What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-02-26 · 185 added, 186 removed, 278 unchanged (57% of the section changed)

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

Liberty Broadband Corporation (“Liberty Broadband,” “the Company,” “us,” “we,” or “our”) is comprised of two wholly owned subsidiaries, GCI Holdings, LLC (“GCI Holdings”) (as of December 18, 2020) and Skyhook Holding, Inc.

(“Skyhook”), as well as an equity method investment in Charter Communications, Inc.

Liberty Broadband Corporation (“Liberty Broadband,” “the Company,” “us,” “we,” or “our”) is primarily comprised of GCI Holdings, LLC (“GCI Holdings”) (as of December 18, 2020), a wholly owned subsidiary, and an equity method investment in Charter Communications, Inc.

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband, and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock (the “Broadband Spin-Off”).

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As a result of the Combination, each holder of a share of Series A common stock and Series B common stock of GCI Liberty received 0.58 of a share of Series C common stock and Series B common stock, respectively, of Liberty Broadband.

Additionally, each holder of a share of Series A Cumulative Redeemable Preferred Stock of GCI Liberty received one share of newly issued Liberty Broadband Series A Cumulative Redeemable Preferred Stock, which has substantially identical terms to GCI Liberty’s former Series A Cumulative Redeemable Preferred Stock, including a mandatory redemption date of March 9, 2039.

GCI Liberty’s former Series A Cumulative Redeemable Preferred Stock, including a mandatory redemption date of March 9, 2039.

Cash was paid in lieu of issuing fractional shares of Liberty Broadband stock in the Combination.

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Through a number of prior years’ transactions, including the Combination, Liberty Broadband has acquired an interest in Charter Communications, Inc.

Pursuant to a proxy agreement with Advance/Newhouse Partnership (“A/N”), Liberty Broadband controls 25.01% of the aggregate voting power of Charter.

Liberty Broadband controls 25.01% of the aggregate voting power of Charter.

During the first quarter of 2021, as a result of the closing of the Combination on December 18, 2020, Skyhook Holding, Inc.

(“Skyhook”), a wholly owned subsidiary of the Company, is no longer significant to the Company and has been included in Corporate and other for presentation purposes.

The revised segment reporting structure includes the following reportable segments:

(1) GCI Holdings and (2) Charter.

All prior period segment disclosure information has been reclassified to conform to the current reporting structure.

These reclassifications had no effect on our consolidated financial statements in any period.

Strategies and Challenges

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GCI Holdings, a wholly owned subsidiary of the Company, provides a full range of wireless, data, video, voice, and managed services to residential customers, businesses, governmental entities, and educational and medical institutions primarily in Alaska under the GCI brand.

Skyhook, a wholly owned subsidiary of the Company, markets and sells a location determination service called the Precision Location Solution.

Skyhook also previously marketed and sold a location intelligence and data insights service called Geospatial Insights.

In November 2020, Skyhook decided to wind down the Geospatial Insights business, which did not constitute a material portion of Skyhook’s business.

Charter is a leading broadband connectivity company and cable operator serving more than 32 million customers in 41 states through its Spectrum brand.

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Through close coordination of its customer service and sales and marketing efforts, its customer service representatives suggest to its customers other services they can purchase or enhanced versions of services they already purchase to achieve increased revenue and penetration of its multiple service offerings.

Skyhook earns revenue from the sale and integration of its Precision Location Solution (including the licensing of software and data components that make up that solution).

In addition, Skyhook earns revenue from licensing its intellectual property (including patents) to other enterprises.

Charter’s revenue is principally derived from the monthly fees customers pay for services it provides.

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Current Trends Affecting Our Business

GCI Holdings, Skyhook and Charter must stay abreast of rapidly evolving technological developments and offerings to remain competitive and increase the utility of their products and services.

GCI Holdings and Charter must stay abreast of rapidly evolving technological developments and offerings to remain competitive and increase the utility of their products and services.

These companies must be able to incorporate new technologies into their products and services in order to address the needs of their customers.

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As a major provider of Internet services in Alaska, GCI Holdings believes it plays an instrumental role in enabling social distancing through telecommuting and e-learning across the state and remains focused on its service to customers, as well as the health and safety of its employees and customers.

The majority of GCI Holdings’ workforce has transitioned to working at home full time and it expects to keep those employees working from home through the middle of 2021.

The majority of GCI Holdings’ workforce has transitioned to working at home full time and it expects to keep those employees working from home through at least May 2022.

GCI Holdings cannot predict the ultimate impact of COVID-19 on its business, including the depth and duration of the economic impact to its customers’ ability to pay for products and services including the impact of extended unemployment benefits and other stimulus packages and what assistance may be provided to its customers.

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In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to GCI Holdings and the risk of limitations on the deployment and maintenance of its services.

The Alaska economy is dependent upon the oil industry, state government spending, United States military spending, investment earnings and tourism.

The price of Alaska North Slope Crude oil has decreased significantly and large tourism companies have decided not to operate during 2020 due to the COVID-19 pandemic.

It is expected that the decline in oil prices will continue to put significant pressure on the Alaska state government budget.

Although Alaska state government has significant reserves that GCI Holdings believes will help fund the state government for the next couple of years, major structural budgetary reforms will be required in order to offset the impact of the COVID-19 pandemic and low oil prices.

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.

Although the Alaska state government has significant reserves that GCI Holdings believes will help fund the state government for the next couple of years, major structural budgetary reforms will be required in order to offset the impact of the COVID-19 pandemic and a decline in oil prices.

Although GCI Holdings cannot predict the long-term impact COVID-19 will have on these sectors of the Alaska economy, adverse circumstances in these industries may have an adverse impact on the demand for its products and services and on its results of operations and financial condition.

The Alaska economy was in a recession that started in late 2015.

At the end of 2019, the Alaska economy showed signs of emerging from this recession, however, the recession has continued as a result of the COVID-19 pandemic and continued low oil prices.

While it is difficult for GCI Holdings to predict the future impact of a renewed or continuing recession on its business, these conditions have had an adverse impact on its business and could continue to 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.

The Alaska economy is in a recession that started in late 2015 and has continued as a result of the COVID-19 pandemic.

While it is difficult for GCI Holdings to predict the future impact of a renewed or continuing 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.

Additionally, 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.

If that were to occur, GCI Holdings could be required to increase its allowance for doubtful accounts, and the number of days outstanding for its accounts receivable could increase.

If the recession continues, it could continue to 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.

If that were to occur, GCI Holdings could be required to increase its allowance for credit losses, and the number of days outstanding for its accounts receivable could increase.

If the recession continues, 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.

Rural Health Care (“RHC”) Program

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The following paragraphs describe certain separate matters related to the RHC Program that impact or could impact the revenue earned and receivables recognized by the Company.

As of December 31, 2020, the Company had net accounts receivable from the RHC Program in the amount $237 million, which is included within Trade and other receivables in the consolidated balance sheets.

As of December 31, 2021, the Company had net accounts receivable from the RHC Program in the amount of approximately $120 million, which is included within Trade and other receivables in the consolidated balance sheets.

FCC Rate Reduction.

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In response to the Bureau’s letter, GCI Holdings filed an Application for Review with the FCC.

