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, 2023

☐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, 2023 was:

Table of Contents

Table of Contents

Part I - Financial Information

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-24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	I-36
Item 4. Controls and Procedures	I-37

Part II - Other Information

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

SIGNATURES	II-3

I-1

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)


	March 31,		December 31,
	2023		2022

	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	169	375
Trade and other receivables, net of allowance for credit losses of $4 and $4, respectively		194	201
Prepaid and other current assets		91	84
Total current assets		454	660
Investment in Charter, accounted for using the equity method (note 4)		11,609	11,433
Property and equipment, net		1,012	1,011
Intangible assets not subject to amortization
Goodwill		755	755
Cable certificates		550	550
Other		37	37
Intangible assets subject to amortization, net (note 5)		506	516
Other assets, net		206	180
Total assets	$	15,129	15,142

See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	March 31,		December 31,
	2023		2022

	amounts in millions,
	except share amounts
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$	86	92
Deferred revenue		21	20
Current portion of debt, including $2 and $1,373 measured at fair value, respectively (note 6)		5	1,376
Indemnification obligation (note 3)		29	50
Other current liabilities		152	137
Total current liabilities		293	1,675
Long-term debt, net, including $1,251 and zero measured at fair value, respectively (note 6)		3,674	2,425
Obligations under tower obligations and finance leases, excluding current portion		85	86
Long-term deferred revenue		62	63
Deferred income tax liabilities		2,074	2,040
Preferred stock (note 7)		202	202
Other liabilities		155	150
Total liabilities		6,545	6,641
Equity
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 18,221,602 and 18,528,468 at March 31, 2023 and December 31, 2022, respectively		—	—
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,037,259 and 2,106,636 at March 31, 2023 and December 31, 2022, respectively		—	—
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 125,938,456 and 125,962,296 at March 31, 2023 and December 31, 2022, respectively		1	1
Additional paid-in capital		3,282	3,318
Accumulated other comprehensive earnings (loss), net of taxes		59	9
Retained earnings		5,224	5,155
Total stockholders' equity		8,566	8,483
Non-controlling interests		18	18
Total equity		8,584	8,501
Commitments and contingencies (note 9)
Total liabilities and equity	$	15,129	15,142

See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended
	March 31,
	2023		2022

	amounts in millions, except per share amounts
Revenue	$	246	238
Operating costs and expenses:
Operating expense (exclusive of depreciation and amortization shown separately below)		62	66
Selling, general and administrative, including stock-based compensation (note 8)		110	101
Depreciation and amortization		58	64
		230	231
Operating income (loss)		16	7
Other income (expense):
Interest expense (including amortization of deferred loan fees)		(45)	(26)
Share of earnings (losses) of affiliate (note 4)		248	303
Gain (loss) on dilution of investment in affiliate (note 4)		(27)	(56)
Realized and unrealized gains (losses) on financial instruments, net (note 3)		(114)	137
Other, net		14	(21)
Earnings (loss) before income taxes		92	344
Income tax benefit (expense)		(23)	(45)
Net earnings (loss)		69	299
Less net earnings (loss) attributable to the non-controlling interests		—	—
Net earnings (loss) attributable to Liberty Broadband shareholders	$	69	299
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)	$	0.47	1.79
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)	$	0.47	1.77

See accompanying notes to the condensed consolidated financial statements.

I-4

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)


	Three months ended
	March 31,
	2023		2022

	amounts in millions
Net earnings (loss)	$	69	299
Other comprehensive earnings (loss), net of taxes:
Credit risk on fair value debt instruments gains (loss)		50	(4)
Other comprehensive earnings (loss), net of taxes		50	(4)
Comprehensive earnings (loss)		119	295
Less comprehensive earnings (loss) attributable to the non-controlling interests		—	—
Comprehensive earnings (loss) attributable to Liberty Broadband shareholders	$	119	295

See accompanying notes to the condensed consolidated financial statements.

I-5

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Three months ended
	March 31,
	2023		2022

	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	69	299
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		58	64
Stock-based compensation		8	9
Share of (earnings) losses of affiliate, net		(248)	(303)
(Gain) loss on dilution of investment in affiliate		27	56
Realized and unrealized (gains) losses on financial instruments, net		114	(137)
Deferred income tax expense (benefit)		22	6
Other, net		(1)	(1)
Changes in operating assets and liabilities:
Current and other assets		(6)	65
Payables and other liabilities		(2)	32
Net cash provided by (used in) operating activities		41	90
Cash flows from investing activities:
Capital expenditures		(54)	(32)
Cash received for Charter shares repurchased by Charter		42	602
Other investing activities, net		—	4
Net cash provided by (used in) investing activities		(12)	574
Cash flows from financing activities:
Borrowings of debt		1,248	300
Repayments of debt, tower obligations and finance leases		(1,416)	(2)
Repurchases of Liberty Broadband common stock		(40)	(843)
Indemnification payment to Qurate Retail		(24)	—
Other financing activities, net		(3)	(3)
Net cash provided by (used in) financing activities		(235)	(548)
Net increase (decrease) in cash, cash equivalents and restricted cash		(206)	116
Cash, cash equivalents and restricted cash, beginning of period		400	206
Cash, cash equivalents and restricted cash, end of period	$	194	322

