Realized and Unrealized Gains (Losses) on Financial Instruments

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


	Three months ended
	March 31,
	2021		2020

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

(amounts in thousands)

Time Warner Cable investment (1)

$
—

—

—

92,990

Derivative instruments (2)

2,675

—

5,026

—

$
2,675

—

5,026

92,990

(1)

~~As discussed~~The Company has elected to account for its exchangeable senior debentures using the fair value option. Changes in ~~note 4, Time Warner Cable merged with Charter on May 18, 2016. Therefore~~ the fair value of the exchangeable senior debentures recognized in the condensed consolidated statements of operations are primarily due to market factors driven by changes in the fair value of the underlying shares into which debt is exchangeable. The Company ~~no longer has an investment in Time Warner Cable as~~isolates the portion of ~~May 18, 2016, and~~ the unrealized gain (loss) ~~related~~attributable to ~~our investment~~the change in ~~Time Warner Cable is recorded through this date.~~ ~~In connection with~~ the ~~merger,~~instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the ~~Company exchanged,~~fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a ~~tax-free transaction, its shares~~gain of ~~Time Warner Cable~~$205 thousand and 0 for ~~shares of Charter Class A common stock~~.

~~(2)~~

As of December 31, 2016, the Company had an outstanding zero-strike call option on 704,908 shares of Liberty Broadband Series C common stock which the Company exercised in March 2017. In April 2017, the Company entered into another zero-strike call option on 600,242 shares of Liberty Broadband Series C common stock. The Company prepaid a premium of $50.0 million in April 2017. Upon expiration in June 2017, the call option was rolled into a new zero-strike call option on 600,242 shares of Liberty Broadband Series C common stock. Liberty Broadband exercised its option to settle the contract in cash in August 2017 for cash proceeds of $53.8 million. The Company realized gains on the options outstanding and settled during the three ~~and nine~~ months ended ~~September 30, 2017.~~

March 31, 2021 and 2020, respectively. The cumulative change was a gain of $8.8 million as of March 31, 2021.

~~(4)~~(5) Investment in Charter Accounted for Using the Equity Method

~~In May 2013, Liberty acquired approximately 26.9 million shares~~Through a number of Legacy Charter common stock and approximately 1.1 million warrants to purchase shares of Legacy Charter common stock for approximately $2.6 billion, which represented an approximate 27% beneficial ownership (including the warrants on an as if converted basis) in Legacy Charter at the time of purchase and price per share of $95.50. Liberty funded the purchase with a combination of cash on hand of approximately $1.2 billion and new margin loan arrangements. Liberty allocated the purchase price between the shares of common stockprior years’ transactions and the ~~warrants~~Combination, Liberty Broadband has acquired an interest in the transaction by determining the fair value of the publicly traded warrants and allocating the remaining balance to the shares acquired, which resulted in an initial excess basis in the investment of $2,532 million.Charter. The investment in ~~Legacy~~ Charter is accounted for as an equity method affiliate based on ~~the~~our voting and ownership interest ~~obtained~~ and the board seats held by individuals appointed by ~~Liberty.~~

~~During May 2014,~~ Liberty purchased 897 thousand Legacy Charter shares for approximately $124.5 million. During November 2014, subsequent to the Broadband Spin-Off, Liberty Broadband exercised all of its outstanding warrants to purchase shares of Legacy Charter common stock for approximately $52 million.

On May 18, 2016, the Time Warner Cable Merger was completed, which resulted in Legacy Charter and Time Warner Cable becoming wholly owned subsidiaries of Charter. Also on May 18, 2016, the previously announced Bright House Transaction was completed. In connection with these transactions, Legacy Charter underwent a corporate reorganization, resulting in Charter, a former subsidiary of Legacy Charter, becoming the new publicly traded parent company. In connection with the Time Warner Cable Merger and the Bright House Transaction, Liberty Broadband completed the previously announced transactions described below:

~~I-11~~

~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

~~Transactions Completed in Connection with the Time Warner Cable Merger~~

~~Charter Investment Agreement~~

On May 18, 2016, Liberty Broadband completed its previously announced investment in Charter in accordance with the investment agreement dated May 23, 2015 by and among Liberty Broadband, Legacy Charter and Charter (the “Charter Investment Agreement”). Pursuant to the Charter Investment Agreement, immediately following the consummation of the Time Warner Cable Merger, Liberty Broadband purchased from Charter $4.3 billion of shares of Charter Class A common stock, par value $0.001 per share, at a price per share of $195.70 following adjustment by the applicable exchange ratio. As a result, Liberty Broadband received approximately 22.0 million shares of Charter Class A common stock. Liberty Broadband funded its purchase of these shares of Charter Class A common stock with proceeds from the issuance of Liberty Broadband Series C common stock.

