Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding business, product and marketing strategies; revenue growth; future expenses; anticipated changes to regulations; the Universal Service Fund (“USF”) programs; the impacts of economic trends; indebtedness and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. You can identify some of the forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “may” and other similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties. There can be no assurance that such expectations or beliefs will result or be achieved or accomplished and you should not place undue reliance on these forward-looking statements. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
● competition faced by us that may reduce our market share and financial performance;
● customer demand for our products and services and our ability to adapt to changes in demand;
● adverse economic conditions in the United States (“U.S.”) and inflationary pressures on input costs and labor;
● 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;
● our ability to obtain or maintain roaming services needed from other carriers;
● our ability to stay abreast of new technology, including the use of artificial intelligence, and the resulting risks and challenges associated with the use of new technology;
● our ability to obtain necessary communications equipment from third-party vendors to meet customer needs;
● natural or man-made disasters or terrorist attacks;
● failure to protect the security of personal information about our customers, subjecting us to potentially costly government enforcement actions or private litigation and reputational damage;
● our ability to obtain additional financing, or refinance or renew our existing indebtedness on acceptable terms;
● the impact of our significant indebtedness;
● our ability to generate cash to service our debt and to meet other obligations;
● our overlapping directors and officers with Liberty Broadband Corporation (“Liberty Broadband”), and Liberty Media Corporation (“Liberty Media”), and our overlapping officers with Liberty Live Holdings, Inc.;
● 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; and
● the additional costs we will incur or have incurred as a result of our Separation (as defined below).
For additional risk factors, please see Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 . These forward-looking statements and such risks, uncertainties and other factors speak
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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 consolidated financial statements and the notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2025 .
Overview
GCI Liberty, Inc. (“GCI Liberty”) consists of 100% of the outstanding equity interests in GCI, LLC, GCI Holdings, LLC (“GCI Holdings” or “GCI”) and their subsidiaries (collectively, the “GCI Business”), and was formerly owned by Liberty Broadband, prior to the Separation (defined below).
GCI Liberty was formed in Nevada in December 2024 for the purpose of ultimately holding the GCI Business. On July 14, 2025, Liberty Broadband and its subsidiaries completed an internal reorganization in order for Liberty Broadband to transfer the GCI Business to GCI Liberty in exchange for GCI Liberty stock, including 10,000 shares of GCI Liberty non-voting preferred stock, and the assumption of liabilities related to the GCI Business by GCI Liberty. The internal reorganization resulted in GCI Liberty owning, directly or indirectly, GCI, LLC and the operations comprising, and the entities that conduct, the GCI Business. Following the internal reorganization, Liberty Broadband sold all of the non-voting preferred stock (the “Preferred Stock Sale”) to third parties. The non-voting preferred stock is issued by GCI Liberty, and 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 (“GLIBA”), Series B GCI Group common stock (“GLIBB”) and Series C GCI Group common stock (“GLIBK”) 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 to as the “Separation.”
In connection with the Separation, the Company entered into certain agreements, including a separation and distribution agreement, a tax sharing agreement (the “Tax Sharing Agreement”) and a tax receivables agreement (the “Tax Receivables Agreement”), pursuant to which, among other things, GCI Liberty and Liberty Broadband will indemnify each other against certain losses that may arise. The Tax Sharing Agreement governs the allocation of taxes, tax benefits, tax items and tax-related losses between Liberty Broadband and GCI Liberty, and the Tax Receivables Agreement governs the respective rights and obligations of Liberty Broadband and GCI Liberty with respect to certain tax matters. In addition, the Company entered into certain agreements, including a services agreement (the “Services Agreement”), a facilities sharing agreement and an aircraft time sharing agreement, with Liberty Media and/or its subsidiaries. Pursuant to the Services Agreement, Liberty Media provides GCI Liberty with public company support services, including legal, tax, accounting, treasury, information technology, cybersecurity, internal audit and investor relations services. GCI Liberty reimburses Liberty Media for all out-of-pocket expenses incurred by Liberty Media in providing the services and pays a services fee that is subject to review and evaluation for reasonableness on a quarterly basis.
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Update on Economic Conditions
GCI Holdings offers wireless and wireline telecommunication services, data services, and managed services to customers primarily throughout Alaska. Because of this geographic concentration, growth of GCI Holdings’ business and operations depends upon economic conditions in Alaska. Unfavorable economic conditions, such as a recession or economic slowdown in the U.S., or inflation in the markets in which GCI operates, could negatively affect the affordability of and demand for GCI’s products and services and its cost of doing business. In recent years, varying factors, including the conflict in Iran, have contributed to significant volatility and disruption of financial markets and global supply chains. After several years of higher interest rates, the U.S. Federal Reserve decreased interest rates in 2024 and the latter half of 2025, with no additional decreases thus far in 2026. Mounting inflationary cost pressures and recessionary fears have negatively impacted the U.S. and global economy. 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. A decline in oil prices would put significant pressure on the Alaska state government budget. The Alaska state government has financial reserves that GCI Holdings believes may be able to help fund the state government for the next couple of years. The Alaska economy is subject to recessionary pressures as a result of the economic impacts of volatility in oil prices, inflation, and other causes that could result in a decrease in economic activity. While it is difficult for GCI Holdings to predict the future impact of a recession on its business, these conditions have had an adverse impact on its business and could adversely affect the affordability of and demand for some of its products and services and cause customers to shift to lower priced products and services or to delay or forgo purchases of its products and services. GCI Holdings’ customers may not be able to obtain adequate access to credit, which could affect their ability to make timely payments to GCI Holdings and could lead to an increase in accounts receivable and bad debt expense. If Alaska experiences a recession or economic slowdown, it could negatively affect GCI Holdings’ business including its financial position, results of operations, or liquidity, as well as its ability to service debt, pay other obligations and enhance shareholder returns.
In addition, during the past several years, GCI Holdings has experienced, and continues to experience the impact of inflation-sensitive items, including upward pressure on the costs of materials, labor, and other items that are critical to GCI Holdings’ business. GCI Holdings continues to monitor these impacts closely and, if costs continue to rise, GCI Holdings may be unable to recoup losses or offset diminished margins by passing these costs through to its customers or implementing offsetting cost reductions.
On October 1, 2025, the federal government of the U.S. began a shut-down. While this shut-down ended, future shut-downs 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
Legal Challenges to the Constitutionality of the FCC Universal Service Support Programs. There have been a number of legal challenges to the constitutionality of the USF. The U.S. Courts of Appeals for the Sixth and Eleventh Circuits rejected such challenges in 2023, as did a panel of three judges in the Fifth Circuit. However, on July 24, 2024, the U.S. Court of Appeals for the Fifth Circuit sitting en banc ruled that the USF program was 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 (“USAC”), the private company responsible for USF administration. 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 filed a new Petition for
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Review in the Fifth Circuit, on October 1, 2025, to challenge two statutory provisions that the Supreme Court did not have occasion to address, and pursuant to which GCI or its customers receive universal service support, as well as to challenge the legality of the USAC, which administers that program for the FCC.
USF Program
GCI Holdings receives support from various USF programs. The USF programs are subject to change by regulatory actions taken by the FCC, interpretations of or compliance with USF program rules, or legislative actions. The USF programs have also been subject to legal challenge, which could disrupt the support GCI Holdings receives. 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.
Quintillion Acquisition
On April 21, 2026, GCI Holdings agreed pursuant to a securities purchase agreement (the “Purchase Agreement”), subject to receipt of regulatory approval and satisfaction of customary closing conditions, to acquire all of the issued and outstanding equity interests in Q Gateway Intermediate Holdings, LLC, a Delaware limited liability company (“Quintillion”), in exchange for consideration of $310 million in cash subject to certain adjustments (including working capital, cash, indebtedness and transaction expenses), reimbursement of up to $50 million for certain capital expenditures incurred by Quintillion, and potential earn-out payments in 2028, 2029 and 2031.
Concurrent with the entry into the Purchase Agreement, GCI, LLC, as lender, entered into a Term Loan Credit Agreement with the seller in the acquisition, as borrower, providing, subject to the satisfaction of certain condition precedents, for a term loan in an initial principal amount of $160 million. The term loan bears interest at Secured Overnight Financing Rate (“SOFR”) plus a margin of 8.50% (with, subject to certain conditions, up to SOFR plus 2.00% payable in cash and the remainder paid-in-kind). Upon the closing of the acquisition, the outstanding amounts under the term loan will automatically be deemed paid in full and credited toward the purchase price; if the acquisition does not close, the term loan will mature on April 21, 2031.
Other Corporate Activity
As of April 22, 2026, GCI Liberty has received all required regulatory approvals, including from the FCC, allowing its Chairman of the Board of Directors, Dr. John C. Malone, to hold de jure voting control of GCI Liberty and its subsidiaries. As a result, the existing letter agreement, dated December 31, 2024, that limited Dr. Malone’s voting power to below 50% has terminated by its terms, and Dr. Malone may now vote his equity ownership in full, which represents an approximate 53.7% voting interest based on outstanding shares as of March 23, 2026.
