Earnings call transcript: GCI Liberty Q3 2025 reveals revenue dip, stock falls

GCI Liberty reported a 2% year-over-year decrease in revenue for the third quarter of 2025, amounting to $257 million. The company's stock fell by 3.62% to $37.02 following the announcement. Despite these challenges, GCI Liberty remains focused on network upgrades and rural expansion, projecting record Adjusted EBITDA for 2025.

Key Takeaways

• Revenue declined by 2% year-over-year to $257 million.
• Stock price dropped 3.62% to $37.02 post-earnings announcement.
• Adjusted EBITDA decreased by 8% to $92 million.
• GCI Liberty exited its video business to focus on connectivity.
• The company plans significant capital expenditures in 2025 and 2026.

Company Performance

GCI Liberty's Q3 2025 earnings revealed a slight downturn in performance, with a 2% decline in revenue compared to the previous year. The company is navigating a challenging market environment, marked by competitive pressures and technological shifts. Despite these hurdles, GCI Liberty is investing in network upgrades and expanding its rural connectivity offerings, positioning itself as a pure-play connectivity provider.

Financial Highlights

• Revenue: $257 million, a 2% decrease year-over-year.
• Adjusted EBITDA: $92 million, down 8% from the previous year.
• Consolidated cash stood at $137 million.
• Total debt reached approximately $1 billion.
• Free cash flow over the trailing 12 months was $155 million.

Outlook & Guidance

Looking ahead, GCI Liberty expects to achieve record Adjusted EBITDA in 2025, driven by ongoing investments in network infrastructure. The company anticipates capital expenditures of $225 million to $250 million in 2025, with peak spending expected in 2026. A planned rights offering aims to raise approximately $300 million for future investments.

Executive Commentary

CEO Ron Duncan highlighted the company's strategic focus, stating, "We are proud to say we are tracking towards a record Adjusted EBITDA in 2025, a huge milestone for the company." He emphasized the benefits of network upgrades, noting, "We believe these changes will not only lead to higher speeds, but also a network with fewer maintenance requirements."

Risks and Challenges

• Competitive pressures from wireless substitution could impact market share.
• The company's high leverage ratio of 2.3x poses financial risks.
• Economic conditions in Alaska, including potential oil and gas developments, could affect regional demand.
• Technological advancements by competitors may challenge GCI Liberty's market position.
• Execution risks related to planned capital expenditures and network upgrades.

GCI Liberty's strategic initiatives and financial outlook suggest a focus on long-term growth, despite current market challenges and stock volatility. The company's efforts to enhance connectivity and expand its network could position it well for future success.

Full transcript - GCI Liberty Inc A (GLIBA) Q3 2025:

Conference Operator: Greetings. Welcome to the GCI Liberty 2025 Q3 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press star one on your telephone keypad. As a reminder, this conference will be recorded today, November 5th. I will now turn the call over to Shane Kleinstein, Senior Vice President, Investor Relations. Please go ahead.

Legal/Compliance Representative, GCI Liberty: 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. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the prospectus forming part of GCI Liberty's registration statement, the most recent forms 10Q followed by GCI Liberty and Liberty Broadband with the SEC. These forward-looking statements speak only as of the date of this call, and GCI Liberty and Liberty Broadband expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in GCI Liberty or Liberty Broadband'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 for GCI Liberty, including adjusted EBITDA, adjusted EBITDA margin, and free cash flow. Information regarding the required definitions, along with the comparable GAAP metrics and reconciliations, including schedule one, can be found in the earnings press release issued today, which is available on GCI Liberty's website. Speaking on the call today, we have Ron Duncan, CEO of GCI Liberty, Brian Wendling, GCI Liberty's Chief Accounting and Principal Financial Officer. During Q&A, we will answer questions related to Liberty Broadband. Members of both GCI Liberty and Liberty Broadband Management and GCI Management will be available to answer questions. With that, I'll turn the call over to Ron.

Ron Duncan, CEO, GCI Liberty: Good morning. GCI had a solid quarter building on an already strong year, and the business is performing largely in line with expectations. We are proud to say we are tracking towards a record Adjusted EBITDA in 2025, a huge milestone for the company. Our consumer business continued to add wireless lines. Our business unit continues to deliver the benefits of last year's strong sales cycle, and we have streamlined to become a pure-play connectivity provider following the exit of our video business this quarter. As mentioned last quarter, our rural operations this year have been adversely impacted by an outage from a fiber break in the Arctic Ocean in January on a third-party network in which GCI uses capacity. In early September, our partner was able to repair the broken fiber.

