UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36713

LIBERTY BROADBAND CORPORATION

(Exact name of Registrant as specified in its charter)


State of Delaware		47-1211994
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12300 Liberty Boulevard Englewood, Colorado		80112
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (720) 875-5700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Series A common stock	LBRDA	The Nasdaq Stock Market LLC
Series C common stock	LBRDK	The Nasdaq Stock Market LLC
Series A Cumulative Redeemable preferred stock	LBRDP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒		Accelerated Filer ☐		Non-accelerated Filer ☐		Smaller Reporting Company ☐		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

The number of outstanding shares of Liberty Broadband Corporation’s common stock as of April 30, 2021 was:

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)


	March 31,		December 31,
	2021		2020

	amounts in thousands
Assets
Current assets:
Cash and cash equivalents	$	1,177,161	1,417,802
Trade and other receivables, net of allowance for doubtful accounts of $537 and $10, respectively		201,228	349,256
Other current assets		82,954	79,453
Total current assets		1,461,343	1,846,511
Investment in Charter, accounted for using the equity method (note 5)		15,734,862	16,178,939
Property and equipment, net		1,071,969	1,098,512
Intangible assets not subject to amortization
Goodwill		764,686	745,577
Cable certificates		550,000	560,000
Other		36,500	21,500
Intangible assets subject to amortization, net (note 6)		624,956	674,049
Tax sharing receivable		86,260	94,549
Other assets, net		160,466	151,487
Total assets	$	20,491,042	21,371,124

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	March 31,		December 31,
	2021		2020

	amounts in thousands,
	except share amounts
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$	198,045	97,933
Deferred revenue		22,244	24,926
Current portion of debt, including $24,741 and $26,350 measured at fair value, respectively (note 7)		29,425	31,026
Indemnification obligation (note 4)		292,873	344,643
Other current liabilities		133,499	113,234
Total current liabilities		676,086	611,762
Long-term debt, net, including $1,399,600 and $1,445,775 measured at fair value, respectively (note 7)		4,557,172	4,785,207
Obligations under finance leases and tower obligations, excluding current portion		91,524	92,840
Long-term deferred revenue		38,278	39,649
Deferred income tax liabilities		1,974,045	1,977,643
Preferred stock (note 8)		202,795	202,917
Other liabilities		140,910	146,687
Total liabilities		7,680,810	7,856,705
Equity
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 26,495,557 and 26,495,249 at March 31, 2021 and December 31, 2020, respectively		265	265
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,549,162 and 2,549,470 at March 31, 2021 and December 31, 2020, respectively		25	25
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 162,652,971 and 167,480,926 at March 31, 2021 and December 31, 2020, respectively		1,627	1,675
Additional paid-in capital		9,563,275	10,319,754
Accumulated other comprehensive earnings, net of taxes		15,597	15,436
Retained earnings		3,217,724	3,165,504
Total stockholders' equity		12,798,513	13,502,659
Non-controlling interests		11,719	11,760
Total equity		12,810,232	13,514,419
Commitments and contingencies (note 10)
Total liabilities and equity	$	20,491,042	21,371,124

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended
	March 31,
	2021		2020

	amounts in thousands, except per share amounts
Revenue	$	246,534	4,104
Operating costs and expenses
Operating, including stock-based compensation (note 9)		69,178	2,468
Selling, general and administrative, including stock-based compensation and transaction costs (note 9)		104,473	8,418
Depreciation and amortization		63,762	493
Litigation settlement		110,000	—
		347,413	11,379
Operating income (loss)		(100,879)	(7,275)
Other income (expense):
Interest expense (including amortization of deferred loan fees)		(33,143)	(5,861)
Share of earnings (losses) of affiliates (note 5)		188,979	61,682
Gain (loss) on dilution of investment in affiliate (note 5)		(82,215)	(59,325)
Realized and unrealized gains (losses) on financial instruments, net (note 4)		99,348	—
Other, net		(8,126)	163
Earnings (loss) before income taxes		63,964	(10,616)
Income tax (expense) benefit		(11,785)	2,774
Net earnings (loss)		52,179	(7,842)
Less net earnings (loss) attributable to the non-controlling interests		(41)	—
Net earnings (loss) attributable to Liberty Broadband shareholders	$	52,220	(7,842)
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)	$	0.27	(0.04)
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)	$	0.27	(0.04)