~~Charter Contribution Agreement~~

Also on May 18, 2016, shares of Time Warner Cable common stock held by Liberty Broadband and Liberty Interactive were exchanged, in a tax-free transaction, for shares of Charter Class A common stock which resulted in each of Liberty Broadband and Liberty Interactive receiving one share of Charter Class A common stock for each share of Time Warner Cable common stock so exchanged. In the exchange, Liberty Broadband received approximately 2.4 million shares of Charter Class A common stock, with a fair value of $531.9 million.

~~Liberty Interactive Proxy Agreement~~

Pursuant to the Proxy and Right of First Refusal Agreement, dated May 23, 2015, as amended (the “Liberty Interactive Proxy Agreement”), by and between Liberty Broadband and Liberty Interactive, Liberty Interactive granted Liberty Broadband an irrevocable proxy to vote all shares of Charter common stock owned beneficially or of record by Liberty Interactive following the closing of the Time Warner Cable Merger, for a five year term subject to extension upon the mutual agreement of both parties, subject to certain limitations. So long as the Liberty Interactive Proxy Agreement is in effect, Liberty Broadband also has a right of first refusal (“ROFR”) to purchase all or a portion of any shares of Charter common stock which Liberty Interactive proposes to transfer, subject to certain limitations.

~~Transactions Completed in Connection with the Bright House Transaction~~

~~Second Amended and Restated Stockholders Agreement~~

On May 18, 2016, pursuant to the Stockholders Agreement, upon the closing of the Bright House Transaction, Liberty Broadband purchased from Charter approximately 3.7 million additional shares of Charter Class A common stock at a price per share of $191.33 following adjustment by the applicable exchange ratios, for an aggregate purchase price of $700 million. Liberty Broadband funded its $700 million purchase in shares of Charter through cash on hand and margin loan draws, as discussed in note 6.

~~Proxy and Right of First Refusal Agreement~~

In connection with the Bright House Transaction, on May 18, 2016, A/N and Liberty Broadband entered into a proxy and right of first refusal agreement, as amended (“A/N Proxy”), pursuant to which A/N granted Liberty Broadband a five-year proxy to vote shares of Charter held by A/N, capped at a number of shares representing 7% of the voting power of Charter’s outstanding shares. As a result of the A/N Proxy and the Liberty Interactive Proxy Agreement, Liberty Broadband controls 25.01% of the aggregate voting power of Charter following the completion of the Time Warner Cable Merger and the Bright House Transaction and is Charter’s largest stockholder.

~~I-12~~

~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

So long as the A/N Proxy is in effect, if A/N proposes to transfer common units of Charter Communications Holdings, LLC (which units are exchangeable into Charter shares and which will, under certain circumstances, result in the conversion of certain shares of Class B Common Stock into Charter shares) or Charter shares, in each case, constituting either (i) shares representing the first 7.0% of the outstanding voting power of Charter held by A/N or (ii) shares representing the last 7.0% of the outstanding voting power of Charter held by A/N, Liberty Broadband will have a ROFR to purchase all or a portion of any such securities A/N proposes to transfer. The purchase price per share for any securities sold to Liberty Broadband pursuant to the ROFR will be the volume-weighted average price of Charter shares for the two trading day period before the notice of a proposed sale by A/N, payable in cash. Certain transfers are permitted to affiliates of A/N, subject to the transferee entity entering into an agreement assuming the transferor’s obligations under the A/N Proxy.