On October 20, 2020, the Wireline Competition Bureau of the FCC issued two separate letters approving the cost-based rural rates GCI Holdings historically applied when recognizing revenue for services provided to its RHC customers for the funding years that ended on June 30, 2019 and June 30, 2020.

GCI Holdings collected $174 million in accounts receivable relating to these two funding years subsequent to December 31, 2020.

On June 25, 2020, GCI Holdings submitted cost studies with respect to a number of its rates for services provided to its RHC customers for the funding year ending June 30, 2021, which require approval by the Bureau.

On October 20, 2020, the Bureau issued two separate letters approving the cost-based rural rates GCI Holdings historically applied when recognizing revenue for services provided to its RHC customers for the funding years that ended on June 30, 2019 and June 30, 2020.

GCI Holdings collected approximately $175 million in accounts receivable relating to these two funding years during the year ended December 31, 2021.

GCI Holdings also filed an Application for Review of these determinations.

Subsequently, GCI identified rates for similar services provided by a competitor that would justify higher rates for certain GCI satellite services in the funding years that ended on June 30, 2018, June 30, 2019, and June 30, 2020.

GCI submitted that information to the Bureau on September 7, 2021.

The Applications for Review remain pending.

On June 25, 2020, GCI Holdings submitted cost studies with respect to a number of its rates for services provided to its RHC customers for the funding year ended June 30, 2021, which require approval by the Bureau.

GCI Holdings further updated those studies on November 12, 2020, to reflect the completion of the bidding season for that funding year.

Those studies remain pending before the Bureau, and we cannot predict when the Bureau will act upon them.

On May 24, 2021, the FCC approved the cost studies submitted by GCI Holdings for the funding year ended June 30, 2021.

Subsequently, on August 16, 2021, GCI submitted a request for approval of rates for 17 additional sites, which remains pending.

RHC Program Funding Cap.

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The Company and its external experts performed significant and extensive procedures to determine whether GCI Holdings’ currently active and expired contracts with its RHC customers would be deemed to be in compliance with the RHC Program rules.

GCI Holdings notified the FCC of our potential compliance issues in the fourth quarter of 2019.

GCI Holdings notified the FCC of the potential compliance issues in the fourth quarter of 2019.

On May 28, 2020, GCI Holdings received a second letter of inquiry from the Enforcement Bureau in the same matter noted above.

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On December 17, 2020, GCI Holdings received a Subpoena Duces Tecum from the FCC’s Office of the Inspector General requiring production of documents from January 1, 2009 to the present related to a single RHC customer and related contracts, information regarding GCI Holdings’ determination of rural rates for a single customer, and to provide information regarding persons with knowledge of pricing practices generally.

GCI Holdings continues to work with the FCC to resolve all enforcement inquiries discussed above.

With respect to the ongoing inquiries from the FCC’s Enforcement Bureau and the FCC’s Office of the Inspector General, GCI Holdings recognized a liability of approximately $12.0 million for contracts that were deemed probable of not complying with the RHC Program rules.

The Company also identified certain contracts where additional loss was reasonably possible and such loss could range from zero to $44.0 million.

On April 21, 2021, representatives of the Department of Justice (“DOJ”) informed GCI Holdings that a qui tam action has been filed in the Western District of Washington arising from the subject matter under review by the Enforcement Bureau.

The DOJ is investigating whether GCI Holdings submitted false claims and/or statements in connection with GCI’s participation in the FCC’s RHC Program.

On July 14, 2021, the DOJ issued a Civil Investigative Demand with regard to the qui tam action.

GCI Holdings continues to work with the FCC and the DOJ to resolve all enforcement inquiries discussed above.

With respect to the ongoing inquiries from the FCC’s Enforcement Bureau and the FCC’s Office of the Inspector General, GCI Holdings recognized a liability of approximately $12 million in 2019 for contracts that were deemed probable of not complying with the RHC Program rules.

GCI Holdings also identified certain contracts where additional loss was reasonably possible and such loss could range from zero to $44 million.

An accrual was not made for the amount of the reasonably possible loss in accordance with the applicable accounting guidance.

GCI Holdings could also be assessed fines and penalties but such amounts could not be reasonably estimated.

With respect to the ongoing inquiries from the DOJ regarding the qui tam action, the Company is unable to assess the ultimate outcome of this action given the confidentiality of the qui tam process and is unable to determine whether any type of fine or penalty would ultimately be assessed as is permitted under the applicable law.

Revision of Support Calculations.

On August 20, 2019, the FCC released an order changing the manner in which support issued under the RHC Program will be calculated and approved.

Some of these changes will become effective beginning with the funding year ending June 30, 2021, while others will apply beginning with the funding year ending June 30, 2022.

Some of these changes will become effective beginning with the funding year ended June 30, 2021, while others will apply beginning with the funding year ending June 30, 2022.

On October 21, 2019, GCI Holdings appealed the order to the United States Court of Appeals for the District of Columbia Circuit.

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On September 30, 2020, USAC released a refreshed version of the database incorporating limited changes submitted by interested parties.

On January 19, 2021, the Wireline Competition Bureau of the FCC issued an Order that waives the requirement to use the database for health care providers in Alaska for the two funding years ending June 30, 2022 and June 30, 2023.

The Order requires GCI Holdings to determine its rural rates based on previously approved rates or under reinstitution of the rules currently in effect through the funding year ending on June 30, 2021.

Skyhook’s location determination services compete against (1) other satellite and terrestrial based location technology offerings, such as GPS;

(2) other providers of WiFi and cell-based positioning, such as Google, Inc.

(“Google”) and HERE, a former subsidiary of Nokia;

and (3) other in-house developed location solutions.

In the smartphone location provider market, because Apple and Google control a large percentage of the market share for smartphone operating systems and both offer location provider services free as part of the iOS and Android markets, Skyhook is constrained in the distribution and monetization of the Precision Location Solution in that market.

There are also a number of new location technologies in development which may further increase competition to be a location solution for new devices (including Internet of Things devices and wearable) and which may require Skyhook to meet more stringent accuracy standards.

In addition, Skyhook’s context services compete against other geofencing and location data offerings from other niche location companies.

Skyhook’s business results for the year ended December 31, 2020 were largely unaffected by the pandemic;

however, Skyhook cannot predict the ultimate impact of COVID-19 on its business, including its customer renewals, ability to generate new business and its ability to collect on payments from customers.

Since the pandemic began, Skyhook has maintained function of all departments and service has been uninterrupted.

On January 19, 2021, the Bureau issued an Order that waives the requirement to use the database for health care providers in Alaska for the two funding years ending June 30, 2022 and June 30, 2023.

On April 8, 2021, the Bureau issued an Order further extending the January 19, 2021 waiver to carriers nationwide and eliminating the ability or requirement to use the database to establish the healthcare provider payments for services subsidized by the RHC Telecom Program.

Charter faces intense competition for residential customers, both from existing competitors and, as a result of the rapid development of new technologies, services and products, from new entrants.

With respect to its residential business, Charter competes with other providers of video, high-speed Internet access, telephone and mobile services, and other sources of home entertainment.

Specifically, newer categories of competitors include virtual multichannel video programming distributors such as Hulu Live, YouTube TV, Sling TV, Philo and AT&T TV.

