What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-07 · 101 added, 76 removed, 153 unchanged (54% of the section changed)

18 unchanged sentences

● changes in, or failure or inability to comply with, government regulations and legislation, including, without limitation, regulations of the Federal Communications Commission (the “FCC”), and adverse outcomes from regulatory proceedings and court cases;

● the impact of a prolonged federal government shutdown on the timeliness of government grant approvals and funding;

● our ability to obtain or maintain roaming services needed from other carriers;

7 unchanged sentences

● our overlapping directors and management with Liberty Broadband Corporation (“Liberty Broadband”) and Liberty Media Corporation (“Liberty Media”);

● the impact of events involving the assets and business market value of the GCI Group common stock;

● the unfavorable outcome of pending or future legal proceedings;

● the additional costs we will incur as a result of our Separation (as defined below).

● the additional costs we will incur or have incurred as a result of our Separation (as defined below).

For additional risk factors, please see “Risk Factors” in our prospectus filed on July 2, 2025 with the Securities and Exchange Commission, as part of our Registration Statement on Form S-1 (File No.

333-286272) (the “Prospectus”), and Part II, Item 1A in this Quarterly Report.

These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to

disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition.

This discussion should be read in conjunction with our accompanying condensed combined financial statements and the notes thereto and the Prospectus.

This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and the Prospectus.

GCI Liberty, Inc.

4 unchanged sentences

Following the internal reorganization, Liberty Broadband sold all of the non-voting preferred stock (the “Preferred Stock Sale”) to third parties.

GCI Liberty effected a reclassification of GCI Liberty’s existing common stock into a sufficient number of shares of Series A GCI Group common stock, Series B GCI Group common stock and Series C GCI Group common stock to complete the divestiture of GCI Liberty pursuant to the distribution (the “Distribution”) by Liberty Broadband to the holders of record of Liberty Broadband common stock, as of the record date for the Distribution, of all the shares of GCI Group common stock held by Liberty Broadband immediately prior to the Distribution.

The non-voting preferred stock is issued by GCI Liberty, has a 12% dividend rate and $1,000 per share liquidation price plus accrued and unpaid dividends.

The mandatory redemption date is July 14, 2032.

Following the Preferred Stock Sale, GCI Liberty effected a reclassification of GCI Liberty’s existing common stock into a sufficient number of shares of Series A GCI Group common stock, Series B GCI Group common stock and Series C GCI Group common stock to complete the divestiture of GCI Liberty pursuant to the distribution (the “Distribution”) by Liberty Broadband to the holders of record of Liberty Broadband common stock, as of the record date for the Distribution, of all the shares of GCI Group common stock held by Liberty Broadband immediately prior to the Distribution.

The internal reorganization, the Preferred Stock Sale, the reclassification and the Distribution are collectively referred as the “Separation.”

5 unchanged sentences

The fees payable to Liberty Media for the first year of the Services Agreement are not expected to exceed approximately $5 million.

Goodwill and other intangible assets with indefinite useful lives are not amortized but instead are tested for impairment at least annually or more frequently if facts and circumstances suggest it is more likely than not that an impairment may exist.

After the Separation from Liberty Broadband, GCI Liberty’s Series A GCI Group common stock and Series C GCI Group common stock began trading on The Nasdaq Global Select Market on July 15, 2025, and management has been monitoring the trading prices to determine whether the trading prices may suggest that it is more likely than not that the fair value of GCI Liberty is less than its carrying value.

In addition to monitoring the trading prices, management will monitor the Company’s current business performance versus current and updated long-term forecasts, among other relevant considerations, to determine whether it is more likely than not that the fair value of GCI Liberty is less than its carrying value.

Future outlook, declines in revenue, cash flows, market trends or other factors could result in a sustained decrease in fair value that may result in a determination that carrying value adjustments are required, which could be material.

Update on Economic Conditions

4 unchanged sentences

Additionally, the U.S.

Federal Reserve began decreasing interest rates in 2024 after several years at higher rates but has kept interest rates steady in 2025.

Federal Reserve began decreasing interest rates in 2024 after several years of higher rates, and while interest rates remained steady throughout most of 2025, the U.S.