~~Investment in Charter~~

For discussion purposes the term “Charter” will be used to discuss both our previous and current holdings in Legacy Charter and Charter. It is noted that the ticker symbol for the Class A common stock of each of Legacy Charter and Charter are the same, and that in connection with the Time Warner Cable Merger, Legacy Charter underwent a corporate reorganization, resulting in Charter, a former subsidiary of Legacy Charter, becoming the new publicly traded parent company.

Broadband. As of ~~September 30, 2017,~~March 31, 2021, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately ~~$9,327 million. The market value~~$15,735 million and $36,177 million, respectively.

I-13

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Upon the closing of the Time Warner Cable merger, the Second Amended and Restated Stockholders Agreement, dated as of May 23, 2015, by and among Charter, Liberty Broadband and Advance/Newhouse Partnership ("A/N"), as amended (the “Stockholders Agreement”), became fully effective. Pursuant to the Stockholders Agreement, Liberty Broadband’s equity ownership in Charter as(on a fully diluted basis) is capped at the greater of ~~September 30, 2017 was approximately $19,651 million, which represented an approximate economic ownership~~26% or the voting cap (“Equity Cap”). As of ~~22%~~March 31, 2021, due to Liberty Broadband’s voting interest exceeding the current voting cap of 25.01%, our voting control of the ~~outstanding equity~~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 ~~date.~~its ownership interest, on a fully diluted basis, had exceeded the Equity Cap set forth in the Stockholders Agreement. On February 23, 2021, Charter and Liberty Broadband entered into a letter agreement in order to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the Equity Cap. Pursuant to this letter agreement, following any month during which Charter purchases, redeems or buys back shares of its Class A common stock, and prior to certain meetings of Charter’s stockholders, Liberty Broadband will be obligated to sell to Charter, and Charter will be obligated to purchase, such number of shares of Class A common stock as is necessary (if any) to reduce Liberty Broadband’s percentage equity interest, on a fully diluted basis, to the Equity Cap (such transaction, a “Charter Repurchase”). The per share sale price for each share of Charter will be equal to the volume weighted average price paid by Charter in its repurchases, redemptions and buybacks of its common stock (subject to certain exceptions) during the month prior to the Charter Repurchase (or, if applicable, during the relevant period prior to the relevant meeting of Charter stockholders). Under the terms of the letter agreement, Liberty Broadband sold 834,576 shares of Charter Class A common stock to Charter for $518.4 million in March 2021 to maintain our fully diluted ownership percentage at 26%. Subsequent to March 31, 2021, Liberty Broadband sold 735,209 shares of Charter Class A common stock to Charter for $459.7 million in April 2021.

During the three months ended March 31, 2020, Liberty Broadband exercised its preemptive right to purchase an aggregate of approximately 35 thousand shares of Charter’s Class A common stock for an aggregate purchase price of $14.9 million.

Investment in Charter

The excess basis ~~is $2,100~~in our investment in Charter of $9,210 million as of ~~September 30, 2017 and has been~~March 31, 2021 is allocated within memo accounts used for equity method accounting purposes as follows (amounts in millions):


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

Property and equipment

$
174

Customer relationships

346

Franchise fees

1,170

Trademarks

29

Goodwill

1,046

Debt

(20)

Deferred income tax liability

(645)

$
2,100

~~Upon acquisition, Liberty Broadband ascribed remaining useful lives of 7 years and 13 years to property~~Property and equipment and customer relationships have weighted average remaining useful lives of approximately 6 years and 10 years, respectively, and ~~indefinite lives to~~ franchise fees, trademarks and ~~goodwill.~~goodwill have indefinite lives. The excess basis of

I-14

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

outstanding debt is amortized over the contractual period using the ~~effective interest rate~~straight-line method. The increase in excess basis for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021 was primarily due to Charter’s share buyback program, partially offset by Liberty Broadband’s participation in Charter’s share buyback program. The Company’s ~~Share~~share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of ~~$15.3~~$57.9 million and ~~$18.5~~$40.1 million, net of related taxes, for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and expenses of $44.0 million and $23.2 million, net of related taxes, for the nine months ended September 30, 2017 and 2016,~~2020, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.