We moved quickly to restore our consumer wireless and internet customers, as well as business customers that had lost service. All customers are operational as of the end of the third quarter. Unfortunately, in early October, Typhoon Halong hit southwest Alaska with devastating consequences. Two villages, Kipnuk and Quinhagak, were destroyed, with dozens of other villages very hard hit. While we do not expect. Including the potential loss of locations served for clinics and schools. We grew consumer wireless subscribers 2% year over year, ending the quarter with 207,500 subscribers. During the quarter, we added 500 consumer wireless lines. On the data side, we saw a 3% decline year over year, ending the quarter with 153,100 cable modem subscribers. During the quarter, we lost 1,400 data subscribers.

The decline of data subscribers over the past year is largely due to competition, including wireless substitution, as well as the aforementioned break on the third-party network in which GCI uses capacity. During the third quarter, we exited the video business. This will not have a significant impact on revenue or cost of sales, but will allow us to avoid future capital expenditures in a business with no margin and to focus on the core connectivity products that our consumers want most. As I mentioned last quarter, the adjusted EBITDA growth rates we reported in the first half of the year benefited from a series of non-recurring tailwinds, with an expected deceleration in the back half of the year. We fully lapped the upsell cycle in schools, which began in the third quarter of 2024.

We also incurred additional SG&A spend in the third quarter as compared to the prior year due to increased personnel expense, including higher healthcare costs and expenses related to accrued employee incentive payments. We are proud of the progress both financially and operationally this year. We remain focused on improving our infrastructure to deliver high-quality service to our customers, furthering our rural expansion to bridge the digital divide, and increasing the efficiency of our business. I'll go into a bit more detail in several areas. Starting with our network infrastructure, we are offering 2.5 gigabit broadband connectivity everywhere that has fiber middle mile, which covers an overwhelming majority of our customers. Material progress is being made in improving the broadband network in Anchorage, as we are in the process of upgrading the core, reducing node sizes, and upgrading to 1.8 gigahertz.

Our initial deployment is yielding positive results, and we plan to significantly scale the deployment of our hybrid fiber coax network next year. All the work that we are doing is DOCSIS 4.0 or 4.0 capable, enabling speeds that are multiple times of that which we have today. We will be rolling this out to other markets starting in 2026, allowing us to get to five gigabits and ultimately beyond. We believe these changes will not only lead to higher speeds, but also a network with fewer maintenance requirements. The strength of this offering positions us well against competitors today and into the future. On wireless, our unlimited test drive promotion continued to support subscriber growth in the third quarter. As a reminder, this promotion offers our broadband customers an attractive discounted price to gain access to unlimited broadband and add a wireless line free of charge.

We expect to roll out other new pricing and promotional offers next year to best maximize quality and value for our customers. Through continued investment in our network, we believe we will be able to offer 5G wireless service to all of Alaska over the coming years. We continue to bridge the digital divide in Alaska with our rural expansion. On the Alaska plan, we expect to complete the first phase and meet our build-out requirements in 2026 and increase wireless speeds in the communities we're serving. Additionally, the FCC's new Alaska Connect Fund will extend the Alaska plan and increase the amount of funding support, which will aid in the deployment of 5G wireless throughout Alaska. Turning to BEAD, GCI was provisionally awarded, subject to NTIA approval, three subgrants. Totaling over $140 million.

These subgrants will support the build-out of infrastructure to and within communities in the Yukon-Kuskokwim Delta and the expansion of GCI's Anchorage local access network to four new neighborhoods. Any funding that GCI has ultimately awarded will offset our capital costs as we expand in unserved locations. Other items. From a macro perspective, looking at the Alaska economy, in mid-October, the administration announced plans to open the Arctic National Wildlife Refuge to drilling. This increase in oil and gas activity, along with the potential deployment of a gas pipeline, could grow the Alaska economy and provide an opportunity for increased demand for our services. And finally, as we announced today, we intend to launch shortly a rights offering to raise approximately $300 million in proceeds. In the offering, all holders of our common stock would receive transferable rights to acquire shares of BLIB-K at a discount to the market.

Our Chairman, John Malone, has stated his intention to fully support the offering by exercising his rights in full and oversubscribing for any remaining shares available. We intend to use the proceeds for general corporate purposes, including potential future M&A. We believe this is an attractive source of liquidity and will provide value to our shareholder base. We refer you to the related registration statement being filed later today for more details. In summary, we continue to deliver high-quality service to the state of Alaska with both the breadth and caliber of our network. We believe the quality of our infrastructure and durability of our financial results will drive value for our customers, partners, and shareholders. With that, I'll turn it to Brian to discuss the financials in more detail.

Brian Wendling, Chief Accounting and Principal Financial Officer, GCI Liberty: Thanks, Ron, and good morning, everyone. At quarter-end, GCI Liberty had consolidated cash, cash equivalents, and restricted cash of $137 million, and total principal amount of debt of approximately $1 billion. At quarter-end, GCI's leverage, as defined by its credit agreement, was 2.3 times, and GCI's credit facility had $377 million of undrawn capacity, net of letters of credit. In the third quarter, $10 million of non-voting preferred stock of GCI Liberty was issued to Liberty Broadband and then sold by Liberty Broadband to third-party buyers. The GCI Liberty non-voting preferred stock pays a 12% dividend with a redemption date in 2032. During the quarter, we took a non-cash impairment charge on our indefinite-lived intangible assets, totaling $525 million. These intangibles were originally recorded as part of the 2020 acquisition of GCI Liberty by Liberty Broadband when cable multiples were much higher.

As part of the spin and seeing the post-spin trading values, we reevaluated the recoverability of these intangibles during the third quarter. The impairment is included in operating loss but excluded from Adjusted EBITDA. Now turning to GCI's operating results, GCI generated total revenue of $257 million, representing a 2% decrease in the third quarter. Revenue declined primarily due to exiting the video business in the quarter. Adjusted EBITDA of $92 million decreased 8%. The decline was driven by lower revenue and higher SG&A expense from increased personnel expense, including higher healthcare costs and growth in accrued employee incentive payments. Partially offset by reduced operating expenses from lower distribution costs. Consumer revenue declined 4% to $115 million. The majority of the decline was driven by a decline in video and data revenue, slightly offset by growth in consumer wireless.

Consumer wireless revenue increased 11% to $52 million, benefiting from subscriber growth and an increase in federal wireless subsidiaries. Subsidies, excuse me. Consumer gross margin increased to 72.2%, driven by a decline in consumer direct costs resulting from decreases in video programming costs and temporary cost savings from the Quintillion fiber break. As a reminder, the Quintillion fiber break was fully restored in September. Business revenue was flat at $142 million. We have now fully lapped the strong upgrade cycle starting in the third quarter of last year. Business wireless revenue declined $1 million, or 9%, driven by a slight decline in roaming revenue, and business gross margin increased to 78.2%, primarily due to temporary cost savings from the Quintillion fiber break combined with data revenue growth. Capital expenditures and grant proceeds totaled $52 million during the quarter. Year to date, GCI had approximately $152 million in net CapEx investment.

We now expect full-year CapEx to be in the range of $225-$250 million, with the lower end of the range driven by normal course timing shifts in planned CapEx projects. We still expect that 2026 will be our peak year for CapEx spend and that CapEx will step down meaningfully after 2026. GCI generated $155 million in free cash flow on a trailing 12-month basis through the end of the third quarter. We believe presenting free cash flow on a trailing 12-month basis more accurately demonstrates our cash generation and liquidity profile by minimizing seasonal fluctuations, particularly around the timing of USF cash receipts. And with that, I will turn the call back over to you, Ron.

Ron Duncan, CEO, GCI Liberty: Thank you, Brian. We appreciate your interest in GCI Liberty and look forward to continuing to update you on our progress. Before we open for Q&A, I want to take a moment to recognize and congratulate Shane Kleinstein, our head of investor relations, on her last earnings call with us. She has been instrumental in our investor relations function and has left an indelible mark on our company. On behalf of the entire GCI Liberty team, thank you, Shane, and we wish you the best in your future endeavors. We will have a new head of investor relations joining us and look forward to sharing that update in the future. In the meantime, we encourage you to please continue to reach out to the rest of the IR team or email us at investor@gcieliberty.com with questions. With that, we'll open the call up for Q&A.

Conference Operator: Thank you. If you'd like to ask a question, please press star one on your telephone keypad. If you're using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, it's star one to ask a question at this time. Mr. Duncan, it seems we have no questions at this time. I'll turn the floor back to you.

Ron Duncan, CEO, GCI Liberty: Okay. Well, thank you all very much for your participation this morning. And as stated previously, we are available for questions through the IR team and the website. Everyone, have a good day. Thank you.

Conference Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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