Federal Reserve further decreased rates in the second half of 2025.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the U.S.

and global economy.

Increased costs to equipment, for example due to increased tariffs, could also impact GCI’s results.

Increased equipment costs, for example due to increased tariffs, could also impact GCI’s results.

The Alaska economy is dependent upon the oil industry, state and federal spending, investment earnings and tourism.

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On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law.

The OBBBA contains numerous business tax provisions with different effective dates in 2025, 2026, and 2027.

OBBBA was enacted during the third quarter of 2025;

therefore, the accounting impacts from the law change will be included in our third quarter results.

We do not expect the OBBBA to have a material impact to income tax expense on our financial statements;

however, we do expect to defer cash taxes to future years as a result of the OBBBA.

We are currently in the process of evaluating the effects of the legislation.

The accounting impacts from the law change were included in our third quarter results.

The OBBBA did not have a material impact on income tax expense on our financial statements;

however, we were able to defer cash taxes to future years as a result of the OBBBA.

On October 1, 2025, the federal government of the United States began a shut-down, which could affect the timeliness of government grant approvals and funding the Company receives.

Due to goodwill and intangible asset impairments recorded during the third quarter of 2025, the fair values of such intangible assets do not significantly exceed their carrying value.

The Company will continue to monitor current business performance versus the current and updated long-term forecasts, among other relevant considerations, to determine if the carrying value of its assets (including goodwill and indefinite-lived intangible assets) is appropriate.

Future outlook declines in revenue, cash flows, or other factors could result in a sustained decrease in fair value that may result in a determination that additional carrying value adjustments are required, which could be material.

Federal Universal Service Programs

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Court of Appeals for the Fifth Circuit sitting en banc ruled that the USF program is unconstitutional as currently administered, and remanded the case to the FCC.

In its decision, the en banc Fifth Circuit concluded that there was an impermissible public delegation of legislative authority to the FCC and an impermissible private delegation of authority from the FCC to the Universal Service Administrative Company, the private company responsible for USF administration.

In its decision, the en banc Fifth Circuit concluded that there was an

impermissible public delegation of legislative authority to the FCC and an impermissible private delegation of authority from the FCC to the Universal Service Administrative Company, the private company responsible for USF administration.

The Supreme Court granted petitions for certiorari from the Fifth Circuit’s decision and heard the case on March 26, 2025.

The Supreme Court issued a decision on June 27, 2025, reversing the Fifth Circuit and upholding the constitutionality of the USF contribution factor.

There is continuing litigation, as petitioners have sought supplemental briefing in the Fifth Circuit to challenge two statutory provisions that the Supreme Court did not have occasion to address.

There is continuing litigation, as petitioners have filed a new Petition for Review in the Fifth Circuit, on October 1, 2025, to challenge two statutory provisions that the Supreme Court did not have occasion to address, as well as to challenge the legality of the USAC, which administers that program for the FCC.

Pause in Federal Financial Assistance.

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Changes to any of the USF programs that GCI Holdings participates in could result in a material decrease in revenue and accounts receivable, which could have an adverse effect on GCI Holdings’ business and the Company’s financial position, results of operations or liquidity.

Results of Operations – Combined

Provided in the tables below is information regarding the historical Combined Operating Results and Other Income and Expense of GCI Liberty.

Three months ended June 30,

Six months ended June 30,

Results of Operations – Consolidated

Provided in the tables below is information regarding the historical Consolidated Operating Results and Other Income and Expense of GCI Liberty.

Three months ended

Nine months ended

September 30,

amounts in millions

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Depreciation and amortization

Impairment of goodwill and intangible assets

Operating income (loss)

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Adjusted OIBDA

Combined revenue increased $15 million and $36 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

The following table highlights selected key performance indicators used in evaluating GCI Holdings.

Consolidated revenue decreased $5 million and increased $31 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.

The following table highlights selected key performance indicators used in evaluating the Company’s business.

September 30,

Cable modem subscribers 1

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1 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased.

Small-to-Medium Business customers and promotional and suspended subscribers are included.

If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber.

2 A wireless line in service is defined as a wireless device with a monthly fee for services.

Small-to-Medium Business customers and promotional and suspended lines are included.