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Net earnings (loss)	$	52,179	(7,842)
Other comprehensive earnings (loss), net of taxes:
Comprehensive earnings (loss) attributable to debt credit risk adjustments		161	—
Other		—	—
Other comprehensive earnings (loss), net of taxes		161	—
Comprehensive earnings (loss)		52,340	(7,842)
Less comprehensive earnings (loss) attributable to the non-controlling interests		(41)	—
Comprehensive earnings (loss) attributable to Liberty Broadband shareholders	$	52,381	(7,842)

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Cash flows from operating activities:
Net earnings (loss)	$	52,179	(7,842)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		63,762	493
Stock-based compensation		9,870	1,801
Litigation settlement		110,000	—
Share of (earnings) losses of affiliate, net		(188,979)	(61,682)
(Gain) loss on dilution of investment in affiliate		82,215	59,325
Realized and unrealized (gains) losses on financial instruments, net		(99,348)	—
Deferred income tax expense (benefit)		10,669	(2,774)
Other, net		(739)	436
Changes in operating assets and liabilities:
Current and other assets		164,639	(192)
Payables and other liabilities		(11,304)	(4,066)
Net cash provided by (used in) operating activities		192,964	(14,501)
Cash flows from investing activities:
Capital expended for property and equipment		(28,617)	(15)
Exercise of preemptive right to purchase Charter shares		—	(14,910)
Cash received for Charter shares repurchased by Charter		518,405	—
Other investing activities, net		141	—
Net cash provided by (used in) investing activities		489,929	(14,925)
Cash flows from financing activities:
Repayments of debt, finance leases and tower obligations		(182,571)	—
Repurchases of Liberty Broadband common stock		(738,411)	—
Other financing activities, net		(2,481)	(1,941)
Net cash provided by (used in) financing activities		(923,463)	(1,941)
Net increase (decrease) in cash, cash equivalents and restricted cash		(240,570)	(31,367)
Cash, cash equivalents and restricted cash, beginning of period		1,433,292	49,724
Cash, cash equivalents and restricted cash, end of period	$	1,192,722	18,357

The following table reconciles cash and cash equivalents and restricted cash reported in the accompanying condensed consolidated balance sheets to the total amount presented in the accompanying condensed consolidated statement of cash flows:


	March 31,		December 31,
	2021		2020

	amounts in thousands
Cash and cash equivalents	$	1,177,161	1,417,802
Restricted cash included in other current assets		15,561	15,490
Total cash and cash equivalents and restricted cash at end of period	$	1,192,722	1,433,292

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Equity

(unaudited)


						Accumulated		Noncontrolling
					Additional	other		interest in
	Common stock				paid-in	comprehensive	Retained	equity of
	Series A		Series B	Series C	capital	earnings	earnings	subsidiaries	Total equity

	amounts in thousands
Balance at January 1, 2021	$	265	25	1,675	10,319,754	15,436	3,165,504	11,760	13,514,419
Net earnings (loss)		—	—	—	—	—	52,220	(41)	52,179
Other comprehensive loss		—	—	—	—	161	—	—	161
Stock-based compensation		—	—	—	9,859	—	—	—	9,859
Issuance of common stock upon exercise of stock options		—	—	—	151	—	—	—	151
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(2,631)	—	—	—	(2,631)
Series C Liberty Broadband stock repurchases		—	—	(48)	(738,363)	—	—	—	(738,411)
Noncontrolling interest activity at Charter and other		—	—	—	(25,495)	—	—	—	(25,495)
Balance at March 31, 2021	$	265	25	1,627	9,563,275	15,597	3,217,724	11,719	12,810,232