In the broadband communications industry, Charter’s principal competitors for video services are DBS service providers and telephone companies that offer video services.

Charter’s principal competitors for high-speed Internet services are the broadband services provided by telephone companies, including fiber-to-the-home, fiber-to-the-node, fixed wireless broadband, Internet delivered via satellite and DSL services.

Charter’s principal competitors for video services are DBS service providers, as well as virtual multichannel video programming distributors such as Hulu Live, YouTube TV, Sling TV, Philo and DirecTV Stream.

Charter’s principal competitors for high-speed Internet services are the broadband services provided by companies, including fiber-to-the-home, fiber-to-the-node, fixed wireless broadband, Internet delivered via satellite and DSL services.

A growing number of commercial areas, such as retail malls, restaurants and airports, offer WiFi Internet service.

Numerous local governments are also considering or actively pursuing publicly subsidized WiFi Internet access networks.

These options offer alternatives to cable-

based Internet access.

These options offer alternatives to cable-based Internet access.

Charter’s principal competitors for voice and mobile services are other mobile and wireline phone providers, as well as other forms of communication, such as text messaging over cellular phones, instant messaging, social networking services, video conferencing and email.

The increase in the number of different technologies capable of carrying voice services and the number of alternative communication options available to customers as well as the replacement of wireline services by wireless have intensified the competitive environment in which Charter operates its residential voice service.

The COVID-19 pandemic and measures taken to prevent its spread impacted Charter’s business and presented significant challenges throughout 2020.

To reduce the transmission of COVID-19, federal, state and local governments implemented a wide range of restrictions on business and individual activities, including closures or limitations on the operations of businesses along with restrictions on large gatherings, travel and other actions to promote or enforce physical distancing.

Despite these restrictions, Charter has continued to deliver its services uninterrupted across its footprint.

The pandemic has significantly impacted how its customers use its products and services, how they interact with Charter, and how its employees work and provide services to customers.

The impacts of COVID-19 have significantly impacted Charter’s results of operations during the year ended December 31, 2020 and it expects that there will continue to be impacts through 2021.

● Beginning in March 2020, Charter offered its customers a set of programs, including its Remote Education Offer pursuant to which new customers with students or educators in the household were eligible to receive its Internet service for free for 60 days;

and the Keep Americans Connected (“KAC”) pledge which paused collection efforts and related disconnects for residential and small and medium business (“SMB”) customers with COVID-19 related payment challenges through June 30, 2020.

These programs resulted in higher customer net additions in 2020 than prior year with retention rates for these customers similar to Charter’s average customer base.

In an effort to assist COVID-19 impacted customers with overdue balances at the end of the KAC and certain state-mandated programs, Charter waived approximately $102 million of receivables which was recorded as a reduction of revenue.

● The interruption of professional sports seasons resulted in $163 million lower programming expenses as a result of estimated sports rebates from sports programming networks as a result of canceled sporting events and a $217 million reduction in regulatory, connectivity and produced content costs as a result of a shortened 2020 baseball season and a delay to the start of the 2020-2021 basketball season which will push some expense that otherwise would have been recognized in 2020 to 2021 and beyond.

In the third quarter of 2020, Charter recognized $218 million of estimated credits that it intends to provide on its customers' invoices related to the rebates to be received from sports programming networks.

The difference between the estimated credits and the estimated rebates is due to an expected reduction in sports rights content costs which is being amortized over the life of the contract.

● Economic conditions and temporary closures or reductions in operations of businesses resulted in reduced advertising spend and lower revenue from seasonal plans offered to SMB and Enterprise hospitality customers that have requested a reduced level of service due to temporary business closure or because these customers have reduced their service offering to their own customers.

Despite the economic conditions, Charter saw improved collections of residential customer receivables which it believes were enhanced by government stimulus benefits.

Charter expects bad debt expense and churn in 2021 to return to pre-pandemic levels.

● Charter increased wages for all hourly field operations and customer service call center employees and gave its employees additional paid sick time for COVID-19-related illnesses and a flex time program to address other COVID-19 issues.

Charter also committed to raise its minimum starting wage for hourly employees to $20 an hour over the next 2 years.

● Through accelerated network capacity increases Charter has been able to respond to the significant increase in data demands on its network to enable social distancing through telecommuting and e-learning with usage by its Internet-only customers averaging over 600 gigabytes per month, up nearly 20% from the end of 2019.

● WiFi access points were opened across Charter’s footprint for public use.

● Requests from government, healthcare and educational institutions for new fiber connections, bandwidth upgrades and new services were prioritized.

● Charter has invested significantly in its self-service infrastructure, and customers have accelerated the adoption of its digital self-service capabilities and self-installation program with nearly 80% of installations using the program.

● A significant portion of Charter’s workforce was temporarily moved to remote work arrangements.

● Charter enhanced safety protocols for field and other employees working outside their home.

● Charter offered public access to its Spectrum News websites to ensure people have access to high-quality local news and information and donated significant airtime to run public service announcements to its entire footprint.

Charter’s ability to successfully operate its business and deliver services during the COVID-19 pandemic is a result of investments made in its network, its employees and its systems.

Charter’s operating and investment strategy has allowed it to sustain and accelerate its customer and financial growth during the pandemic.

Charter cannot predict the ultimate impact of COVID-19 on its business, including the depth and duration of the economic impact to household formation and growth, its residential and business customers’ ability to pay for its products and services including the impact of extended unemployment benefits and other stimulus packages and the long-term impact on its business, including from consumer behavior, after the pandemic is over.

Some of the COVID-19 programs discussed above may result in incremental churn and bad debt in 2021 and may have accelerated demand into 2020.

In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to Charter, the pace of new housing construction, changes in business spend in Charter’s local and national ad sales business, the effects to its employees’ health and safety and resulting reorientation of work activities, and the risk of limitations on the deployment and maintenance of services (including by limiting customer support and on-site service repairs and installations).

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, Charter remains focused on driving customer relationship growth by deploying superior products and services packaged with attractive pricing.

Further, Charter expects to continue to drive customer relationship growth through sales of bundled services and improving customer retention despite the expectation for continued losses of video and wireline voice customers.

The COVID-19 pandemic significantly impacted how Charter’s customers use its products and services, how they interact with Charter, and how Charter’s employees provide services to its customers.

Customer activity levels remain below normal which contributed to lower operating expense from reduced service transactions and lower bad debt in 2021, along with lower growth in customer relationships.

Charter cannot predict when trends return to pre-COVID-19 levels as the economy returns to normal activities.

In October 2021, Charter announced and implemented new Spectrum Mobile multi-line pricing designed to drive more mobile line sales per customer, and in turn, drive more broadband sales and the associated retention benefits.

Further, Charter expects to continue to drive customer relationship growth through sales of Internet connectivity services and improving customer retention despite the expectation for continued losses of video and wireline voice customers.

Results of Operations—Consolidated

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GCI Holdings’ results are only included in the Company’s consolidated results beginning on December 18, 2020.

For a more detailed discussion and analysis of GCI Holding’s results, see "Results of Operations-GCI Holdings"

For a more detailed discussion and analysis of GCI Holdings’ results, see "Results of Operations – GCI Holdings, LLC"

Operating Results

Years ended December 31,

amounts in thousands

amounts in millions

Corporate and other

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Corporate and other

Revenue increased $35.8 million and decreased $7.4 million for the years ended December 31, 2020 and 2019, respectively, as compared to the corresponding prior year periods.

The increase in revenue in 2020 was primarily due to revenue from GCI Holdings from the date of the Combination on December 18, 2020 through December 31, 2020.

Additionally, Skyhook had increased revenue from existing customers.

Revenue increased $937 million and $36 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increases in revenue were primarily due to revenue from GCI Holdings as a result of the Combination on December 18, 2020.

See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

The decrease in revenue in 2019 was primarily due to a license agreement in the prior year, partially offset by increased net revenue from existing customers, coupled with new customer growth.

Revenue for Corporate and other increased slightly in both years due to increased revenue at Skyhook from both existing and new customers.

Operating Income (Loss)

Consolidated operating loss increased $38 million and $31 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in operating loss in 2021 is primarily due to a litigation settlement, net of recoveries of $95 million, as well as an increase in professional service fees and corporate compensation expenses, partially offset by the absence of transaction costs in 2021.

The increase in operating loss in 2020 is primarily driven by an increase in professional service fees mostly related to the Combination and to a lesser extent corporate compensation expense.

The increase in operating loss in 2019 is also due to increased professional service fees at the corporate level of $4.6 million and the decrease to Skyhook’s revenue, as discussed above.

Operating income (loss) was also impacted by GCI Holdings from the date of the Combination.

Operating income increased at GCI Holdings as a result of the Combination on December 18, 2020.

See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Stock-based compensation

Stock-based compensation expense decreased $1.4 million and increased $4.8 million for the years ended December 31, 2020 and 2019, respectively, as compared to the corresponding prior year periods.

Stock-based compensation expense increased $32 million and decreased $1 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in stock-based compensation expense during 2021 was primarily due to upfront grants per our CEO’s employment agreement, along with the impact of the Combination.

The decrease in stock-based compensation expense during 2020 was primarily due to a decrease in the value of restricted stock units of Liberty Broadband Series C common stock granted during the first half of 2020.

The increase in stock-based compensation during 2019 was primarily due to an increase in the number of restricted stock units of Liberty Broadband Series C common stock granted during the first quarter of 2019.

Adjusted OIBDA

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Years ended December 31,

amounts in thousands

amounts in millions

Operating income (loss)

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Stock-based compensation

Litigation settlement, net of recoveries

Transaction costs

Adjusted OIBDA

Adjusted OIBDA improved $2.7 million and declined $13.4 million in the years ended December 31, 2020 and 2019, respectively, as compared to the corresponding prior year periods.

The increase in Adjusted OIBDA for the year ended December 31, 2020 was due to the results of operations of GCI Holdings from the date of the Combination through December 31, 2020, as discussed above, partially offset by increases in corporate compensation expense and professional service fees unrelated to the Combination.

The decrease in Adjusted OIBDA for the year ended December 31, 2019 was due to decreased revenue of $35.8 million, discussed above, coupled with increased professional service fees at the corporate level, discussed above.

Adjusted OIBDA improved $319 million and $3 million in the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increases in Adjusted OIBDA were primarily due to the results of operations of GCI Holdings as a result of the Combination, as discussed above.

Corporate and other Adjusted OIBDA declined in both years due to the fluctuations in operating income (loss) as discussed above.

Other Income and Expense:

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Years ended December 31,

amounts in thousands

amounts in millions

Other income (expense):

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Interest expense increased $89 million and $3 million during the years ended December 31, 2021 and 2020, respectively.

The increase in 2020 was driven by additional amounts outstanding on the Margin Loan Facility (as defined in note 9 to the accompanying consolidated financial statements), the 2.75% Exchangeable Senior Debentures due 2050 that were issued in August 2020 and the 1.25% Exchangeable Senior Debentures due 2050 that were issued in November 2020, partially offset by a decrease in our weighted average interest rate during 2020 compared to the prior year.

The increase in 2019 was driven by additional amounts outstanding on the Margin Loan Facility during 2019, as well as an increase in the weighted average interest rate during 2019 compared to the prior year.

The increases were driven by additional amounts outstanding on the Margin Loan Facility (as defined in note 8 to the accompanying consolidated financial statements), the 2.75% Exchangeable Senior Debentures due 2050 that were issued in August 2020 and the 1.25% Exchangeable Senior Debentures due 2050 that were issued in November 2020.

The increases in both years were partially offset by a decrease in our weighted average interest rates.

Share of earnings (losses) of affiliates

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Upon the Company’s initial investment in Charter, the Company allocated the excess basis, between the book basis of Charter and fair value of the shares acquired, and ascribed remaining useful lives of 7 years and 13 years to property and equipment and customer relationships, respectively, and indefinite lives to franchise fees, trademarks and goodwill.

As of December 31, 2021, property and equipment and customer relationships have weighted average remaining useful lives of approximately 5 years and 9 years, respectively.

Outstanding debt is amortized over the contractual period using the straight-line method.

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In order to provide a better understanding of Charter’s operations, we have included a summarized presentation of Charter’s results from operations.

Charter is a separate publicly traded company and additional information about Charter can be obtained through its website and public filings, which

are not incorporated by reference.

Charter is a separate publicly traded company and additional information about Charter can be obtained through its website and public filings, which are not incorporated by reference.

The amounts included in the table below, derived from Charter’s public filings, represent Charter’s results for each of the years ended December 31, 2021, 2020 and 2019.

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Charter’s revenue increased $3.6 billion and $2.3 billion during the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior years.

Revenue growth during 2020 was primarily due to increases in the number of residential Internet and mobile customers, price adjustments and higher political advertising sales offset by lower local advertising revenue as a result of COVID-19, $218 million of estimated customer credits to be issued to video customers due to canceled sporting events and $102 million of waived receivables related to the KAC and certain state-mandated programs.

Revenue growth during 2019 primarily reflected increases in the number of residential Internet and commercial business customers, price adjustments as well as the launch of Charter’s mobile service in the second half of 2018 offset by a decrease in video customers.

Revenue growth during 2021 was primarily due to increases in the number of residential Internet, mobile and commercial customers and price adjustments.

Revenue growth during 2020 was primarily due to increases in the number of residential Internet and mobile customers, price adjustments and higher political advertising sales offset by lower local advertising revenue as a result of COVID-19, $218 million of estimated customer credits issued to video customers due to canceled sporting events and $102 million of waived receivables related to the Keep Americans Connected pledge and certain state-mandated programs.

The increases in revenue during 2021 and 2020 were partially offset by the net impact of increased operating expenses, excluding stock-based compensation, of $1.7 billion and $0.6 billion, respectively.

Operating costs increased during the year ended December 31, 2021, as compared to the corresponding prior year, primarily due to increased mobile and programming costs, as well as increased regulatory, connectivity and produced content costs.

Operating costs for the year ended December 31, 2021 also increased due to increased litigation settlements, including the tentative settlement with Sprint Communications Company L.P.

and T-Mobile USA, Inc.

for $220 million.

Operating costs increased during the year ended December 31, 2020, as compared to the corresponding prior year, primarily due to increased mobile device costs and mobile service and operating costs, increases in costs to service customers and increases in programming costs, offset by lower regulatory, connectivity and produced content costs.

Operating costs increased during the year ended December 31, 2019, as compared to the corresponding prior year, primarily due to increased programming costs and incremental mobile costs which were comprised of mobile device costs, and mobile services and operating costs.

Programming costs increased during both years as a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent, as well as an increase in video customers in 2020.

The increase in 2020 was offset by $163 million of estimated rebates from sports programming networks as a result of canceled sporting events due to COVID-19 and further benefited from a higher mix of lower cost video packages within its video customer base during the year ended December 31, 2020.

The increase in 2019 was partly offset by lower video customers and pay-per-view during the year ended December 31, 2019.

Charter expects programming rates per customer will continue to increase in future periods due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming, particularly new services.

Charter has been unable to fully pass these increases on to its customers and do not expect to be able to do so in the future without a potential loss of customers.

Costs to service customers increased during 2020 primarily due to higher labor costs resulting from COVID-19 related wage increases and flex time benefits along with 6.5% customer growth offset by a decrease in bad debt expense given the revenue write-off associated with the KAC program and better collections enhanced by government stimulus benefits.

Programming costs increased as a result of $124 million more rebates in 2020 than 2021 from sports programming networks as a result of canceled sporting events due to COVID-19, as well as contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent offset by fewer customers and a higher mix of lower cost video packages within Charter’s video customer base.

Programming costs increased during 2020 as a result of contractual rate adjustments,

including renewals and increases in amounts paid for retransmission consent, as well as an increase in video customers.

The increase in 2020 was offset by the $163 million of estimated rebates from sports programming networks as a result of canceled sporting events due to COVID-19 and further benefited from a higher mix of lower cost video packages within its video customer base during the year ended December 31, 2020.

Charter expects programming rates per customer will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming.

Charter has been unable to fully pass these increases on to its customers and does not expect to be able to do so in the future without a potential loss of customers.

Mobile costs were comprised of mobile device costs and mobile service, customer acquisition and operating costs.

The increase in both years is attributable to an increase in the number of mobile lines.

Regulatory, connectivity and produced content increased during the year ended December 31, 2021 primarily due to higher sports rights costs as a result of more National Basketball Association ("NBA") and Major League Baseball ("MLB") games during 2021 as compared to the corresponding period in 2020.

Regulatory, connectivity and produced content cost decreased during 2020 due to deferred sports rights costs associated with the shortened baseball season and delayed start to the 2020 - 2021 basketball season as a result of COVID-19.

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Depreciation and amortization expense decreased $359 million and $222 million during the years ended December 31, 2021 and 2020, respectively.

The decreases in both years were primarily due to a decrease in depreciation and amortization as certain assets become fully depreciated, offset by an increase in depreciation as a result of more recent capital expenditures.

Other expenses increased $23 million and $545 million in the years ended December 31, 2020 and 2019, respectively, compared to the corresponding prior year periods.

The decreases in both years were primarily due to a decrease in depreciation and amortization as certain assets acquired in acquisitions become fully depreciated, offset by an increase in depreciation as a result of more recent capital expenditures.

Charter’s results were also impacted by other expenses, net which increased $35 million and $23 million in the years ended December 31, 2021 and 2020, respectively, compared to the corresponding prior year periods.

The changes in other expenses, net were primarily due to increased net interest expense, as well as increased losses on financial instruments and increased losses on equity investments, partially offset by increased net periodic pension benefits.

The loss on equity investments also included an impairment on equity investments of approximately $165 million during the year ended December 31, 2021.

The increase in other expenses, net for the year ended December 31, 2020, as compared to the corresponding period year, was primarily due to increased losses on the extinguishment of debt and increased net interest expense, partially offset by a decrease to other expense.

The increase in other expenses, net for the year ended December 31, 2019, as compared to the corresponding prior year, was primarily due to increased net interest expense and increased other pension costs primarily as a result of a remeasurement loss recorded in 2019 versus a remeasurement gain in 2018.

Income tax expense increased $442 million and $187 million during the years ended December 31, 2021 and 2020, respectively, compared to the corresponding prior year periods.

Income tax expense increased during the year ended December 31, 2021, as compared to the corresponding period in the prior year, primarily as a result of higher pretax income.

Income tax expense increased during the year ended December 31, 2020, compared to the corresponding prior year, as a result of higher pretax income offset by increased recognition of excess tax benefits resulting from share-based compensation during 2020.

The income tax expense in 2019 was primarily the result of higher pretax income and lower benefit from state tax rate changes.

Gain (loss) on dilution of investment in equity affiliate

The loss on dilution of investment in affiliate during 2020 and 2019 is primarily due to the issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share.

The loss on dilution of investment in affiliate decreased by $82 million and increased by $105 million during the years ended December 31, 2021 and 2020, respectively, compared to the corresponding periods in the prior year.

In both 2021 and 2020, the loss on dilution was primarily due to increases in issuance of Charter’s common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share, partially offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares.

As Liberty Broadband’s ownership in Charter changes due to exercises of Charter warrants and stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter warrants or stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.

Realized and unrealized gains (losses) on financial instruments, net

Realized and unrealized gains (losses) on financial instruments, net decreased $84.2 million and $2.5 million for each of the years ended December 31, 2020 and 2019, respectively, as compared to the corresponding prior year periods.

The realized and unrealized gains (losses) on financial instruments, net during the year ended December 31, 2020 were primarily related to changes in fair value of the 1.25% Exchangeable Senior Debentures due 2050 and the 2.75% Exchangeable Senior Debentures due 2050 related to changes in market price of underlying Charter stock (see note 9 in the accompanying consolidated financial statements for additional discussion).

The realized and unrealized gains (losses) on financial instruments, net during the years ended December 31, 2019 and 2018 were related to zero-strike call options (see note 6 in the accompanying consolidated financial statements for additional discussion).

Other, net increased $935 thousand and increased $396 thousand for the years ended December 31, 2020 and 2019, respectively, as compared to the corresponding prior year periods.

The increase in 2020 was primarily due to a tax sharing receivable with Qurate Retail that resulted in gains of $1,953 thousand for the period from December 18, 2020 to December 31, 2020, partially offset by decreases in dividend and interest income as a result of lower interest rates and lower cash balances during the current year.

Realized and unrealized gains (losses) on financial instruments, net are comprised of changes in the fair value of the following:

Years ended December 31,

amounts in millions

Indemnification obligation

Exchangeable senior debentures

The changes in these accounts are primarily due to market factors and changes in the fair value of the underlying stocks or financial instruments to which these related.

The changes for both years were primarily related to the assumption of the indemnification obligation by the Company as a result of the Combination (see note 5 to the accompanying consolidated financial statements for additional discussion), as well as the changes in fair value of the 2.75% Exchangeable Senior Debentures due 2050, the 1.25% Exchangeable Senior Debentures due 2050 and the 1.75% Exchangeable Senior Debentures due 2046 related to changes in market price of underlying Charter stock (see notes 5 and 8 to the accompanying consolidated financial statements for additional discussion).

Other, net increased $3 million and $2 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was primarily due to a tax sharing receivable with Qurate Retail that resulted in losses of $10 million for the year ended December 31, 2021, as well as a gain of $12 million on the sale of an investment during the third quarter of 2021.

The increase in 2020 was primarily due to a tax sharing receivable with Qurate Retail that resulted in gains of $2 million for the period from December 18, 2020 to December 31, 2020, partially offset by decreases in dividend and interest income as a result of lower interest rates and lower cash balances during the current year.

The Company’s cash balance increased during the fourth quarter of 2020, but not until the Combination on December 18, 2020.

See more discussion about the tax sharing agreement with Qurate Retail in note 1 to the accompanying consolidated financial statements.

The increase in 2019 was primarily due to increases in dividend and interest income as a result of higher interest rates in the current year.

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

Years ended December 31,

amounts in millions

Earnings (loss) before income taxes

Income tax (expense) benefit

Effective income tax rate

Our effective tax rate for the year ended December 31, 2021 was 23%.

Our effective tax rate was higher than the federal tax rate of 21% in 2021 primarily due to a non-deductible litigation settlement and non-deductible executive compensation, partially offset by tax benefits from a change in effective tax rate used to measure deferred taxes on certain Charter shares.

The Company had an income tax benefit of $37 million for the year ended December 31, 2020.

The current year tax benefit was primarily due to a change in the effective state tax rate used to measure deferred taxes due to the Combination.

Our effective tax rate for both of the years ended December 31, 2019 and 2018 was 24%.

Our effective tax rate was higher than the federal tax rate of 21% for these periods primarily due to state income taxes.

See note 11 to the accompanying consolidated financial statements for more information.

The tax benefit in 2020 was primarily due to a change in the effective state tax rate used to measure deferred taxes due to the Combination.

Our effective tax rate for the year ended December 31, 2019 was 25%.

Our effective tax rate was higher than the federal tax rate of 21% in 2019 primarily due to state income taxes.

Net earnings (losses)

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The following are potential sources of liquidity:

available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), monetization of investments, outstanding or anticipated debt facilities including $300 million available to be drawn under the Margin Loan Facility until August 12, 2021, debt and equity issuances, and dividend and interest receipts.

available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), monetization of investments (including Charter Repurchases (as defined in note 6 to the accompanying consolidated financial statements and discussed below)), outstanding or anticipated debt facilities (as defined in note 8 to the accompany consolidated financial statements), debt and equity issuances, and dividend and interest receipts.

As of December 31, 2021, Liberty Broadband had a cash balance of $191 million.

Years ended December 31,

amounts in thousands

amounts in millions

Cash flow information

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Net cash provided (used) by financing activities

The increase in cash used by operating activities in 2020 and 2019, as compared to the corresponding prior year periods was primarily driven by the decrease in operating income, as well as by timing differences in working capital accounts.

During the year ended December 31, 2020, net cash flows provided by investing activities were primarily due to the $592.2 million in cash acquired as a result of the Combination, as well as the exercise of preemptive rights to purchase an aggregate of approximately 35 thousand shares of Charter’s Class A common stock for an aggregate purchase price of $14.9 million.

During the year ended December 31, 2020, net cash flows provided by financing activities were primarily borrowings of $2.8 billion under the Company’s margin loan and issuances of multiple senior exchangeable debentures (see note 9 to the accompanying financial statements for more information), partially offset by repayments of debt of $1.3 billion and repurchases of Series C Liberty Broadband common stock of $0.6 billion.

During the year ended December 31, 2019, net cash flows provided by financing activities were primarily from additional borrowings under the Company’s Margin Loan Facility and the settlement of zero-strike call options, partially offset by the purchase of zero-strike call options and payment of withholding taxes on net settlements of stock-based compensation.

During the year ended December 31, 2018, net cash flows from financing activities were primarily related to the settlement of zero-strike call options, as well as the modification to the Company’s Margin Loan Facility and a drawdown of $25 million on the Company’s Margin Loan Facility.

The projected uses of our cash are capital expenditures of approximately $130 million, approximately $120 million for interest payments on outstanding debt, approximately $15 million for preferred stock dividends, funding of any operational needs of our subsidiaries, to reimburse Liberty for amounts due under various agreements, to fund potential investment opportunities,

the potential buyback of common stock under the approved share buyback program and to refinance Liberty Broadband’s margin loan, under its Margin Loan Facility, maturing in 2022.

The increase in cash provided by operating activities in 2021, as compared to the corresponding prior year period, was primarily driven by increased activity in working capital accounts due to the Combination and the collection of accounts receivable from the RHC Program for the funding years that ended on June 30, 2019 and June 30, 2020, partially offset by litigation settlements, net of recoveries.

The increase in cash used by operating activities in 2020, as compared to the corresponding prior year period, was primarily driven by the decrease in operating income, as well as by timing differences in working capital accounts.

During the year ended December 31, 2021, net cash flows provided by investing activities were primarily related to the sale of 6,077,664 shares of Charter Class A common stock for $4.2 billion to maintain our fully diluted ownership percentage of Charter at 26%.

In February 2021, Liberty Broadband entered into a letter agreement in order to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the Equity Cap (see more information in note 6 to the accompanying consolidated financial statements).

The Company expects the Charter Repurchase to be a significant source of liquidity in future periods.

The Company expects the Charter Repurchases to be a significant source of liquidity in future periods.

This net inflow of cash was partially offset by capital expenditures of $134 million during the year ended December 31, 2021.

During the year ended December 31, 2020, net cash flows provided by investing activities were primarily due to the $592 million in cash acquired as a result of the Combination, offset partially by the exercise of preemptive rights to purchase an aggregate of approximately 35 thousand shares of Charter’s Class A common stock for an aggregate purchase price of $15 million.

During the year ended December 31, 2021, net cash flows used in financing activities were primarily repurchases of Series A and Series C Liberty Broadband common stock of $4.3 billion, as well as net debt repayments of $700 million of outstanding Revolving Loans (as defined in note 8 to the accompanying consolidated financial statements) under the Margin Loan Facility, net debt repayment of $155 million by GCI, LLC on its revolving credit facility and repayment by GCI, LLC of $395 million of the Term Loan B (as defined in note 8 to the accompanying consolidated financial statements), partially offset by additional borrowings of $250 million under the new Term Loan A (as defined in note 8 to the accompanying consolidated financial statements).

During the year ended December 31, 2020, net cash flows provided by financing activities were primarily borrowings of $2.8 billion under the Company’s Margin Loan Facility and issuances of multiple senior exchangeable debentures (see note 8 to the accompanying financial statements for more information), partially offset by repayments of debt of $1.3 billion and repurchases of Series C Liberty Broadband common stock of $597 million.

The projected uses of our cash are the potential buyback of common stock under the approved share buyback program, net capital expenditures of approximately $150 million, approximately $90 million for interest payments on outstanding debt, approximately $15 million for preferred stock dividends, funding of any operational needs of our subsidiaries, to reimburse Liberty for amounts due under various agreements and to fund potential investment opportunities.

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

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements and Material Cash Requirements

We have contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business.

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In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying consolidated financial statements.

Information concerning the amount and timing of required payments, both accrued and off-balance sheet, under our contractual obligations is summarized below.

The following table summarizes current and long-term material cash requirements, both accrued and off-balance sheet, as of December 31, 2021:

Payments due by period

amounts in thousands

Consolidated contractual obligations

amounts in millions

Material Cash Requirements

Preferred stock liquidation value

Interest expense and preferred stock dividends (2)

Finance lease obligations, including interest

Finance and operating lease obligations

Tower obligations, including interest

Operating lease commitments

Purchase obligations

Total contractual obligations

(1) Amounts are reflected in the table at the outstanding principal amount at December 31, 2021, assuming the debt instrument will remain outstanding until the stated maturity date, and may differ from the amounts stated in our consolidated balance sheet to the extent debt instruments (i) were issued at a discount or premium or (ii) have elements which are reported at fair value in our consolidated balance sheets.

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Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received.

Losses are limited to the extent of the Company’s

investment in, advances to and commitments for the investee.

The Company determines the difference between the purchase price of the investee and the underlying equity which results in an excess basis in the investment.

This excess basis is allocated to the underlying assets and liabilities of the Company’s investee through a purchase accounting exercise and is allocated within memo accounts used for equity accounting purposes.

Losses are limited to the extent of the Company’s investment in, advances to and commitments for the equity method investee.

The Company determines the difference between the purchase price of the equity method investee and the underlying equity which results in an excess basis in the investment.

This excess basis is allocated to the underlying assets and liabilities of the Company’s equity method investee through a purchase accounting exercise and is allocated within memo accounts used for equity method accounting purposes.

Depending on the applicable underlying assets, these amounts are either amortized over the applicable useful lives or determined to be indefinite lived.

Changes in the Company’s proportionate share of the underlying equity of an equity method investee, which result from the issuance of additional equity securities by such equity investee, to investors other than the Company, are recognized in the statement of operations through the gain (loss) on dilution of investment in affiliate line item.

Changes in the Company’s proportionate share of the underlying equity of an equity method investee, which result from the issuance of additional equity securities by such equity method investee, to investors other than the Company, to investors other than the Company, are recognized in the statement of operations through the gain (loss) on dilution of investment in affiliate line item.

We periodically evaluate our equity method investment to determine if decreases in fair value below our cost basis are other than temporary.

If a decline in fair value is determined to be other than temporary, we are required to reflect such decline in our consolidated statement of operations.

If a decline in fair value is determined to be other than temporary, we are required to reflect such decline in our consolidated statements of operations.

Other than temporary declines in fair value of our equity method investment would be included in share of earnings (losses) of affiliates in our consolidated statement of operations.

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the severity of the decline;

and the financial condition, operating performance and near term prospects of the investee.

In addition, we consider the reason for the decline in fair value, be it general market conditions, industry specific or investee specific;

analysts' ratings and estimates of 12 month share price targets for the investee;

and the financial condition, operating performance and near term prospects of the equity method investee.

In addition, we consider the reason for the decline in fair value, be it general market conditions, industry specific or equity method investee specific;

analysts' ratings and estimates of 12 month share price targets for the equity method investee;

changes in stock price or valuation subsequent to the balance sheet date;

and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value.

Fair value of our publicly traded cost and equity investments is based on the market prices of the investments at the balance sheet date.

Impairments are calculated as the difference between our carrying value and our estimate of fair value.

As our assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize such charges requires judgment and includes estimates and assumptions, actual results could differ materially from our estimates and assumptions.

Our evaluation of the fair value of our investments and any resulting impairment charges are made as of the most recent balance sheet date.

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The Company may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques.

Due to the high degree of judgment involved in our estimation techniques, any value ultimately derived from the Company’s amortizing intangible or long-lived assets may differ from its estimate of fair value.

high degree of judgment involved in our estimation techniques, any value ultimately derived from the Company’s amortizing intangible or long-lived assets may differ from its estimate of fair value.

The Company utilizes the cost approach as the primary method used to establish fair value for its property and equipment in connection with business combinations.

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The Company performs an annual assessment of the recoverability of its goodwill during the fourth quarter, or more frequently, if events and circumstances indicate impairment may have occurred.

The Company utilizes a qualitative assessment for determining whether the quantitative goodwill impairment analysis is necessary.

The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test.

In evaluating goodwill on a qualitative basis, the Company reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of its reporting units.

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As part of the analysis, the Company also considers fair value determinations for certain reporting units that have been made at various points throughout the current and prior year for other purposes.

The fair value of goodwill is determined using an income approach, when deemed necessary.

The Company’s income approach model used for its goodwill valuation is consistent with that used for the cable certificates except that cash flows from the entire business enterprise are used for the goodwill valuation.

If based on the qualitative analysis it is more likely than not that an impairment exists, the Company performs the quantitative impairment test.

The quantitative goodwill impairment test compares the estimated fair value of a reporting unit to its carrying value.

The estimated fair value of a reporting unit has historically been determined using an income approach, when deemed necessary.

The Company’s income approach model used for its reporting unit valuation is consistent with that used for the cable certificates except that cash flows from the entire business enterprise are used.

Income Taxes.

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As described in notes 1 and 4 to the accompanying consolidated financial statements, Liberty Broadband acquired GCI Holdings in the Combination on December 18, 2020.

As GCI Holdings’ results are only included in the Company’s results for 13 days following the Combination, we believe a discussion of GCI Holdings’ results for a comparative two year period promotes a better understanding of GCI Holdings’ operations.

For comparison and discussion purposes the Company is presenting actual historical results of GCI Holdings for the years ended December 31, 2020 and 2019, exclusive of the effects of acquisition accounting.

In future periods the most significant effect of acquisition accounting is an expected increase to depreciation and amortization of approximately ten to fifteen percent as compared to prior years as a result of an increase in fair values of depreciable or amortizable assets.

This historical financial information of GCI Holdings can be found in historical filings of GCI

Liberty, Inc.

As GCI Holdings’ results are only included in the Company’s 2020 results for 13 days following the Combination, we believe a discussion of GCI Holdings’ results for a comparative three year period promotes a better understanding of GCI Holdings’ operations.

For comparison and discussion purposes the Company is presenting (a) the results of GCI Holdings for the year ended December 31, 2021, as included in the consolidated financial statements of the Company and (b) the actual historical results of GCI Holdings for the years ended December 31, 2020 and

2019, exclusive of the effects of acquisition accounting.

The most significant effect of acquisition accounting is an increase to depreciation and amortization as compared to prior periods as a result of an increase in fair values of depreciable and amortizable assets.

This historical financial information of GCI Holdings can be found in historical filings of GCI Liberty, Inc.

with the exception of the fourth quarter of 2020.

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Basic subscribers 4

Homes passed 5

Total local access lines in service 5

Revenue generating wireless lines in service 1

Cable modem subscribers 3

Total local access lines in service 6

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

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4 A basic subscriber is defined by the purchase of basic video service.

5 A home passed is defined as a dwelling unit that can be connected to GCI Holdings’ network without the need of otherwise extending its network.

5 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.

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Years ended December 31,

amounts in thousands

amounts in millions

Operating expenses (excluding stock-based compensation included below):

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Years ended December 31,

amounts in thousands

amounts in millions

Total revenue

Consumer wireless revenue increased $3.0 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

Consumer wireless revenue increased $13 million and $3 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was primarily due to increased plan service fee revenue of $9 million driven by an increase in the number of subscribers and subscribers’ selection of plans with higher recurring monthly charges that offer higher usage limits.

Additionally, equipment and accessories sales revenue increased $5 million, driven by an increase in the number of handsets sold in 2021.

The increase in revenue in 2020 was primarily due to increased plan service fee revenue of $5 million, driven by subscribers’ selection of plans with higher recurring monthly charges that offer higher usage limits.

The increase was partially offset by a $2 million decrease in equipment sales revenue due to a decrease in the number of handsets sold in 2020.

Consumer data revenue increased $18.8 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The increase in 2020 was driven by an increase in the number of subscribers and the subscribers' selection of plans with higher recurring monthly charges that offer higher speeds and higher usage limits.

Consumer video revenue increased $7.4 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The increase in 2020 was due to a $10.9 million increase in advertising revenue driven by a reorganization effective August 1, 2020.

Consumer data revenue increased $26 million and $19 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increases in both years were driven by increases in the number of subscribers and the subscribers' selection of plans with higher recurring monthly charges that offer higher speeds and higher usage limits.

Consumer video revenue decreased $20 million and increased $7 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The decrease in 2021 was due to a $15 million decrease in plan service fee revenue driven by a decrease in the number of subscribers.

Additionally, there was a decrease of $6 million in advertising revenue driven by a reduction in advertising sales due to the absence of a major political election in 2021 compared to 2020.

The increase in 2020 was due to an $11 million increase in advertising revenue driven by a reorganization effective August 1, 2020.

The Company transitioned its advertising sales to Consumer video following the sale of the Company’s broadcast television station.

The increase was partially offset by a decrease in plan fee revenue driven by a decrease in the number of subscribers.

Consumer voice revenue decreased $2.0 million for the year ended December 31, 2020, as compared to the corresponding prior year periods.

Consumer voice revenue remained flat and decreased $2 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The decrease in 2020 was primarily due to a reduction in the number of customers.

Business wireless revenue decreased $4.1 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

Business wireless revenue decreased $15 million and $4 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The decrease in 2021 was primarily due to a decrease in grant and roaming revenue.

The decrease in 2020 was primarily due to wholesale customers removing backhaul circuits from our network and a decrease in grant revenue partially offset by increases in roaming revenue driven by the renegotiation of a roaming contract.

Business data revenue increased $61.8 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

Business data revenue increased $29 million and $61 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was due to a $50 million increase in data and transport, driven by increased sales to education and medical customers for service upgrades.

The increase was partially offset by a decrease of $12 million in professional services revenue driven by a reduction in time and materials project work.

Additionally, the increase was partially offset by the absence of $9 million in revenue recorded in the first quarter of 2020 for a RHC customer whose funding was initially denied but subsequently approved in the first quarter of 2020.

The increase in 2020 was due to a $73 million increase in data and transport revenue driven by increased sales to school and medical customers for service upgrades.

The increase also included $9 million associated with prior periods for an RHC customer whose funding was initially denied but subsequently approved in the first quarter of 2020.

The increase also included the $9 million in revenue associated with prior periods for an RHC customer whose funding was initially denied but subsequently approved in the first quarter of 2020.

The increases were partially offset by a $12 million decrease in professional services revenue driven by a reduction in time and materials project work.

Business video revenue decreased $4.5 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The decrease in 2020 was primarily due to the sale of the Company’s broadcast television station.

Business voice revenue decreased $0.9 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The decrease in 2020 was driven by a decrease in local service lines partially offset by an increase in long distance and conferencing services.

Operating expenses increased $4.5 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The increase in 2020 was primarily due to a $18.1 million increase in costs to operate our network driven by the increase in demand from school and medical customers.

Business video revenue decreased $9 million and $4 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The decreases in both 2021 and 2020 were primarily due to the sale of the Company’s broadcast television station in the third quarter of 2020.

Business voice revenue decreased $3 million and $1 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The decrease in 2021 was driven by a reduction in conference calling, long distance minutes, and local service lines.

The decrease in 2020 was driven by a reduction in local service lines partially offset by an increase in long distance and conferencing services.

Operating expenses increased $1 million and $4 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was primarily due to a $20 million increase in costs to operate our network driven by the increase in demand from education and medical customers, as well as a $3 million increase in wireless handset costs.

These increases were partially offset by a decrease of $10 million in professional services costs driven by a reduction in time and materials project work and a decrease of $13 million in video costs driven by the sale of the Company’s broadcast television station in the third quarter of 2020, as well as a decrease in costs paid to content producers driven by a decrease in video subscribers.

The increase in 2020 was primarily due to an $18 million increase in costs to operate our network driven by the increase in demand from school and medical customers.

The increase is partially offset by decreases of $8 million in professional services costs driven by a reduction in time and materials project work and $4 million in video costs paid to content producers driven by a decrease in video subscribers.

Selling, general and administrative expenses decreased $13.5 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

Selling, general and administrative expenses increased $11 million and decreased $13 million for the years ended December 31, 2021 and 2020, as compared to the corresponding prior year periods.

The increase in 2021 was primarily due to a $16 million increase in labor related costs driven by increases in healthcare costs as employees have returned to normal healthcare interactions and increases in contract labor.

Additionally, the period was impacted by a $2 million increase in software costs driven by an increase in software as service arrangements and a $2 million increase in travel and training costs driven by a return to more normal activity levels.

The increase is partially offset by a $2 million decrease in bad debt expense, $3 million decrease in legal and compliance cost and $3 million decrease in lease and facility costs.

The decrease in 2020 was primarily due to the absence of a $17 million reserve recorded in the fourth quarter of 2019 for contracts that were deemed probable of not complying with RHC Program rules, and the Company’s cost cutting efforts.

The decrease was partially offset by a $5 million increase in legal and compliance costs.

Stock based compensation decreased $5.3 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

Stock based compensation increased $6 million and decreased $5 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was due to the fair value assigned to converted awards as part of the modification as a result of the Combination.

Additionally, stock-based compensation expense for the prior period included the reversal of expense for performance-based awards that did not vest.

The decrease in 2020 was primarily due to the reversal of expense for performance-based awards that did not vest due to a shortfall in certain financial metrics and qualitative criteria;

1 unchanged sentence

and a decrease in the number of awards granted.

Depreciation and amortization decreased $14.3 million for the year ended December 31, 2020, as compared to the corresponding prior year period.

The decrease in 2020 was primarily due to assets which became fully depreciated prior to 2020, a decrease in assets placed in service since January 1, 2019, and lower amortization expense because of an accelerated recognition pattern for amortizing intangibles.

Depreciation and amortization increased $18 million and decreased $16 million for the years ended December 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods.

The increase in 2021 was primarily due to an increase in assets placed in service since January 1, 2020 and higher amortization expense because of an accelerated recognition pattern for amortizing intangibles as a result of the Combination.

The decrease in 2020 was primarily due to assets which became

fully depreciated prior to 2020, a decrease in assets placed in service since January 1, 2019, and lower amortization expense because of an accelerated recognition pattern for amortizing intangibles.

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-K

Item 7. Management’s Discussion and Analysis