The components of revenue are as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

amounts in millions

Total revenue

Consumer data revenue decreased $3 million and $4 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

The decreases were primarily driven by decreases in the number of subscribers including the impact of the discontinuation of the Affordable Connectivity Program in 2024.

Subscriber growth in rural areas has also been adversely impacted by an outage from a fiber break on a third-party network in which GCI Holdings uses capacity.

Consumer wireless revenue increased $3 million and $6 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

The increases were driven by increases in wireless subscribers and an increase in wireless USF support for high cost areas.

Consumer other revenue decreased $2 million and $3 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

Consumer data revenue decreased $2 million and $6 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.

The decrease for the three months ended September 30, 2025 was primarily driven by a decrease in the number of subscribers.

The decrease for the nine months ended September 30, 2025 was primarily driven by a decrease in the number of subscribers, including the impact of the discontinuation of the Affordable Connectivity Program in 2024.

Subscriber growth in rural areas has also been adversely impacted by an outage from a fiber break on a third-party network in which GCI Holdings uses capacity, however the network was restored during the three months ended September 30, 2025.

Consumer wireless revenue increased $5 million and $11 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.

The increases were driven by an increase in wireless USF support for high cost areas.

Consumer other revenue decreased $8 million and $11 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.

Consumer other revenue consists of consumer video and voice revenue.

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On May 5, 2025, GCI Holdings received regulatory approval to begin discontinuing video services.

The Company began discontinuing service for remaining video customers after receiving the regulatory approval and expects to have exited the video business by the end of 2025.

Business data revenue increased $19 million and $41 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, primarily due to service upgrades with existing health care and education customers.

Business wireless revenue decreased $2 million and $4 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, primarily due to decreases in roaming revenue due to contractual changes.

Business other revenue remained flat for both the three and six months ended June 30, 2025, as compared to the same periods in 2024.

The Company began discontinuing service for remaining video customers after receiving the regulatory approval and as of September 30, 2025, the Company has exited the video business.

Business data revenue increased $1 million and $42 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, primarily due to service upgrades with existing health care and education customers.

Business wireless revenue decreased $1 million and $5 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, primarily due to decreases in roaming revenue due to contractual changes.

Business other revenue remained flat for both the three and nine months ended September 30, 2025, as compared to the same periods in 2024.

Business other revenue consists of business video and voice revenue.

On May 5, 2025, GCI Holdings received regulatory approval to begin discontinuing video services.

The Company began discontinuing service for remaining video customers after receiving the regulatory approval and expects to have exited the video business by the end of 2025.

The Company began discontinuing service for remaining video customers after receiving the regulatory approval and as of September 30, 2025, the Company has exited the video business.

Operating expense

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

amounts in millions

4 unchanged sentences

Consumer direct costs consists of wireless handset inventory costs, video programming, wireless distribution costs, marketing and advertising expenses, bad debt expense, credit card and other transactional fees, and internal and external labor costs for managing relationships with consumer customers.

Consumer direct costs decreased $1 million and $2 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, due to decreases in video programming costs and distribution costs.

The decreases in distribution costs were partially due to the temporary cost savings from a fiber break on a third party network in which GCI Holdings uses capacity.

Consumer direct costs decreased $6 million and $8 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, due to decreases in video programming costs and distribution costs.

The decreases in distribution costs were partially due to the temporary cost savings from a fiber break on a third party network in which GCI Holdings uses capacity, which was fully restored during the three months ended September 30, 2025.

Business direct costs consists of network distribution costs, largely to healthcare and education customers, as well as internal and external labor costs for managing relationships with business customers.

Business direct costs decreased $6 million and $11 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, due to decreases in distribution costs for health care and education customers, primarily related to temporary cost savings from a fiber break on a third party network in which GCI Holdings uses capacity.

Business direct costs decreased $1 million and $12 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, due to decreases in distribution costs for health care and education customers, primarily related to temporary cost savings from a fiber break on a third party network in which GCI Holdings uses capacity, which was fully restored during the three months ended September 30, 2025.