						Accumulated
					Additional	other
	Common stock				paid-in	comprehensive	Retained
	Series A		Series B	Series C	capital	earnings	earnings	Total equity

	amounts in thousands
Balance at January 1, 2020	$	265	25	1,529	7,890,084	8,158	2,767,885	10,667,946
Net earnings (loss)		—	—	—	—	—	(7,842)	(7,842)
Stock-based compensation		—	—	—	1,805	—	—	1,805
Issuance of common stock upon exercise of stock options		—	—	1	3	—	—	4
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(1,944)	—	—	(1,944)
Noncontrolling interest activity at Charter		—	—	—	(12,998)	—	—	(12,998)
Balance at March 31, 2020	$	265	25	1,530	7,876,950	8,158	2,760,043	10,646,971

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

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

On December 18, 2020, pursuant to the Agreement and Plan of Merger, dated as of August 6, 2020, entered into by GCI Liberty, Inc. (“GCI Liberty”), Liberty Broadband, Grizzly Merger Sub 1, LLC, a wholly owned subsidiary of Liberty Broadband (“Merger LLC”), and Grizzly Merger Sub 2, Inc., a wholly owned subsidiary of Merger LLC (“Merger Sub”), Merger Sub merged with and into GCI Liberty (the “First Merger”), with GCI Liberty surviving the First Merger as an indirect wholly owned subsidiary of Liberty Broadband (the “Surviving Corporation”), and immediately following the First Merger, GCI Liberty (as the Surviving Corporation in the First Merger) merged with and into Merger LLC (the “Upstream Merger”, and together with the First Merger, the “Combination”), with Merger LLC surviving the Upstream Merger as a wholly owned subsidiary of Liberty Broadband.

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 (“GCI Liberty Preferred Stock”) received one share of newly issued Liberty Broadband Series A Cumulative Redeemable Preferred Stock (“Liberty Broadband 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 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.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty Broadband's Annual Report on Form 10-K for the year ended December 31, 2020. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The preparation of financial statements in conformity with GAAP requires management 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. Actual results could differ from those estimates. The Company considers (i) the application of the equity method of accounting for its affiliates, (ii) non-recurring fair value measurements of non-financial instruments and (iii) accounting for income taxes to be its most significant estimates.

In December 2019, Chinese officials reported a novel coronavirus outbreak (“COVID-19”). 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

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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.

We are not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

Through a number of prior years’ transactions, including the Combination, Liberty Broadband has acquired an interest in Charter. Liberty Broadband holds an investment in Charter that is accounted for using the equity method. Liberty Broadband does not control the decision making process or business management practices of this affiliate. Accordingly, Liberty Broadband relies on the management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty Broadband relies on audit reports that are provided by the affiliate's independent auditor on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Liberty Broadband's condensed consolidated financial statements.

Spin-Off Arrangements

In connection with the Broadband Spin-Off, Liberty (for accounting purposes a related party of the Company) and Liberty Broadband entered into certain agreements in order to govern certain of the ongoing relationships between the two companies and to provide for an orderly transition, including a services agreement and a facilities sharing agreement. Under the facilities sharing agreement, Liberty Broadband shares office space with Liberty and related amenities at Liberty’s corporate headquarters. Liberty Broadband will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services which will be negotiated semi-annually.

Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. In December 2019, the Company entered into an amendment to the services agreement with Liberty in connection with Liberty’s entry into a new employment arrangement with Gregory B. Maffei, the Company’s President and Chief Executive Officer. Under the amended services agreement, components of his compensation would either be paid directly to him by each of the Company, Liberty TripAdvisor Holdings, Inc., GCI Liberty, and Qurate Retail, Inc. (“Qurate Retail”) (collectively, the “Service Companies”) or reimbursed to Liberty, in each case, based on allocations among Liberty and the Service Companies set forth in the amended services agreement, currently set at 18% for the Company but subject to adjustment on an annual basis upon the occurrence of certain events. Following the Combination, GCI Liberty no longer participates in the services agreement arrangement.

Additionally, in connection with a prior transaction, GCI Liberty and Qurate Retail (for accounting purposes a related party of the Company) entered into a tax sharing agreement, which was assumed by Liberty Broadband as a result of the Combination. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and Liberty Broadband and other agreements related to tax matters.

