GCI Liberty, Inc. Series C GCI Group Common Stock When Issued

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, stock repurchases, future financial performance, matters relating to the Universal Service Administrative Company and rural healthcare program, market and regulatory conditions, new service and product launches and other matters that are not historical facts.

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, the availability of acquisition opportunities, competitive issues, regulatory issues and continued access to capital on terms acceptable to GCI Liberty. These forward-looking statements speak only as of the date of this call, and GCI Liberty expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in GCI Liberty's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, including preliminary notes in Schedules 1 and 2 can be found in the earnings press release issued today, which is available on our website.

This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty Broadband. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These forward-looking statements speak only as of the date of this call, and Liberty Broadband expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Now I'd like to introduce Greg Maffei, our President and CEO.

Thank you, Courtnee and thank you out there to all our listeners who are signing up to join this afternoon. Today speaking on the call besides myself are GCI Liberty's CFO, Mark Carleton; GCI's CFO, Pete Pounds.

And in addition GCI's CEO Ron Duncan will be available during the Q&A. Also during the Q&A if you have interest, we'll be available to answer questions regarding Liberty Broadband.

So beginning with GCI Liberty. We raised $477 million in cash through the sale of exchangeable senior debentures.

We set a portion of that cash raised over at Qurate Retail, to settled out indemnification associated with their repurchase of Charter exchangeables. We also completed our reincorporation in Delaware which caused the dividend on our preferred stock to rise from 5% to 7%.

Turning now to GCI, the company continues to execute on its strategy of exploring operating synergies while expanding and improving coverage. It launched its new billing system in the last few years.

And we believe that will greatly improve customer service. GCI Liberty has a double discount on Charter as we've noted before.

The look through Charter price is trading under GCI's own trading price at about a discounted range of 20%. You expect us to take advantage of that discount overtime.

Turning now briefly to Liberty Broadband, and Charter. I would note that Charter posted solid Q2 results with a strong feed on net adds for residential broadband.

We believe as many observers do, cable continues to offer the best connectivity on a growing set of digital services. On June 30, Charter launched Spectrum Mobile and we expect that to be an important component of its offering going forward.

We are on track at Charter to have the integration nearly complete by year-end, unified product marketing and service infrastructure, Charter remains a growth story which we believe will accelerate as that integration is completed. And has especially attractive free cash flow characteristics which will only get better as cash flow intensity, the CapEx intensity declines over the next several years.

And we also repurchased Charter's 6.4 million shares for approximately $1.9 billion. With that, I'd like to turn it over to Mark Carleton to discuss the financials further.

Thank you, Greg. Quarter end GCI Liberty had consolidated cash of $768 million which includes $31 million of cash at GCI and this includes the impact of the $133 million indemnification payment that Greg referred to just a few seconds ago.

The value of the public equity method securities at GCI as of today's close was $5.8 billion which includes our $1.6 billion interest in Charter, our $3.3 billion interest in Liberty Broadband and an $800 million interest in Lending Tree. GCI Liberty has a $1 billion margin loan outstanding against its Liberty Broadband shares.

At quarter end GCI Liberty had a total principal amount of debt of approximately $3.1 million which includes the aforementioned margin loan and $1.6 billion of debt including capital leases and tower applications at GCI. GCI's leverage as defined in its credit agreement was 4.9 times compared to a maximum allowable leverage of 5.95 times.

And with that I'll turn it over to Pete Pounds.

Thank you Mark. Well first I'll start with three material updates.

First, rural healthcare. As we announced last quarter the funding request for the RHC program exceeded the program cap which at the time was $400 million.

This led to the SEC imposing funding reductions of 15.6% which resulted in a $6 million reduction in pro forma revenues operating income and OEBITDA in the first quarter of 2018. On June 5, 2018 the FCC increased the size of the fund from $400 million to $571 million and agreed to continue to adjust the fund for inflation as well as carry forward unused funding from past years.

This is great news for GCI and our RHC customers. At this point we continue to work with the FCC on a rate review.

As you might imagine delivering services in remote Alaska is significantly more expensive than typical rural locations. We are continuing to work diligently with the FCC on this but until we have resolution to this open rate review we have maintained a total net reduction of approximately $6 million to the RHC program support receivable.

The next item is our billing system upgrade. On August 4 our new billing system went live after years of planning and hard work and we shut down our two legacy billing systems, both of which were over a decade old.

I expect that we will have the normal bumps that come with any major new IT system. However to-date the process has been relatively smooth.

There are a number of benefits that we are expecting. Although some of them maybe delayed a couple of months as we integrate the new system.

These include a single build for our customers, a single view of the customer for our customer service representatives, faster customer service particularly for new multi-product customers, the ability to respond to market changes with new plans more quickly, the ability to establish autopay when a customer first signs up for service and the ability to upgrade video and data services online. We have some real opportunities with the new billing system.

From a financial prospect the change will bring us efficiencies that will be helpful in driving down costs. However in the third quarter we are expecting to experience a small reduction in revenue related switching a large subset of our wireless customers from billing arrears to billing advance.

The last thing we wanted to do was have our customer's first experience with the new build be a negative that billed them for two months of service on one bill. The third update the Alaska economy.

The latest economic forecast by the Anchorage Economic Development Corporation calls for the end of the state wide recession in Q4 of 2018 or Q1 of 2019. We're starting to see improving numbers on our consumer front as well and it's pretty clear that the confidence level is improving.

Now on to operating results, throughout my remarks I will be referring to GCIs pro forma financial statements released as presented in our earnings press release today. Overall we had a good quarter financially.

Operating income increased, adjusted OBITDA was up about $2 million and revenue was up about $3 million, all on a year-over-year basis. If you exclude the RHC write off in the second quarter of 2017, revenue would be down slightly, operating income would have been relatively flat, and OIBDA would be down slightly, driven by lower business revenues, partially offset by continued customer migration from lower margin products to higher margin products.

The recession has been impacting our ability to grow so we're eager for the economy to turn the corner. Business revenues were flat on a year-over-year basis.

However, excluding the impact of the 2017 RHC write off they were down $5 million. This decrease is largely attributable to time and materials, video and voice revenues which are our lowest margin products.

We did successfully negotiate all of our education contracts that were up for renewal, this last contract cycle. Consumer, we have encouraging quarter in our consumer group.

Revenues were up over $2 million on a year-over-year basis on the strength of solid performance in our data business. We also had a great quarter in wireless as we added 4,400 subscribers compared to the first quarter.

And while some of this is due to the seasonal influx of workers, it is a meaningful improvement from the 2,500 subscriber increase in the same quarter of last year. These improvements appear to be due to both our improving wireless network and an economy that seems to be showing some signs of life.

CapEx, through the first half of the year we've invested $66 million in capital expenditures. This is about 40% of our expected CapEx for the year, which is fairly typical for us.

Given that the construction season in Alaska general runs from mid Q2 to mid Q4, clearly there are a lot of projects that don't require construction outside, but we typically skew our CapEx spend to the second half of the year. Wrapping up, we continue to make progress on items that are in our control that will drive the cash flow of the business going forward, like efficiencies of the new billing system and improving our wireless network.

I'm hopeful that we will shortly get an assist from the economy as well. And now we'll hand the call back over to Greg.

Thanks, Mark and Pete as a reminder, for all of you on the call, we will be holding our Annual Investor Meeting on November 14th in New York. As we get closer to that date please refer to our website for additional information.

Thank you for your continued interest in GCI Liberty and I'd now like to open the call for questions. Operator?