Technology expense consists of field and technology operations costs incurred to manage the Company's network, including internal and external labor costs, software related costs, lease expenses, maintenance costs, as well as utility costs.

Technology expenses increased $1 million and $3 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, primarily due to increased software costs.

Technology expenses increased $2 million and $5 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, primarily due to increased maintenance and software costs.

Selling, general and administrative expense consists of corporate overhead costs largely comprised of internal and external labor costs, software costs, insurance expense, property taxes and professional service fees.

Selling, general and administrative expense decreased $1 million and increased $1 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

The decrease for the three months ending June 30, 2025 was primarily due to a decrease in external labor costs, partially offset by an increase in internal labor costs.

The increase for the six months ending June 30, 2025 was primarily due to an increase in internal labor costs, paritally offset by a decrease in external labor costs.

Stock-based compensation remained relatively flat for the three and six months ended June 30, 2025, as compared to the same periods in 2024.

Depreciation and amortization remained flat and increased $3 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

For the six months ended June 30, 2025, the increase was due to a general increase in assets being placed in service subsequent to March 31, 2024.

Selling, general and administrative expense increased $8 million and $9 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, primarily due to an increase in internal labor costs, including higher healthcare costs and higher accrued incentive payments, as well as increased corporate expenses related to amounts allocated pursuant to the Services Agreement, partially offset by a decrease in external labor costs.

Stock-based compensation decreased $2 million for both of the three and nine months ended September 30, 2025, as compared to the same periods in 2024, primarily due to decreased grant activity prior to the Separation.

Depreciation and amortization remained relatively flat for the three and nine months ended September 30, 2025, as compared to the same periods in 2024.

Impairment of goodwill and intangible assets.

During the nine months ended September 30, 2025, the Company recorded an impairment of goodwill and intangible assets of $525 million, consisting of a goodwill impairment of $108 million and an intangible asset impairment of $417 million.

See note 4 to the accompanying notes to the condensed consolidated financial statements for additional information.

Operating Income (Loss).

Combined operating income increased $21 million and $42 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

Operating income was impacted by the above explanations.

Consolidated operating loss increased $529 million and $487 million for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024.

Operating loss was impacted by the above explanations.

Adjusted OIBDA.

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The Company’s chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate its business decisions and allocate resources.

The Company believes this is an important indicator of the operational strength and performance

of its business by identifying those items that are not directly a reflection of business performance or indicative of ongoing business trends.

The Company believes this is an important indicator of the operational strength and performance of its business by identifying those items that are not directly a reflection of business performance or indicative of ongoing business trends.

In addition, this measure allows management to view operating results, perform analytical comparisons and identify strategies to improve performance.

2 unchanged sentences

The following table provides a reconciliation of operating income (loss) to Adjusted OIBDA:

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

amounts in millions

2 unchanged sentences

Stock-based compensation

Impairment of goodwill and intangible assets

Adjusted OIBDA

Combined Adjusted OIBDA increased $22 million and $45 million during the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, due to the items discussed above.

Consolidated Adjusted OIBDA decreased $8 million and increased $37 million during the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, due to the items discussed above.

Other Income and Expense

Components of Other income (expense) are presented in the table below.

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

amounts in millions

2 unchanged sentences

Interest Expense.

Combined interest expense remained relatively flat during the three and six months ended June 30, 2025, as compared to the same periods in 2024.

Other, net income was relatively flat during the three and six months ended June 30, 2025, as compared to the same periods in 2024.

Interest expense remained relatively flat during the three and nine months ended September 30, 2025, as compared to the same periods in 2024.

Other, net income was relatively flat during the three and nine months ended September 30, 2025, as compared to the same periods in 2024.

Income taxes.

Earnings (losses) before income taxes and income tax (expense) benefit are as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

amounts in millions

2 unchanged sentences

Effective income tax rate

For both the three and six months ended June 30, 2025 and 2024, the income tax expense was in excess of the expected federal tax expense primarily due to state income taxes.

For the three months ended September 30, 2025, the income tax benefit differs from the U.S.

statutory tax rate of 21% primarily due to state income taxes, mostly offset by an impairment of goodwill that is not deductible for tax purposes (see note 4 to the accompanying condensed consolidated financial statements).