Under these various agreements, amounts reimbursable to Liberty were approximately $3.5 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively. Liberty Broadband had a tax sharing receivable with Qurate Retail of $110.0 million and $119.0 million as of March 31, 2021 and December 31, 2020, respectively, of which $23.7 million and $24.4 million was in Other current assets as of March 31, 2021 and December 31, 2020, respectively.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(2) Earnings Attributable to Liberty Broadband Stockholders Per Common Share

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty Broadband shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Excluded from diluted EPS for the three months ended March 31, 2021 and 2020 are 893 thousand and zero potential common shares, respectively, because their inclusion would have been antidilutive.


	Liberty Broadband Common Stock
	Three months	Three months
	ended	ended
	March 31, 2021	March 31, 2020

	(numbers of shares in thousands)
Basic WASO	194,433	181,902
Potentially dilutive shares (1)	1,681	906
Diluted WASO	196,114	182,808

(1) Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

(3) Acquisition

On December 18, 2020, the Company completed the Combination with GCI Liberty. The Company accounted for the Combination using the acquisition method of accounting.

The following details the acquisition consideration as of December 18, 2020 (amounts in thousands), which is primarily based on level 1 inputs:


Fair value of newly issued Liberty Broadband Series C and B common stock ¹	$	9,695,184
Fair value of newly issued Liberty Broadband Preferred Stock ²		202,944
Fair value of share-based payment replacement awards ³		104,683
Total fair value of consideration		10,002,811
Less: Fair value of Liberty Broadband shares attributable to share repurchase ⁴		(6,738,609)
Total fair value of consideration attributable to business combination		3,264,202
Less: Fair value of newly issued Liberty Broadband Preferred Stock²		(202,944)
Less: Fair value of share-based payment replacement awards accounted for as liability awards		(1,309)
Total fair value of acquisition consideration to be allocated	$	3,059,949

(1)

The fair value of newly issued Series C and B Liberty Broadband common stock was calculated by multiplying (i) the outstanding shares of GCI Liberty Series A and B common stock as of December 18, 2020 (ii) the exchange ratio of 0.580, and (iii) the closing share price of Liberty Broadband Series C and B common stock on December 18, 2020. Liberty Broadband issued 61.3 million shares of Series C common stock and 98 thousand shares of Series B common stock.

(2)

The fair value of the newly issued Liberty Broadband Preferred Stock was calculated by multiplying (i) the outstanding shares of GCI Liberty Preferred Stock as of December 18, 2020, and (ii) the closing share price of GCI

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liberty Preferred Stock on December 18, 2020. The GCI Liberty Preferred Stock was converted on a one to one ratio into Liberty Broadband Preferred Stock.

(3)

This amount represents the fair value of share-based payment replacement awards.

(4)

GCI Liberty owned approximately 42.7 million shares of Liberty Broadband Series C common stock. The acquisition of Liberty Broadband Series C common stock is accounted for as a share repurchase by Liberty Broadband. This amount was calculated by multiplying (i) the number of shares of Liberty Broadband Series C common stock owned by GCI Liberty as of December 18, 2020 and (ii) the closing share price of Liberty Broadband Series C common stock on December 18, 2020.

The application of the acquisition method resulted in the assignment of purchase price to the GCI Liberty assets acquired and liabilities assumed based on preliminary estimates of their acquisition date fair values (primarily level 3). The determination of the fair values of the acquired assets and liabilities (and the determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

The preliminary acquisition purchase price allocation for GCI Liberty is as follows (amounts in thousands):


Cash and cash equivalents including restricted cash	$	592,240
Receivables		339,061
Property and equipment		1,108,588
Goodwill		758,189
Investment in Charter		3,493,677
Intangible assets not subject to amortization		586,500
Intangible assets subject to amortization		638,855
Other assets		302,570
Deferred revenue		(60,292)
Debt, including obligations under tower and finance leases		(2,772,147)
Indemnification liability		(336,141)
Deferred income tax liabilities		(1,018,993)
Preferred stock		(202,944)
Non-controlling interest		(11,771)
Other liabilities		(357,443)
	$	3,059,949

