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; new service and product offerings; revenue growth; future expenses; anticipated changes to regulations; the Universal Service Fund (“USF”) programs, including the Rural Health Care (“RHC”) Program; 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;
● 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 management with Liberty Broadband Corporation (“Liberty Broadband”) and Liberty Media Corporation (“Liberty Media”);
● the unfavorable outcome of pending or future legal proceedings; and
● the additional costs we will incur 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
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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.
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. 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.”
In connection with the Separation, the Company entered into certain agreements, including the 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 (“Services Agreement”), a facilities sharing agreement and an aircraft time sharing agreement, with Liberty Media Corporation (“Liberty Media”) and/or its subsidiaries. Pursuant to the Services Agreement, Liberty Media will provide GCI Liberty with public company support services, including legal, tax, accounting, treasury, information technology, cybersecurity, internal auditing and investor relations services. GCI Liberty will reimburse Liberty Media for all out-of-pocket expenses incurred by Liberty Media in providing the services and will pay a services fee that will be subject to review and evaluation for reasonableness on a quarterly basis. The fees payable to Liberty Media for the first year of the Services Agreement are not expected to exceed approximately $5 million.
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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
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 have contributed to significant volatility and disruption of financial markets and global supply chains. 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. 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.
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 2024 and continuing in 2025, GCI Holdings has experienced 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 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.
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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 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. 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.
Pause in Federal Financial Assistance. On January 27, 2025, the Office of Management and Budget (“OMB”) issued a memorandum directing a pause in federal financial assistance pending review for consistency with presidential executive actions. On January 28, 2025, OMB clarified that this only applied to programs affected by certain specified executive actions, which do not appear to include FCC universal service support programs. OMB subsequently withdrew the memorandum, which has also been subject to preliminary injunction by two federal district courts. However, if this or another pause were to extend to federal universal service support programs, or to other infrastructure grants that GCI Holdings receives, and such a pause were to become extended, it could have a material adverse effect on GCI Holdings’ business and the Company’s financial position, results of operations or liquidity.
RHC Program
GCI Holdings receives support from various USF programs including the RHC Program. 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 ongoing legal challenges, which could disrupt or eliminate 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.
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Results of Operations – Combined
General. 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,
2025
2024
2025
2024
amounts in millions
Revenue
$
261
246
527
491
Operating costs and expenses:
Operating expense (exclusive of depreciation and amortization)
128
134
253
263
Selling, general and administrative expense (excluding stock-based compensation)
25
26
53
52
Stock-based compensation
5
4
7
7
Depreciation and amortization
52
52
105
102
Operating income (loss)
51
30
109
67
Other income (expense):
Interest expense (including amortization of deferred loan fees)
(12)
(13)
(22)
(23)
Other, net
2
2
3
3
(10)
(11)
(19)
(20)
Earnings (loss) before income taxes
41
19
90
47
Income tax benefit (expense)
(14)
(6)
(28)
(14)
Net earnings (loss)
$
27
13
62
33
Adjusted OIBDA
$
108
86
221
176
Revenue. 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.
June 30,
2025
2024
Consumer
Data:
Cable modem subscribers 1
154,500
159,000
Wireless:
Wireless lines in service 2
207,000
205,600
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.
2 A wireless line in service is defined as a wireless device with a monthly fee for services.
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The components of revenue are as follows:
Three months ended June 30,
Six months ended June 30,
2025
2024
2025
2024
amounts in millions
Consumer
Data
$
60
63
121
125
Wireless
51
48
101
95
Other
8
10
18
21
Business
Data
125
106
253
212
Wireless
10
12
20
24
Other
7
7
14
14
Total revenue
$
261
246
527
491
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 other revenue consists of consumer video and voice revenue. The decreases were primarily due to decreases in video subscribers. 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. 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.
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Operating expense
Three months ended June 30,
Six months ended June 30,
2025
2024
2025
2024
amounts in millions
Consumer direct costs
$
35
36
71
73
Business direct costs
26
32
52
63
Technology expense
67
66
130
127
Total operating expenses
$
128
134
253
263
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.
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.
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.
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.
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.
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, 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
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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 June 30,
Six months ended June 30,
2025
2024
2025
2024
amounts in millions
Operating income (loss)
$
51
30
109
67
Depreciation and amortization
52
52
105
102
Stock-based compensation
5
4
7
7
Adjusted OIBDA
$
108
86
221
176
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.
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,
2025
2024
2025
2024
amounts in millions
Other income (expense):
Interest expense
$
(12)
(13)
(22)
(23)
Other, net
2
2
3
3
$
(10)
(11)
(19)
(20)
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. Other, net income was relatively flat during the three and six months ended June 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,
2025
2024
2025
2024
amounts in millions
Earnings (loss) before income taxes
$
41
19
90
47
Income tax (expense) benefit
(14)
(6)
(28)
(14)
Effective income tax rate
34%
32%
31%
30%
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.
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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 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 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. 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,
2025
2024
amounts in millions
Cash flow information
Net cash provided by (used in) operating activities
$
226
162
Net cash provided by (used in) investing activities
$
(94)
(104)
Net cash provided by (used in) financing activities
$
(90)
(102)
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.
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.