For the nine months ended September 30, 2025, the income tax benefit differs from the U.S.

statutory rate of 21% primarily due to state income taxes, offset by an impairment of goodwill that is not deductible for tax purposes.

For the three and nine months ended September 30, 2024, the income tax expense differs from the U.S.

statutory tax rate of 21% primarily due to state income taxes.

Net earnings (loss).

The Company had net earnings of $27 million and $13 million for the three months ended June 30, 2025 and 2024, respectively, and net earnings of $62 million and $33 million for the six months ended June 30, 2025 and 2024, respectively.

The Company had net losses of $387 million and net earnings of $21 million for the three months ended September 30, 2025 and 2024, respectively, and net losses of $325 million and net earnings of $54 million for the nine months ended September 30, 2025 and 2024, respectively.

The change in net earnings (loss) was the result of the above-described fluctuations in our revenue, expenses, and other income and expenses.

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The following are potential sources of liquidity:

available cash balances, cash generated by the operating activities of GCI Holdings, dividend and interest receipts and debt (including borrowings under the Senior Credit Facility (as discussed in note 5 to the accompanying condensed combined financial statements)) .

As of June 30, 2025, GCI Liberty had a cash and cash equivalents balance of $104 million, which was substantially held in cash.

available cash balances, cash generated by the operating activities of GCI Holdings, dividend and interest receipts, capital market transactions and debt (including borrowings under the Senior Credit Facility (as discussed in note 5 to the accompanying condensed consolidated financial statements)) .

As of September 30, 2025, GCI Liberty had a cash and cash equivalents balance of $124 million, which was substantially held in cash.

When applicable, cash equivalents are invested in U.S.

Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.

Six months ended June 30,

Nine months ended

September 30,

amounts in millions

3 unchanged sentences

Net cash provided by (used in) financing activities

The increase in cash provided by operating activities during the six months ended June 30, 2025, as compared to the same period in 2024, was primarily driven by increased operating income and timing differences in working capital accounts.

During the six months ended June 30, 2025 and 2024, net cash flows used in investing activities were primarily related to capital expenditures, net of grant proceeds of $100 million and $104 million, respectively.

During the six months ended June 30, 2025, net cash flows used in financing activities were primarily for net debt repayments of $84 million.

During the six months ended June 30, 2024, net cash flows used in financing activities were primarily for distributions to our former parent of $150 million, paritally offset by net debt borrowings of $48 million.

The projected uses of our cash and restricted cash are debt repayments, net capital expenditures of approximately $150 million, approximately $25 million for interest payments on outstanding debt, to reimburse Liberty Media for amounts due under various agreements and to fund potential investment opportunities at GCI Liberty.

We expect corporate cash and other available sources of liquidity as discussed above to cover corporate expenses for the foreseeable future.

GCI, LLC is in compliance with all debt maintenance covenants as of June 30, 2025.

See note 5 to the accompanying condensed combined financial statements for a description of all indebtedness obligations.

The increase in cash provided by operating activities during the nine months ended September 30, 2025, as compared to the same period in 2024, was primarily driven by increased operating income (not factoring in the impairment) and timing differences in working capital accounts.

During the nine months ended September 30, 2025 and 2024, net cash flows used in investing activities were primarily related to capital expenditures, net of grant proceeds of $152 million and $143 million, respectively.

During the nine months ended September 30, 2025, net cash flows used in financing activities were primarily for net debt repayments of $87 million.

During the nine months ended September 30, 2024, net cash flows used in financing activities were primarily for distributions to our former parent of $150 million, partially offset by net debt borrowings of $26 million.

The projected uses of our cash and restricted cash are debt repayments, net capital expenditures of approximately $80 million, approximately $20 million for interest payments on outstanding debt, reimbursements to Liberty Media for amounts due under various agreements and to fund potential investment opportunities at GCI Liberty.

We expect cash and other available sources of liquidity as discussed above to cover expenses for the foreseeable future.

GCI, LLC is in compliance with all debt maintenance covenants as of September 30, 2025.

See note 5 to the accompanying condensed consolidated financial statements for a description of all indebtedness obligations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis