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Table of Contents

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

OR

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: (720875-5700

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:

Series A

Series B

Series C

Liberty Broadband Corporation common stock

18,221,602

2,037,259

125,938,350

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.

I-2

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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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.

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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.

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Table of Contents

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.

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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.

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Table of Contents

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

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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

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