Goodwill is calculated as the excess of the consideration transferred over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, value associated with future customers, continued innovation and non-contractual relationships. Amortizable intangible assets of $638.9 million were acquired and are comprised of customer relationships with a weighted average useful life of approximately 14 years and right-to-use assets with a weighted average useful life of approximately 12 years. Approximately $134.3 million of the acquired goodwill will be deductible for income tax purposes. As of March 31, 2021, the valuation related to the acquisition of GCI Liberty is not final, and the acquisition price allocation is preliminary and subject to revision. The primary areas of our acquisition price allocation that changed from the initial allocation relate to an increase to property and equipment of $3.5 million, an increase to goodwill of $19.1 million, an increase to intangible assets not subject to amortization of $5.0 million, a decrease to intangible assets subject to amortization of $35.0 million and an increase to deferred income tax liabilities of $7.4 million. The primary areas of the acquisition price allocation that are not yet finalized are related to property and equipment, intangible assets, liabilities, deferred income tax liabilities, and discount rates used to determine the fair value of intangible assets.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The unaudited pro forma revenue, net earnings and basic and diluted net earnings per common share of Liberty Broadband, prepared utilizing the historical financial statements of Liberty Broadband, giving effect to acquisition accounting related adjustments made at the time of acquisition, as if the acquisition discussed above occurred on January 1, 2019, are as follows:


	Three months ended
	March 31, 2020
	amounts in thousands,
	except per share amounts
Revenue	$	238,383
Net earnings (loss)	$	12,318
Net earnings (loss) attributable to Liberty Broadband shareholders	$	12,343
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share	$	0.07
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share	$	0.07

The pro forma results include adjustments directly attributable to the business combination including adjustments related to the amortization of acquired tangible and intangible assets, revenue, interest expense, stock-based compensation, and the exclusion of transaction related costs. The pro forma information is not representative of the Company’s future results of operations nor does it reflect what the Company’s results of operations would have been if the acquisition had occurred previously and the Company consolidated the results of GCI Liberty during the period presented.

(4) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

The Company’s assets and (liabilities) measured at fair value are as follows:


	March 31, 2021				December 31, 2020
			Quoted prices	Significant		Quoted prices	Significant
			in active	other		in active	other
			markets for	observable		markets for	observable
			identical assets	inputs		identical assets	inputs
Description	Total		(Level 1)	(Level 2)	Total	(Level 1)	(Level 2)

	amounts in thousands
Cash equivalents	$	1,108,784	1,108,784	—	1,368,176	1,368,176	—
Indemnification obligation	$	292,873	—	292,873	344,643	—	344,643
Exchangeable senior debentures	$	1,424,341	—	1,424,341	1,472,125	—	1,472,125

Pursuant to an indemnification agreement initially entered into by GCI Liberty and assumed by Liberty Broadband in connection with the Combination, Liberty Broadband has agreed to indemnify Liberty Interactive LLC (“LI LLC”), a subsidiary of Qurate Retail, for certain payments made to holders of LI LLC’s 1.75% exchangeable debentures due 2046 (the

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

"LI LLC 1.75% Exchangeable Debentures"). An indemnity obligation in the amount of $336.1 million was recorded upon completion of the Combination. The indemnification liability due to LI LLC pertains to the holders’ ability to exercise their exchange right according to the terms of the LI LLC 1.75% Exchangeable Debentures on or before October 5, 2023. Such amount will equal the difference between the exchange value and par value of the LI LLC 1.75% Exchangeable Debentures at the time the exchange occurs. The indemnification obligation recorded in the condensed consolidated balance sheets as of March 31, 2021 represents the fair value of the estimated exchange feature included in the LI LLC 1.75% Exchangeable Debentures primarily based on observable market data as significant inputs (Level 2). As of March 31, 2021, a holder of the LI LLC 1.75% Exchangeable Debentures has the ability to exchange and, accordingly, such indemnification obligation is included as a current liability in the Company’s condensed consolidated balance sheets.

