What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-25 · 166 added, 163 removed, 300 unchanged (52% 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 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.

Liberty Broadband Corporation (“Liberty Broadband,” “the Company,” “us,” “we,” or “our”) is primarily comprised of GCI Holdings, LLC (“GCI Holdings” or “GCI”) (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.

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

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.

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

No shares of Liberty Broadband stock were issued with respect to (x) shares of GCI Liberty capital stock held by (i) GCI Liberty as treasury stock, (ii) any of GCI Liberty’s wholly owned subsidiaries or (iii) Liberty Broadband or its wholly owned subsidiaries or (y) shares of GCI Liberty Series B Common Stock held by any stockholders who perfected and did not waive, effectively withdraw or lost their appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware

No shares of Liberty

Broadband stock were issued with respect to shares of GCI Liberty capital stock held by (i) GCI Liberty as treasury stock, (ii) any of GCI Liberty’s wholly owned subsidiaries or (iii) Liberty Broadband or its wholly owned subsidiaries.

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

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.

Skyhook Holdings, Inc.

(“Skyhook”) was a wholly owned subsidiary of Liberty Broadband until its sale on May 2, 2022 for aggregate consideration of approximately $194 million, including amounts held in escrow of approximately $23 million.

Liberty Broadband recognized a gain on the sale of $179 million, net of closing fees, in the second quarter of 2022, which is recorded in Gain (loss) on dispositions, net in the accompanying consolidated statement of operations.

Skyhook is included in Corporate and other through April 30, 2022 and is not presented as a discontinued operation as the sale did not represent a strategic shift that had a major effect on Liberty Broadband’s operations and financial results.

Included in Revenue in the accompanying consolidated statements of operations is $6 million, $18 million and $17 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to Skyhook.

Included in Net earnings (loss) in the accompanying consolidated statement of operations are earnings of $4 million and less than $1 million and losses of $3 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to Skyhook.

Included in Total assets in the accompanying consolidated balance sheets as of December 31, 2021 is $18 million related to Skyhook.

Strategies and Challenges

Executive Summary

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.

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

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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Spectrum Reach delivers tailored advertising and production for the modern media landscape.

Charter also distributes award-winning news coverage, sports and high-quality original programming to its customers through Spectrum Networks and Spectrum Originals.

Charter also distributes award-winning news coverage and sports programming to its customers through Spectrum Networks.

At December 31, 2022, Liberty Broadband owned approximately 47.2 million shares of Charter Class A common stock, representing an approximate 30.9% economic ownership interest in Charter’s issued and outstanding shares.

Key Drivers of Revenue

GCI Holdings earns revenue from the monthly fees customers pay for wireless, data, video, voice and managed services.

GCI Holdings earns revenue from the monthly fees customers pay for data, wireless, video, voice and managed services.

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.

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Because of this geographic concentration, growth of GCI Holdings’ business and operations depends upon economic conditions in Alaska.

In December 2019, Chinese officials reported a novel coronavirus outbreak.

COVID-19 has since spread through China and internationally.

On March 11, 2020, the World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices, which has caused a significant disruption to most sectors of the economy.

Although the COVID-19 pandemic has significantly impacted Alaska, GCI Holdings has continued to deliver services uninterrupted by the pandemic and expects to be able to continue to respond to the increase in network activity.

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 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.

There is a risk that GCI Holdings’ accounts receivable and bad debt expense will increase substantially due to the economic impact of the COVID-19 pandemic.

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 COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets.

The Russian invasion of Ukraine in February 2022 has led to further economic disruptions.

Federal Reserve increased interest rates starting in March 2022 and additional increases are expected to continue.

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

and global economy.

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.

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 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 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.

The Alaska state government has significant reserves that GCI Holdings believes will 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 the COVID-19 pandemic, 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.

In addition, adverse economic conditions may lead to an increased number of customers that are unable to pay for services.

There is a risk that GCI Holdings’ accounts receivable and bad debt expense could increase substantially in a recessionary environment.

If a recession occurs, 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 2022, GCI Holdings began to experience the impact of inflation-sensitive items, including upward pressure on the costs of materials, labor, and other items that are critical to GCI Holding’s business.

GCI Holdings continues to monitor these impacts closely and, if costs continue to rise, may be unable to recoup losses or offset diminished margins by passing these costs through to its customers or implementing offsetting cost reductions.

Rural Health Care (“RHC”) Program

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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.

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.

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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.

Subsequently, on August 16, 2021, GCI submitted a request for approval of rates for 17 additional sites, 13 of which the FCC approved on December 22, 2022.

The rest remain pending.

RHC Program Funding Cap.

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Enforcement Bureau and Related Inquiries.

On March 23, 2018, GCI Holdings received a letter of inquiry and request for information from the Enforcement Bureau of the FCC relating to the period beginning January 1, 2015 and including all future periods, to which it is in the process of responding.

This includes inquiry into the rates charged by GCI Holdings, and presently it is unable to assess the ultimate outcome of this rate inquiry.

Other aspects related to the Enforcement Bureau’s review of GCI Holdings’ compliance with program rules are discussed separately below.

This includes inquiry into the rates charged by GCI Holdings and other aspects related to the Enforcement Bureau’s review of GCI Holdings’ compliance with program rules, which are discussed separately below.

The ongoing uncertainty in program funding, as well as the uncertainty associated with the rate review, could have an adverse effect on its business, financial position, results of operations or liquidity.

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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.

The FCC’s Enforcement Bureau and GCI Holdings held discussions regarding GCI Holdings potential RHC Program compliance issues related to certain of its contracts with its RHC customers for which GCI Holdings had previously recognized an estimated liability for a probable loss of approximately $12 million in 2019 for contracts that were deemed probable of not complying with the RHC Program rules.

During the year ended December 31, 2022, GCI Holdings recorded an additional estimated settlement expense of $15 million relating to a settlement offer made by GCI Holdings resulting in a total estimated liability of $27 million.

GCI Holdings also identified certain contracts where additional loss was reasonably possible and such loss could range from zero to $30 million, which is a reduction of the reasonably possible loss range as previously disclosed in our December 31, 2021 Form 10-K given the settlement offer made during 2022.

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.

The DOJ and GCI Holdings held discussions regarding the qui tam action whereby the DOJ clarified that its investigation relates to the years from 2010 through 2019 and alleged that GCI Holdings had submitted false claims under the RHC Program during this time period.

GCI Holdings continues to work with the DOJ related to this matter and has recorded a $14 million estimated settlement expense during the year ended December 31, 2022 to reflect discussions and settlement offers that GCI Holdings made to the DOJ during 2022.

However, the Company is unable to assess the ultimate outcome of this action and is unable to reasonably estimate any range of additional possible loss beyond the $14 million estimated settlement liability, including any type of fine or penalty that may ultimately be assessed as permitted under the applicable law.

Separately, during the third quarter of 2022, GCI Holdings became aware of possible RHC Program compliance issues relating to potential conflicts of interest identified in the historical competitive bidding process with respect to certain of its contracts with its RHC customers.

GCI Holdings notified the FCC’s Enforcement Bureau of the potential compliance issues;

however, the Company is unable to assess the ultimate outcome of the potential compliance issues and is unable to reasonably estimate any range of loss or possible loss.

Revision of Support Calculations.

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

On December 6, 2019, that appeal was held in abeyance for nine months due to pending Petitions for Reconsideration filed by other parties at the FCC and on September 25, 2020, the period of abeyance was extended through March 8, 2021.

On December 6, 2019, that appeal was held in abeyance for nine months due to pending Petitions for Reconsideration filed by other parties at the FCC.

The period of abeyance was subsequently extended several times, and is currently in place through March 8, 2023.

At the direction of the FCC, USAC has released a database that purports to determine a median rate which will cap the amount of support available for each service sold under the program, starting in the funding year ending June 30, 2022.

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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.

On April 12, 2022 and May 25, 2022, the Bureau issued Orders further extending the January 19, 2021 and April 8, 2021 waivers regarding use of the database by health care providers seeking support under the RHC Program through the funding year ending June 30, 2024.

On January 26, 2023, the Commission adopted an Order on Reconsideration, Report and Order, and Second Further Notice of Proposed Rulemaking, which grants the petitions challenging the rates database, returns the RHC Telecom Program to the rate determination rules in place prior to the adoption of the rates database, permits providers to determine rural rates based on previously approved rates through the funding years ending June 30, 2025 and June 30, 2026, and seeks comment on future revisions to the rate determination rules.

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.

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

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.

Charter’s principal competitors for Internet services are the broadband services provided by companies, including fiber-to-the-home, 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.

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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.

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 on 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 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.

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 with attractive pricing.

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.

During the year ended December 31, 2022, Charter added 1,728,000 mobile lines, 344,000 Internet customers and 126,000 residential and Small and Medium Business customer relationships, which excludes mobile-only customers.

continues to see lower customer move rates and switching behavior among providers, which has reduced its selling opportunities.

In October 2022, Charter introduced Spectrum One, which brings together Spectrum Internet, Advanced WiFi and Unlimited Spectrum Mobile, to offer consumers fast, reliable and secure online connections on their favorite devices at home and on-the-go in a high-value package which contributed to Charter’s increase in mobile lines in the fourth quarter.

In 2022, Charter also made targeted investments in employee wages and benefits inside of its operations to build employee skill sets and tenure as well as continued investments in digitization of its customer service platforms and proactive maintenance all with the goal of improving the customer experience, reducing transactions and driving customer growth.

Charter spent $1.8 billion on its rural construction initiative during the year ended December 31, 2022.

Charter expects that over time, its rural construction initiative will support customer growth and in 2022, Charter constructed over 200,000 rural passings.

In addition, Charter continues to evolve and upgrade its network to provide higher Internet speeds and reliability and invest in its products and customer service platforms.

By continually improving its product set and offering consumers the opportunity to save money by switching to its services, Charter believes it can continue to penetrate its expanding footprint and attract more spend on additional products for its existing customers.

Results of Operations—Consolidated

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Corporate and other

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.

Revenue decreased $13 million and increased $937 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

Revenue at GCI Holdings remained relatively flat for the year ended December 31, 2022, as compared to the corresponding prior year period.

The increase in revenue for the year ended December 31, 2021, as compared to the corresponding prior year period, was 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.

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

Revenue for Corporate and other decreased for the year ended December 31, 2022, as compared to the corresponding prior year period, due to the sale of Skyhook.

With the sale of Skyhook in May 2022, Corporate and other revenue was minimal during the first half of 2022 and will be zero in future periods as all Corporate and other revenue was generated by Skyhook.

Revenue for Corporate and other increased slightly for the year ended December 31, 2021, as compared to the corresponding prior year period, 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.

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

Consolidated operating loss decreased $59 million and increased $38 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

Operating loss for Corporate and other for the years ended December 31, 2022 and 2021 included net litigation settlements of $38 million and $95 million, respectively.

Operating loss for Corporate and other decreased for the year ended December 31, 2022, as compared to the corresponding prior year period, primarily due to decreased litigation settlements, as well as decreased professional service fees.

Operating loss for Corporate and other for the year ended December 31, 2021, as compared to the corresponding prior year period, increased due to increased litigation settlements, as well as an increase in professional service fees and corporate compensation expenses, partially offset by the absence of transaction costs in 2021.

Operating income decreased at GCI Holdings for the year ended December 31, 2022, as compared to the corresponding prior year period, and increased for the year ended December 31, 2021, as compared to the corresponding prior year period.

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 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.

Stock-based compensation expense decreased $4 million and increased $32 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The decrease in stock-based compensation expense during 2022 was primarily due to a decrease in Liberty Broadband’s allocation rate per the services agreement arrangement as described in note 1 to the accompanying consolidated financial statements.

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.

Adjusted OIBDA

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Adjusted OIBDA improved $22 million and $319 million in the years ended December 31, 2022 and 2021, 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.

GCI Holdings’ Adjusted OIBDA improved $4 million and $344 million in the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

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

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

Other Income and Expense:

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

Gain (loss) on dispositions, net

Interest expense

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

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.

Interest expense increased $16 million and $89 million during the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The increase in 2022 was driven by higher interest rates on our variable rate debt.

The increase in 2021 was driven by additional amounts outstanding on the Margin Loan Facility, the 2.75% Debentures and the 1.25% Debentures (each as defined in note 8 to the accompanying consolidated financial statements).

The increase in 2021 was partially offset by a decrease in our weighted average interest rates.

Share of earnings (losses) of affiliates

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Charter’s revenue increased $2.3 billion and $3.6 billion during the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior years.

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.

Revenue growth during both years was primarily due to increases in the number of residential Internet, mobile and commercial customers and price adjustments, as well as higher advertising sales in 2022.

The increases in revenue during 2022 and 2021 were partially offset by the net impact of increased operating expenses, excluding stock-based compensation, of $1.3 billion and $1.7 billion, respectively.

Operating costs increased during the year ended December 31, 2022, as compared to the corresponding prior year, primarily due to increased mobile costs, costs to service customers, as well as other corporate operating costs, partially offset by decreased programming costs and regulatory, connectivity and produced content costs.

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.

Operating costs for the year ended December 31, 2021 also increased due to increased litigation settlements, including the 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.

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.

Mobile costs were comprised of mobile device, 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.

Costs to service customers increased during 2022 compared to the corresponding period in 2021 primarily due to higher bad debt, adjustments to job structure, pay and benefits to build a more skilled and longer tenured workforce and fuel costs.

Other corporate operating costs increased during 2022 compared to the corresponding period in 2021 primarily due to increased advertising sales expense driven by higher political advertising revenue, as well as higher computer and software expense and labor costs.

Regulatory, connectivity and produced content decreased during 2022 compared to the corresponding period in 2021 primarily due to lower costs of video devices sold to customers and regulatory pass-through fees, as well as lower sports rights costs as a result of more basketball games during 2021 as compared to 2022 as the prior period had additional games due to the delayed start of the 2020 - 2021 National Basketball Association ("NBA") season as a result of COVID-19.

Regulatory, connectivity and produced content increased during 2021 primarily due to higher sports rights costs as a result of more NBA and Major League Baseball games during 2021 as compared to the corresponding period in 2020.

Programming costs decreased during 2022 compared to the corresponding period in 2021 as a result of fewer customers and a higher mix of lower cost video packages within Charter’s video customer base, offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent.

Programming costs increased during 2021 compared to the corresponding period in 2020 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.

Charter’s Adjusted OIBDA in 2022 and 2021 increased for the reasons described above.

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Charter’s results were also impacted by other expenses, net which increased $362 million and $35 million in the years ended December 31, 2022 and 2021, 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 changes in other expenses, net during the year ended December 31, 2022, as compared to the corresponding period in the prior year, were primarily due to increased net interest expense, as well as increased losses on extinguishment of debt and increased losses on equity investments.

The changes in other expenses, net during the year ended December 31, 2021, as compared to the corresponding period in the prior year, 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.

Income tax expense increased $545 million and $442 million during the years ended December 31, 2022 and 2021, respectively, compared to the corresponding prior year periods.

Income tax expense increased during the year ended December 31, 2022, as compared to the corresponding period in the prior year, primarily as a result of an increase in pretax income, lower benefit from state tax rate changes and decreased recognition of excess tax benefits resulting from share-based compensation during 2021.

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.

Gain (loss) on dilution of investment in equity affiliate

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.

The loss on dilution of investment in affiliate decreased by $39 million and $82 million during the years ended December 31, 2022 and 2021, respectively, compared to the corresponding periods in the prior year.

The decrease in 2022 is primarily due to a decrease in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, partially offset by a smaller gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares, compared to the corresponding period in the prior year.

The decrease in 2021 is primarily due to decreases in issuance of Charter’s common stock from the exercise of stock options held by employees and other third parties, partially offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares.

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

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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.

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 (see notes 5 and 8 to the accompanying consolidated financial statements for additional discussion).

The increase in realized and unrealized gains in 2022, compared to the corresponding period in the prior year, was primarily due to an increase in unrealized gains on the indemnification obligation, as well as the changes in fair value of the 2.75% Debentures, the 1.25% Debentures and the 1.75% Debentures related to changes in market price of the underlying Charter stock.

The increase in 2021, compared to the corresponding period in the prior year, was primarily related to the assumption of the indemnification obligation by the Company as a result of the Combination, as well as the changes in fair value of the 2.75% Debentures, the 1.25% Debentures and the 1.75% Debentures related to changes in market price of the underlying Charter stock.

Gain (loss) on dispositions, net

Liberty Broadband recognized a gain on the sale of Skyhook of $179 million, net of closing fees, in the second quarter of 2022, which is recorded in Gain (loss) on dispositions, net in the accompanying consolidated statement of operations.

In 2021, Liberty Broadband recorded a gain of $12 million on the sale of an investment that occurred during the third quarter of 2021, which is recorded in Gain (loss) on dispositions, net in the accompanying consolidated statement of operations.

Other, net expense increased $64 million and $9 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The increase in both years was primarily due to a tax sharing receivable with Qurate Retail, Inc.

(“Qurate Retail”) that resulted in increased losses of $69 million and $12 million for the years ended December 31, 2022 and 2021, respectively.

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

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Our effective tax rate for the year ended December 31, 2022 was 18%.

Our effective tax rate was lower than the federal tax rate of 21% in 2022 primarily due to the nontaxable decrease in the fair value of the indemnification obligation owed to Qurate Retail and tax benefits from the sale of stock of a subsidiary.

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.

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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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Net cash provided (used) by financing activities

The increase in cash used by operating activities in 2022, as compared to the corresponding prior year period, was primarily driven by the non-recurring favorable collection of accounts receivable during the first quarter of 2021 from the RHC Program for the funding years that ended on June 30, 2019 and June 30, 2020.

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%.

During the years ended December 31, 2022 and 2021, net cash flows provided by investing activities were primarily related to the sale of 6,168,174 and 6,077,664 shares of Charter Class A common stock for $3.0 billion and $4.2 billion, respectively, 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 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.

Additionally, the Company received $163 million of cash proceeds, net of closing fees, from the sale of Skyhook.

These net inflows of cash was partially offset by capital expenditures of $181 million and $134 million during the years ended December 31, 2022 and 2021, respectively.

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.

During the year ended December 31, 2022, net cash flows used in financing activities were primarily repurchases of Series A and Series C Liberty Broadband common stock of $2.9 billion, partially offset by net borrowings of debt of approximately $100 million of outstanding Revolving Loans (as defined in note 8 to the accompanying consolidated financial statements) under the Margin Loan Facility.

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 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 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 Margin Loan Facility and issuances of multiple senior exchangeable debentures (see note 8 to the accompanying consolidated 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 $185 million, approximately $175 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.

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

Although it is reasonably possible we may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made.

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.

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

Although it is reasonably possible we may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made, except for those matters disclosed in notes 10 and 14 to the accompanying consolidated financial statements.

Information concerning the amount and timing of current and long-term material cash requirements, both accrued and off-balance sheet, excluding loss contingencies and uncertain tax positions, if any, where it is indeterminable when payments will be made, is summarized below:

Payments due by period

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Purchase 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.

(1) Amounts are reflected in the table at the outstanding principal amount at December 31, 2022, 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.

Amounts do not assume additional borrowings or refinancings of existing debt.

(2) Amounts (i) are based on our outstanding debt at December 31, 2021, (ii) assume the interest rates on our variable rate debt remain constant at the December 31, 2021 rates and (iii) assume that our existing debt is repaid at maturity.

(2) Amounts (i) are based on our outstanding debt at December 31, 2022, (ii) assume the interest rates on our variable rate debt remain constant at the December 31, 2022 rates and (iii) assume that our existing debt is repaid at contractual maturity.

Critical Accounting Estimates and Policies

The preparation of our financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The preparation of our financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Listed below are the accounting estimates and accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.

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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.

This excess basis is allocated to the underlying assets and liabilities of the Company’s equity method investee through an acquisition 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 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.

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, 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.

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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.

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.

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.

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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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.

For comparison and discussion purposes the Company is presenting (a) the results of GCI Holdings for the years ended December 31, 2022 and 2021, as included in the accompanying consolidated financial statements of the Company and (b) the actual historical results of GCI Holdings for the year ended December 31, 2020, 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.

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The financial information below is presented voluntarily and does not purport to represent what the results of operations of GCI Holdings would have been if it were a wholly owned subsidiary of Liberty Broadband for the periods presented or to project the results of operations of GCI Holdings for any future periods.

GCI Holdings provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska.

GCI Holdings provides a full range of data, wireless, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska.

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

Revenue generating wireless lines in service 1

Non-revenue generating wireless lines in service 2

Wireless lines in service

Cable modem subscribers 1

Basic subscribers 4

Total local access lines in service 5

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

2 A non-revenue generating wireless line in service is defined as a data-only line with no monthly fee for services.

Wireless lines in service 2

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.

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

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.

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

GCI Holdings’ operating results for the years ended December 31, 2022, 2021 and 2020 are as follows:

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Stock-based compensation

Impairment of intangibles and long-lived assets

Insurance proceeds and restructuring, net

Litigation settlement

Depreciation and amortization

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Total revenue

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 $17 million and $26 million for the years ended December 31, 2022 and 2021, 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 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.

Consumer wireless revenue increased $9 million and $13 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The increases in both years were primarily due to increased plan service fee revenue 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, which was driven by an increase in the number of handsets sold.

Consumer other revenue decreased $31 million and $20 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

Consumer other revenue consists of consumer video and voice revenue.

The decreases in both years were due to a decrease in video revenue primarily driven by decreased video subscribers.

This was the result of both the transition from traditional linear video delivery to IP delivery and GCI Holdings’ decision to discontinue selling bulk video packages for multi-dwelling units.

Additionally, when 2021 is compared to the corresponding prior year period, there was a decrease in advertising revenue driven by a reduction in advertising sales due to the absence of a major political election in 2021 compared to 2020.

Historically, GCI Holdings has seen declines in video and voice subscribers and revenue and expects a continued decrease as customers potentially choose alternative services.

Business data revenue increased $27 million and $29 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The increases in both years were primarily due to increased

sales to school and health care customers due to service upgrades as well as new customer growth.

The increases for both periods were partially offset by decreases in professional services revenue driven by a reduction in time and materials project work.

Business wireless revenue decreased $21 million and $15 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The decrease in 2022 was primarily due to decreases in roaming revenue.

The decrease in roaming revenue was driven by a contract amendment signed in the fourth quarter of 2021.

Although the contract amendment will result in lower annual roaming revenue, GCI Holdings will benefit from the extension of the agreement for several years as well as continued backhaul revenue.

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 $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 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 $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 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 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.

Business other revenue decreased $2 million and $12 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

Business other revenue consists of business video and voice revenue.

The decrease in 2022 was primarily due to decreased business video and long distance revenue.

The decrease in 2021 was primarily due to the sale of the Company’s broadcast television station in the third quarter of 2020, as well as a reduction in conference calling, long distance minutes and local service lines for voice services.

Historically, GCI Holdings has seen declines in video and voice subscribers and revenue and has not focused business efforts on growth in these areas.

Operating expenses decreased $22 million and increased $1 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The decrease in 2022 was primarily due to a decrease in video costs, primarily due to a decrease in costs paid to content producers driven by reduced video subscribers, partially offset by an increase in costs to operate GCI Holdings’ network driven by the increase in demand for data services.

The increase in 2021 was primarily due to an increase in costs to operate our network driven by the increase in demand from school and health care customers, as well as an increase in wireless handset costs.

These increases were partially offset by a decrease in professional services costs driven by a reduction in time and materials project work and a decrease 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.

Selling, general and administrative expenses increased $17 million and $11 million for the years ended December 31, 2022 and 2021, as compared to the corresponding prior year periods.

The increase in 2022 was primarily due to increases in labor related costs driven by an increase in contract labor costs.

The increase in 2021 was primarily due to an increase in labor related costs driven by increases in healthcare costs as employees returned to normal healthcare interactions and increases in contract labor.

The increase is partially offset by decreased legal and compliance costs and decreased lease and facility costs.

Stock based compensation decreased $3 million and increased $6 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The decrease in 2022 was due to awards granted in prior years that became fully vested in 2021.

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;

employees who left the company prior to the vesting of their awards;

and a decrease in the number of awards granted.

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.

Additionally, stock-based compensation expense for the year ended December 31, 2020 included the reversal of expense for performance-based awards that did not vest.

Litigation settlement increased $29 million for the year ended December 31, 2022, as compared to the corresponding prior year period.

This was due to an increase in the estimated liability of $29 million relating to compliance with RHC program rules which reflects settlement offers that GCI Holdings made to the DOJ and the Enforcement Bureau of the FCC in 2022.

Depreciation and amortization decreased $4 million and increased $18 million for the years ended December 31, 2022 and 2021, respectively, as compared to the corresponding prior year periods.

The decrease in 2022 was due to lower amortization expense because of an accelerated recognition pattern for amortizing intangible assets.

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.

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