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,
	2023		2022

	amounts in millions
Cash and cash equivalents	$	169	375
Restricted cash included in other current assets		24	24
Restricted cash included in other long-term assets		1	1
Total cash and cash equivalents and restricted cash at end of period	$	194	400

See accompanying notes to the condensed consolidated financial statements.

I-6

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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 millions
Balance at January 1, 2023	$	—	—	1	3,318	9	5,155	18	8,501
Net earnings (loss)		—	—	—	—	—	69	—	69
Other comprehensive earnings (loss), net of taxes		—	—	—	—	50	—	—	50
Stock-based compensation		—	—	—	8	—	—	—	8
Issuance of common stock upon exercise of stock options		—	—	—	1	—	—	—	1
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(2)	—	—	—	(2)
Liberty Broadband stock repurchases		—	—	—	(40)	—	—	—	(40)
Noncontrolling interest activity at Charter and other		—	—	—	(3)	—	—	—	(3)
Balance at March 31, 2023	$	—	—	1	3,282	59	5,224	18	8,584


						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 millions
Balance at January 1, 2022	$	—	—	1	6,214	14	3,898	12	10,139
Net earnings (loss)		—	—	—	—	—	299	—	299
Other comprehensive earnings (loss), net of taxes		—	—	—	—	(4)	—	—	(4)
Stock-based compensation		—	—	—	9	—	—	—	9
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(3)	—	—	—	(3)
Liberty Broadband stock repurchases		—	—	—	(843)	—	—	—	(843)
Noncontrolling interest activity at Charter and other		—	—	—	(2)	—	—	4	2
Balance at March 31, 2022	$	—	—	1	5,375	10	4,197	16	9,599

See accompanying notes to the condensed consolidated financial statements.

I-7

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Liberty Broadband Corporation and its controlled subsidiaries (collectively, "Liberty Broadband," the "Company," “us,” “we,” or “our” unless the context otherwise requires). Liberty Broadband Corporation is primarily comprised of GCI Holdings, LLC (“GCI Holdings” or “GCI”), a wholly owned subsidiary, and an equity method investment in Charter Communications, Inc. (“Charter”).

On December 18, 2020, GCI Liberty, Inc. (“GCI Liberty”) was merged with Liberty Broadband (the “Combination”) and Liberty Broadband acquired GCI Holdings.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2022, 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, 2022. 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 affiliate, (ii) non-recurring fair value measurements of non-financial instruments and (iii) accounting for income taxes to be its most significant estimates.

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

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. 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 condensed consolidated statements of operations is $5 million for the three months ended March 31, 2022, related to Skyhook. Included in Net earnings (loss) in the accompanying condensed consolidated statement of operations are earnings of $3 million for the three months ended March 31, 2022, related to Skyhook.

As described in note 4, we are currently participating in Charter’s share buyback program in order to maintain our fully diluted ownership percentage of 26%. The primary use of those proceeds has been to repurchase Liberty Broadband

I-8

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Series A and Series C common stock pursuant to our authorized share repurchase programs. In addition, some of the proceeds were used for debt repayments.

During the three months ended March 31, 2023, we repurchased 459 thousand shares of Liberty Broadband Series A and Series C common stock for a total purchase price of $40 million. During the three months ended March 31, 2022, we repurchased 5.7 million shares of Liberty Broadband Series A and Series C common stock for a total purchase price of $843 million. As of March 31, 2023, the amount remaining under the authorized repurchase program is approximately $1,962 million.

Exchange Agreement with Chairman

On June 13, 2022, Liberty Broadband entered into an Exchange Agreement with its Chairman of the board of directors, John C. Malone, and a revocable trust of which Mr. Malone is the sole trustee and beneficiary (the “JM Trust”) (the “Exchange Agreement”). Under the Exchange Agreement, the JM trust exchanged 215,647 shares of Liberty Broadband Series B common stock for the same number of Liberty Broadband Series C common stock on June 13, 2022, and exchanged 211,255 shares of Liberty Broadband Series B common stock for the same number of Liberty Broadband Series C common stock on July 19, 2022. Additionally, the JM Trust exchanged 54,247 shares of Liberty Broadband Series B common stock for the same number of Liberty Broadband Series C common stock on January 23, 2023.

Spin-Off Arrangements

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”). 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 reimburses Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services which are 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. 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 23% for the Company but subject to adjustment on an annual basis upon the occurrence of certain events.

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 $2 million and $3 million for the three months ended March 31, 2023 and 2022, respectively. Liberty Broadband had a tax sharing receivable with Qurate Retail of $15 million and $7 million as of March 31, 2023 and December 31, 2022, respectively, of which $1 million was in Other current assets as of both March 31, 2023 and December 31, 2022, with the remaining receivable in Other assets, net.

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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, 2023 and 2022 are 2 million and 1 million potential common shares, respectively, because their inclusion would have been antidilutive.


	Liberty Broadband Common Stock
	Three months	Three months
	ended	ended
	March 31, 2023	March 31, 2022

	(numbers of shares in millions)
Basic WASO	146	167
Potentially dilutive shares (1)	1	2
Diluted WASO	147	169

(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) 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, 2023				December 31, 2022
			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 millions
Cash equivalents	$	109	109	—	288	288	—
Indemnification obligation	$	29	—	29	50	—	50
Exchangeable senior debentures	$	1,253	—	1,253	1,373	—	1,373

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 "LI LLC 1.75% Exchangeable Debentures"). 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,

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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, 2023 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, 2023, a holder of the LI LLC 1.75% Exchangeable Debentures has the ability to put their debentures on October 5, 2023, and, accordingly, such indemnification obligation is included as a current liability in the Company’s condensed consolidated balance sheets. During the three months ended March 31, 2023, indemnification payments of $24 million were made by Liberty Broadband to Qurate Retail in connection with exchanges of $157 million of the LI LLC 1.75% Exchangeable Debentures that settled in the quarter.

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 1.25% Debentures, and the 2.75% Debentures and 1.75% Debentures prior to their redemption in the first quarter of 2023 (defined in note 6)) and long-term debt (with the exception of the 3.125% Debentures (as defined in note 6)). 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 the Margin Loan Facility, the Senior Credit Facility and the Wells Fargo Note Payable (each as defined in note 6) all bear interest at a variable rate and therefore are 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,
	2023		2022

	amounts in millions
Indemnification obligation	$	(3)	85
Exchangeable senior debentures (1)		(111)	52
	$	(114)	137

(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 the 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 $64 million and a loss of $6 million for the three months ended March 31, 2023 and 2022, respectively. The cumulative change was a gain of $64 million as of March 31, 2023.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(4) 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, 2023, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately $11.6 billion and $16.8 billion, respectively. We own an approximate 31.3% economic ownership interest in Charter, based on shares of Charter’s Class A common stock issued and outstanding as of March 31, 2023.

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, 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, 2023, 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 120,149 and 970,241 shares of Charter Class A common stock to Charter for $42 million and $602 million during the three months ended March 31, 2023 and 2022, respectively, to maintain our fully diluted ownership percentage at 26%.

Investment in Charter

The excess basis in our investment in Charter is allocated within memo accounts used for equity method accounting purposes as follows (amounts in millions):


		March 31,	December 31,
		2023	2022
Property and equipment	$	499	524
Customer relationships		2,200	2,230
Franchise fees		3,838	3,809
Trademarks		29	29
Goodwill		4,013	3,975
Debt		(407)	(450)
Deferred income tax liability		(1,509)	(1,505)
	$	8,663	8,612

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Property and equipment and customer relationships have weighted average remaining useful lives of approximately 4 years and 8 years, respectively, and franchise fees, trademarks and goodwill have indefinite lives. The excess basis of 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, 2023 was primarily due to Charter’s share buyback program. The Company’s share of earnings (losses) of affiliate line item in the accompanying condensed consolidated statements of operations includes expenses of $69 million and $67 million, net of related taxes, for the three months ended March 31, 2023 and 2022, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.

The Company had dilution losses of $27 and $56 million during the three months ended March 31, 2023 and 2022, respectively. The dilution losses for the periods presented were primarily attributable to stock option exercises by employees and other third parties, partially offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during both the three months ended March 31, 2023 and 2022.

Summarized unaudited financial information for Charter is as follows:

Charter condensed consolidated balance sheets


	March 31, 2023		December 31, 2022

	amounts in millions
Current assets	$	4,067	4,017
Property and equipment, net		36,602	36,039
Goodwill		29,563	29,563
Intangible assets, net		69,845	70,135
Other assets		4,793	4,769
Total assets	$	144,870	144,523
Current liabilities	$	12,242	12,065
Deferred income taxes		19,030	19,058
Long-term debt		95,973	96,093
Other liabilities		4,723	4,758
Equity		12,902	12,549
Total liabilities and shareholders’ equity	$	144,870	144,523

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Charter condensed consolidated statements of operations


	Three months ended
	March 31,
	2023		2022

	amounts in millions
Revenue	$	13,653	13,200
Cost and expenses:
Operating costs and expenses (excluding depreciation and amortization)		8,511	8,134
Depreciation and amortization		2,206	2,294
Other operating expenses, net		10	1
		10,727	10,429
Operating income		2,926	2,771
Interest expense, net		(1,265)	(1,060)
Other income (expense), net		(104)	23
Income tax (expense) benefit		(374)	(345)
Net income (loss)		1,183	1,389
Less: Net income attributable to noncontrolling interests		(162)	(186)
Net income (loss) attributable to Charter shareholders	$	1,021	1,203

(5) Intangible Assets

Intangible Assets Subject to Amortization, net


	March 31, 2023				December 31, 2022
	Gross			Net	Gross		Net
	carrying		Accumulated	carrying	carrying	Accumulated	carrying
	amount		amortization	amount	amount	amortization	amount

	amounts in millions
Customer relationships	$	515	(101)	414	515	(91)	424
Other amortizable intangible assets		153	(61)	92	147	(55)	92
Total	$	668	(162)	506	662	(146)	516

Amortization expense for intangible assets with finite useful lives was $16 million and $17 million for the three months ended March 31, 2023 and 2022, respectively. Amortization expense for amortizable intangible assets for each of the five succeeding fiscal years is estimated to be (amounts in millions):


Remainder of 2023	$	47
2024	$	57
2025	$	52
2026	$	49
2027	$	48

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(6) Debt

Debt is summarized as follows:


	Outstanding
	principal		Carrying value
	March 31,		March 31,		December 31,
	2023		2023		2022
	amounts in millions
Margin Loan Facility	$	1,400		1,400	1,400
3.125% Exchangeable Senior Debentures due 2053		1,265		1,251	—
1.25% Exchangeable Senior Debentures due 2050		2		2	798
2.75% Exchangeable Senior Debentures due 2050		—		—	560
1.75% Exchangeable Senior Debentures due 2046		—		—	15
Senior notes		600		626	628
Senior credit facility		396		396	397
Wells Fargo note payable		5		5	5
Deferred financing costs				(1)	(2)
Total debt	$	3,668		3,679	3,801
Debt classified as current				(5)	(1,376)
Total long-term debt			$	3,674	2,425

Margin Loan Facility

On November 8, 2022, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”) entered into Amendment No. 6 to Margin Loan Agreement (the “Sixth Amendment”), which amends SPV’s margin loan agreement, dated as of August 31, 2017 (as amended by the Sixth Amendment, the “Margin Loan Agreement”), with a group of lenders. The Margin Loan Agreement provides for (x) a term loan credit facility in an aggregate principal amount of $1.15 billion (the “Term Loan Facility” and proceeds of such facility, the “Term Loans”), (y) a revolving credit facility in an aggregate principal amount of $1.15 billion (the “Revolving Loan Facility” and proceeds of such facility, the “Revolving Loans”; the Revolving Loans, collectively with the Term Loans, the “Loans”) and (z) an uncommitted incremental term loan facility in an aggregate principal amount of up to $200 million (collectively, the “Margin Loan Facility”). No additional borrowings under the Margin Loan Agreement were made in connection with the Sixth Amendment. SPV’s obligations under the Margin Loan Facility are secured by shares of Charter owned by SPV. Effective on October 3, 2022, pursuant to Amendment No. 5 to Margin Loan Agreement, an additional 6 million shares of Charter were voluntarily pledged as collateral, which improved the loan to value ratio.

Outstanding borrowings under the Margin Loan Agreement were $1.4 billion as of both March 31, 2023 and December 31, 2022. As of March 31, 2023, SPV was permitted to borrow an additional $900 million under the Margin Loan Agreement, subject to certain funding conditions, which may be drawn until five business days prior to the maturity date. The maturity date of the loans under the Margin Loan Agreement is May 12, 2024 (except for any additional loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). Borrowings under the Margin Loan Agreement bear interest at the three-month LIBOR rate plus a per annum spread of 1.5%. The Margin Loan Agreement also provides for customary LIBOR replacement provisions.

The Margin Loan Agreement contains various affirmative and negative covenants that restrict the activities of SPV (and, in some cases, the Company and its subsidiaries with respect to shares of Charter owned by the Company and its subsidiaries). The Margin Loan Agreement does not include any financial covenants. The Margin Loan Agreement does contain restrictions related to additional indebtedness and events of default customary for margin loans of this type.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

SPV’s obligations under the Margin Loan Agreement are secured by first priority liens on a portion of the Company’s ownership interest in Charter, sufficient for SPV to meet the loan to value requirements under the Margin Loan Agreement. The Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares pledged as collateral, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreement. As of March 31, 2023, 37.3 million shares of Charter common stock with a value of $13.3 billion were held in collateral accounts related to the Margin Loan Agreement.

Exchangeable Senior Debentures

On February 28, 2023, the Company closed a private offering of $1,265 million aggregate original principal amount of its

Liberty Broadband Corporation common stock