The Company’s exchangeable senior debentures are debt instruments with quoted market value prices that are not considered to be traded on “active markets”, as defined in GAAP, and are reported in the foregoing table as Level 2 fair value.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt (with the exception of the 1.75% Debentures (defined in note 7)) and long-term debt (with the exception of the 1.25% Debentures and the 2.75% Debentures (defined in note 7)). With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt bears interest at a variable rate and therefore is also considered to approximate fair value.

Realized and Unrealized Gains (Losses) on Financial Instruments

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


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Indemnification obligation	$	51,770	—
Exchangeable senior debentures (1)		47,578	—
	$	99,348	—

(1)

The Company has elected to account for its exchangeable senior debentures using the fair value option. Changes in the fair value of the exchangeable senior debentures recognized in the condensed consolidated statements of operations are primarily due to market factors driven by changes in the fair value of the underlying shares into which debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a gain of $205 thousand and zero for the three months ended March 31, 2021 and 2020, respectively. The cumulative change was a gain of $8.8 million as of March 31, 2021.

(5) Investment in Charter Accounted for Using the Equity Method

Through a number of prior years’ transactions and the Combination, Liberty Broadband has acquired an interest in Charter. The investment in Charter is accounted for as an equity method affiliate based on our voting and ownership interest and the board seats held by individuals appointed by Liberty Broadband. As of March 31, 2021, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately $15,735 million and $36,177 million, respectively.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

We own an approximate 31.1% economic ownership interest in Charter, based on shares of Charter’s Class A common stock issued and outstanding as of March 31, 2021.

Upon the closing of the Time Warner Cable merger, the Second Amended and Restated Stockholders Agreement, dated as of May 23, 2015, by and among Charter, Liberty Broadband and Advance/Newhouse Partnership ("A/N"), as amended (the “Stockholders Agreement”), became fully effective. Pursuant to the Stockholders Agreement, Liberty Broadband’s equity ownership in Charter (on a fully diluted basis) is capped at the greater of 26% or the voting cap (“Equity Cap”). As of March 31, 2021, due to Liberty Broadband’s voting interest exceeding the current voting cap of 25.01%, our voting control of the aggregate voting power of Charter is 25.01%. Under the Stockholders Agreement, Liberty Broadband has agreed to vote (subject to certain exceptions) all voting securities beneficially owned by it, or over which it has voting discretion or control that are in excess of the voting cap in the same proportion as all other votes cast by public stockholders of Charter with respect to the applicable matter.

In February 2021, Liberty Broadband was notified that its ownership interest, on a fully diluted basis, had exceeded the Equity Cap set forth in the Stockholders Agreement. On February 23, 2021, Charter and 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. Pursuant to this letter agreement, following any month during which Charter purchases, redeems or buys back shares of its Class A common stock, and prior to certain meetings of Charter’s stockholders, Liberty Broadband will be obligated to sell to Charter, and Charter will be obligated to purchase, such number of shares of Class A common stock as is necessary (if any) to reduce Liberty Broadband’s percentage equity interest, on a fully diluted basis, to the Equity Cap (such transaction, a “Charter Repurchase”). The per share sale price for each share of Charter will be equal to the volume weighted average price paid by Charter in its repurchases, redemptions and buybacks of its common stock (subject to certain exceptions) during the month prior to the Charter Repurchase (or, if applicable, during the relevant period prior to the relevant meeting of Charter stockholders). Under the terms of the letter agreement, Liberty Broadband sold 834,576 shares of Charter Class A common stock to Charter for $518.4 million in March 2021 to maintain our fully diluted ownership percentage at 26%. Subsequent to March 31, 2021, Liberty Broadband sold 735,209 shares of Charter Class A common stock to Charter for $459.7 million in April 2021.

During the three months ended March 31, 2020, Liberty Broadband exercised its preemptive right 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.

Investment in Charter

The excess basis in our investment in Charter of $9,210 million as of March 31, 2021 is allocated within memo accounts used for equity method accounting purposes as follows (amounts in millions):


		March 31,	December 31,
		2021	2020
Property and equipment	$	766	733
Customer relationships		2,769	2,726
Franchise fees		3,849	3,693
Trademarks		29	29
Goodwill		4,116	3,934
Debt		(626)	(602)
Deferred income tax liability		(1,693)	(1,641)
	$	9,210	8,872

Property and equipment and customer relationships have weighted average remaining useful lives of approximately 6 years and 10 years, respectively, and franchise fees, trademarks and goodwill have indefinite lives. The excess basis of

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

outstanding debt is amortized over the contractual period using the straight-line method. The increase in excess basis for the three months ended March 31, 2021 was primarily due to Charter’s share buyback program, partially offset by Liberty Broadband’s participation in Charter’s share buyback program. The Company’s share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $57.9 million and $40.1 million, net of related taxes, for the three months ended March 31, 2021 and 2020, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.

The Company had a dilution loss of $82.2 million and $59.3 million during the three months ended March 31, 2021 and 2020, respectively. The dilution losses for the periods presented were attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per share, slightly offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during the three months ended March 31, 2021.

Summarized unaudited financial information for Charter is as follows (amounts in millions):

Charter condensed consolidated balance sheets


	March 31, 2021		December 31, 2020
Current assets	$	3,663	3,909
Property and equipment, net		34,184	34,357
Goodwill		29,554	29,554
Intangible assets, net		72,507	72,937
Other assets		3,531	3,449
Total assets	$	143,439	144,206
Current liabilities	$	9,916	9,875
Deferred income taxes		18,227	18,108
Long-term debt		83,882	81,744
Other liabilities		4,233	4,198
Equity		27,181	30,281
Total liabilities and shareholders’ equity	$	143,439	144,206

Charter condensed consolidated statements of operations


	Three months ended
	March 31,
	2021		2020
Revenue	$	12,522	11,738
Cost and expenses:
Operating costs and expenses (excluding depreciation and amortization)		7,711	7,432
Depreciation and amortization		2,441	2,497
Other operating expenses, net		302	7
		10,454	9,936
Operating income		2,068	1,802
Interest expense, net		(983)	(980)
Other income (expense), net		52	(326)
Income tax (expense) benefit		(216)	(29)
Net income (loss)		921	467
Less: Net income attributable to noncontrolling interests		(114)	(71)
Net income (loss) attributable to Charter shareholders	$	807	396

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(6) Intangible Assets

Intangible Assets Subject to Amortization, net


	March 31, 2021				December 31, 2020
	Gross			Net	Gross			Net
	carrying		Accumulated	carrying	carrying		Accumulated	carrying
	amount		amortization	amount	amount		amortization	amount
	amounts in thousands
Customer relationships	$	515,000	(14,975)	500,025		560,212	(13,687)	546,525
Other amortizable intangibles		133,840	(8,909)	124,931		137,315	(9,791)	127,524
Total	$	648,840	(23,884)	624,956		697,527	(23,478)	674,049

Amortization expense for intangible assets with finite useful lives was $18.6 million and $437.0 thousand for the three months ended March 31, 2021 and 2020, respectively. Amortization expense for amortizable intangible assets for each of the five succeeding fiscal years is estimated to be (amounts in thousands):


Remainder of 2021	$	55,172
2022	$	63,880
2023	$	57,570
2024	$	51,698
2025	$	50,246

(7) Debt

Debt is summarized as follows:

f
	Page No
Item 1. Financial Statements
LIBERTY BROADBAND CORPORATION Condensed Consolidated Balance Sheets (unaudited)	I-2
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Operations (unaudited)	I-4
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)	I-5
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited)	I-6
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Equity (unaudited)	I-7
LIBERTY BROADBAND CORPORATION Notes to Condensed Consolidated Financial Statements (unaudited)	I-8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	I-26
Item 3. Quantitative and Qualitative Disclosures about Market Risk	I-39
Item 4. Controls and Procedures	I-41

Part II - Other Information

Item 1. Legal Proceedings	II-1
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	II-2
Item 6. Exhibits	II-3

SIGNATURES	II-4

Liberty Broadband Corporation common stock