seasonality in expenses with Q4 and Q1 being a little bit heavier on expenses than Q2 and Q3. Q4 last year probably had a little more of the one-time or unusual stuff than normal. But, we're not giving guidance on what those numbers are other than note that you are correct, there is some seasonal higher numbers and expenses in the fourth quarter there.

And I'll comment first, but rather than discussing the politics, I'll comment on -- I mentioned a minute ago that in many cases, Charter has done more work on a topic just because of their scale. This is a case where because of the 5G installation, I think there is a lot that certainly we at Liberty can learn and perhaps they can learn at Charter as well. And so, obviously, we watch what's happening with 5G with great interest. And having a installation on our own will be a very powerful learning zone. On the politics, there's always risks around politics. That's just the way it is. I'm not sure how many actionable items we have because of that, but we certainly watch all of them with interest. In general, who would have guessed that in a time when the DoJ was more of a problem or was less of a problem and the SEC was more, we've now got it reversed. So, who knows where this will all go.

And we will move on to our final question from TD Securities we have Bentley Cross.

Hi. Quick question for Greg on Liberty Broadband. Just thoughts as we look out forward to the exploration of the Advanced/Newhouse proxy. Is there anything to be done there or should the buybacks take care of themselves so that your ownership issue, the 25% threshold is a non-issue all together?

Yes. I don't know if it's a non-issue. I would point that probably three ways it gets solved. One is, some sort of a renewal of that proxy. Certainly, good relations between particularly John Malone, and the Newhouses and commonality there. Secondly, as you rightly know, Charter continues to repurchase, and that alone may drive us over the 25%. And third, we've in the past, used relatively efficient ways to increase our ownership and not take massive amounts of economic risk that would the like that could drive us over the 25% on our own. So, I can't say there is no risk, but it's not one that keeps me up at night by any means.

Thank you.

Thank you. So, thank you to all of the listeners and questioners. And as we said, we hope to see many of you next week in New York. And if not, we'll speak again next quarter if not beforehand. Thank you very much operator.

And once again, ladies and gentlemen, that does conclude our call for today. Thank you for joining us. You may now disconnect.