On April 16, 2026, GCI Liberty completed the purchase of approximately 61 thousand Class A Common Shares (“LILA”) and approximately 12.3 million Class C Common Shares (“LILAK”), in each case, of Liberty Latin America Ltd. (“LLA”) for approximately $107 million in cash.
On April 16, 2026, the Board of Directors approved renaming the parent company from GCI Liberty, Inc. to Liberty Capital Corporation. The company does not intend to change the tickers.
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Results of Operations – Consolidated
General. Provided in the tables below is information regarding the historical consolidated operating results and other income and expense of GCI Liberty.
Three months ended
March 31,
2026
2025
amounts in millions
Revenue
$
256
266
Operating costs and expenses:
Operating expense (exclusive of depreciation and amortization)
132
125
Selling, general and administrative expense
31
28
Stock-based compensation
8
2
Depreciation and amortization
52
53
Acquisition costs
3
—
Operating income (loss)
30
58
Other income (expense):
Interest expense (including amortization of deferred loan fees)
(8)
(10)
Other, net
4
1
(4)
(9)
Earnings (loss) before income taxes
26
49
Income tax benefit (expense)
(8)
(14)
Net earnings (loss)
$
18
35
Adjusted OIBDA
$
93
113
Revenue. Consolidated revenue decreased $10 million for the three months ended March 31, 2026, as compared to the same period in 2025. The following table highlights selected key performance indicators used in evaluating the Company’s business.
March 31,
2026
2025
Consumer
Data:
Cable modem subscribers 1
150,500
154,700
Wireless:
Wireless lines in service 2
200,000
195,500
Business
Wireless:
Wireless lines in service 3
7,700
8,700
1 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber. Small-to-Medium Business customers, promotional cable modem access points and customers that have been inactive for 60 days or less are included.
2 A consumer wireless line in service is defined as a wireless device with a monthly fee for services. Consumer wireless lines include Small-to-Medium Business customers, promotional lines, postpaid lines that have been inactive for 60 days or less and paying prepaid lines.
3 A business wireless line in service is defined as a wireless device with a monthly fee for services. Business wireless lines include enterprise customers, promotional lines and postpaid lines that have been inactive for 60 days or less.
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The components of revenue are as follows:
Three months ended
March 31,
2026
2025
amounts in millions
Consumer
Data
$
59
61
Wireless
52
50
Other
4
10
Business
Data
124
128
Wireless
10
10
Other
7
7
Total revenue
$
256
266
Consumer data revenue decreased $2 million for the three months ended March 31, 2026, as compared to the same period in 2025, driven by a decrease in the number of subscribers.
Consumer wireless revenue increased $2 million for the three months ended March 31, 2026, as compared to the same period in 2025, driven by an increase in the number of subscribers.
Consumer other revenue decreased $6 million for the three months ended March 31, 2026, as compared to the same period in 2025. Consumer other revenue consists of consumer voice revenue, and up until the third quarter of 2025, video revenue, and other revenue. The decrease was primarily due to no video revenue being recorded during the quarter ended March 31, 2026 as a result of the discontinuation of video services in the prior year.
Business data revenue decreased $4 million for the three months ended March 31, 2026, as compared to the same period in 2025 . The three months ended March 31, 2025 benefited from approximately $4 million of revenue relating to the successful appeal of rates for services provided to certain healthcare customers in prior years.
Business wireless revenue remained flat for the three months ended March 31, 2026, as compared to the same period in 2025.
Business other revenue remained flat for the three months ended March 31, 2026, as compared to the same period in 2025.
Operating expense
Three months ended
March 31,
2026
2025
amounts in millions
Consumer direct costs
$
32
36
Business direct costs
32
26
Technology expense
68
63
Total operating expenses
$
132
125
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 personnel expense for managing relationships with consumer customers. Consumer direct costs decreased $4 million for the three months ended March 31, 2026, as compared to the same period in 2025, due to decreases in video programming costs as a result of the discontinuation of video services (as discussed above).
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Business direct costs consists of network distribution costs, largely to healthcare and education customers, as well as personnel expense for managing relationships with business customers. Business direct costs increased $6 million for the three months ended March 31, 2026, as compared to the same period in 2025, due to increases in distribution costs for health care and education customers. The increase was primarily related to temporary cost savings of approximately $5 million in the first quarter of 2025 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 personnel expenses, professional service fees, software related costs, lease expenses, maintenance costs, as well as utility costs. Technology expenses increased $5 million for the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to increased professional service fees, and to a lesser extent, an increase in maintenance and software costs.
Selling, general and administrative expense consists of corporate overhead costs largely comprised of personnel expenses, software costs, insurance expense, property taxes and professional service fees. Selling, general and administrative expense increased $3 million for the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to amounts allocated pursuant to the Services Agreement.
Stock-based compensation increased $6 million for the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to a delay in grants to GCI employees until after the Separation was effective combined with a change in grant timing for GCI employees resulting in two years of value being granted in March 2026, a portion of which vested immediately.
Depreciation and amortization remained relatively flat for the three months ended March 31, 2026, as compared to the same period in 2025.
Acquisition costs increased $3 million, as compared to the same period in 2025, due to expenses incurred related to the future acquisition of Quintillion, as described above.
Operating Income (Loss). Consolidated operating income decreased $28 million for the three months ended March 31, 2026, as compared to the same period in 2025. Operating income was impacted by the above explanations.
Adjusted OIBDA. To provide investors with additional information regarding the Company’s financial results, the Company also discloses Adjusted OIBDA, which is a non-GAAP financial measure. The Company defines Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition costs and impairment charges. 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. In addition, this measure allows management to view operating results, perform analytical comparisons and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles. The following table provides a reconciliation of operating income (loss) to Adjusted OIBDA:
Three months ended
March 31,
2026
2025
amounts in millions
Operating income (loss)
$
30
58
Depreciation and amortization
52
53
Stock-based compensation
8
2
Acquisition costs
3
—
Adjusted OIBDA
$
93
113
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Consolidated Adjusted OIBDA decreased $20 million during the three months ended March 31, 2026, as compared to the same period in 2025, due to the items discussed above.
Other Income and Expense
Components of Other income (expense) are presented in the table below.
Three months ended
March 31,
2026
2025
amounts in millions
Other income (expense):
Interest expense
$
(8)
(10)
Other, net
4
1
$
(4)
(9)
Interest Expense. Interest expense decreased $2 million during the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to lower amounts outstanding and lower interest rates on the Company’s Senior Credit Facility (as defined in note 5 to the accompanying condensed consolidated financial statements) compared to the prior year.
Other, net. Other, net income increased $3 million during the three months ended March 31, 2026, as compared to the same period in 2025, primarily related to interest and dividend income related to the Company’s cash equivalents which were higher in the first quarter of 2026 compared to the prior year as a result of the rights offering (as defined and described in note 1 to the accompanying condensed consolidated financial statements).
Income taxes. Earnings (losses) before income taxes and income tax (expense) benefit are as follows:
Three months ended
March 31,
2026
2025
amounts in millions
Earnings (loss) before income taxes
$
26
49
Income tax (expense) benefit
$
(8)
(14)
Effective income tax rate
31%
29%
For the three months ended March 31, 2026, the income tax expense was in excess of the U.S. statutory tax rate of 21% primarily due to state income taxes and nondeductible executive compensation. For the three months ended March 31, 2025, the income tax expense was in excess of the U.S. statutory rate of 21% primarily due to state income taxes.
Net earnings (loss). The Company had net earnings of $18 million and $35 million for the three months ended March 31, 2026 and 2025, respectively. The change in net earnings (loss) was the result of the above-described fluctuations in our revenue, expenses, and other income and expenses.
Liquidity and Capital Resources
The following are potential sources of liquidity: 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 March 31, 2026, GCI Liberty had a cash and cash equivalents balance of $435 million, which was substantially held in cash equivalents. When applicable, cash equivalents are invested in U.S. Treasury securities, other
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government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.
Three months ended
March 31,
2026
2025
amounts in millions
Cash flow information
Net cash provided by (used in) operating activities
$
78
119
Net cash provided by (used in) investing activities
$
(55)
(46)
Net cash provided by (used in) financing activities
$
(4)
1
The decrease in cash provided by operating activities during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily driven by decreased net earnings and timing differences in working capital accounts.
During the three months ended March 31, 2026 and 2025, net cash flows used in investing activities were primarily related to capital expenditures, net of grant proceeds of $55 million and $49 million, respectively.
The projected uses of our cash and restricted cash are debt repayments, net capital expenditures of approximately $235 million, approximately $45 million for interest payments on outstanding debt, reimbursements to Liberty Media for amounts due under various agreements and to fund investment opportunities at GCI Liberty (including the LLA investments discussed above), and acquisitions (including the Quintillion acquisition discussed above). 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 March 31, 2026. See note 5 to the accompanying condensed consolidated financial statements for a description of all indebtedness obligations.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.