The Company had a dilution loss of ~~$3.7~~$82.2 million and ~~$16.3~~$59.3 million during the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and a dilution loss of $42.5 million and a dilution gain of $760.1 million during the nine months ended September 30, 2017 and 2016,~~2020, respectively. The dilution ~~gain~~losses for the nine months ended September 30, 2016 is primarily attributable to Liberty Broadband’s investment basis in Charter at a price per share below the new equity issued in the Time Warner Cable Merger. The dilution losses during the other periods presented ~~are~~were attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per ~~share.~~share, slightly offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during the three months ended March 31, 2021.

~~I-13~~

~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

~~Accounting Change~~

Charter adopted Accounting Standards Update (“ASU”) 2016-09 on January 1, 2017. Upon adoption of ASU 2016-09, Charter recognized excess tax benefits of approximately $136 million in deferred tax assets that were previously not recognized in a cumulative-effect adjustment to retained earnings. The impact of this entry on the Company’s equity is reflected in the line item Cumulative effect of accounting change at Charter in the accompanying condensed consolidated statement of equity.

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

Charter condensed consolidated balance sheets


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

September 30, 2017

December 31, 2016

Current assets

$
4,132

3,300

Property and equipment, net

33,300

32,963

Goodwill

29,554

29,509

Intangible assets, net

79,905

81,924

Other assets

1,337

1,371

Total assets

$
148,228

149,067

Current liabilities

10,419

9,572

Deferred income taxes

26,576

26,665

Long-term debt

66,064

59,719

Other liabilities

2,591

2,745

Equity

42,578

50,366

Total liabilities and shareholders’ equity

$
148,228

149,067

Charter condensed consolidated statements of operations


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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Revenue
$
10,458

10,037

30,979

18,728
Cost and expenses:

Operating costs and expenses (excluding depreciation and amortization)

(6,703)

(6,482)

(19,857)

(12,157)
Depreciation and amortization

(2,701)

(2,437)

(7,846)

(4,412)
Other operating expenses, net

(145)

(207)

(374)

(776)

(9,549)

(9,126)

(28,077)

(17,345)
Operating income

909

911

2,902

1,383
Interest expense, net

(788)

(724)

(2,250)

(1,771)
Other income (expense), net

(3)

79

(55)

429
Income tax benefit (expense)

(26)

(16)

(99)

3,135
Net income (loss)

92

250

498

3,176
Less: Net income attributable to noncontrolling interests

(44)

(61)

(156)

(108)
Net income (loss) attributable to Charter shareholders
$
48

189

342

3,068

~~I-14~~I-15

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

~~(5) Goodwill and Other~~ (6) Intangible Assets

~~There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2017.~~Intangible Assets Subject to Amortization, net


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

~~Intangible assets subject to amortization are comprised of the following (amounts in thousands):~~

September 30, 2017

December 31, 2016

Gross

Net

Gross

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

Acquired patents

$
10,823

(9,633)

1,190

10,823

(8,450)

2,373

Customer relationships

10,213

(6,463)

3,750

10,213

(5,440)

4,773

Tradename

2,838

(1,809)

1,029

2,838

(1,528)

1,310

Capitalized software

857

(763)

94

850

(710)

140

$
24,731

(18,668)

6,063

24,724

(16,128)

8,596

Skyhook’s patents are amortized straight-line over three and a half years and Skyhook’s tradename and customer relationship are amortized straight-line over five and a half years. Capitalized softwareAmortization expense for intangible assets ~~are amortized over three to five years. Amortization expense~~with finite useful lives was ~~$842 thousand~~$18.6 million and ~~$850~~$437.0 thousand for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $2.5 million and $2.6 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively.

~~The estimated future amortization~~Amortization expense for ~~the next five years related to~~amortizable intangible assets ~~with definite lives as~~for each of ~~September 30, 2017~~the five succeeding fiscal years is ~~as follows~~estimated to be (amounts in thousands):

Remainder of 2017

$
841

2018

$
2,575

2019

$
1,776

2020

$
871

2021

$
—


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

(7) Debt

~~(6)~~ Debt

~~Outstanding debt at September 30, 2017 and December 31, 2016~~ is summarized as follows:

September 30, 2017

December 31, 2016

(amounts in thousands)
2014 Margin Loans
$
—

400,000
2016 Margin Loans

—

200,000
2017 Margin Loans

500,000

—
Deferred loan costs

(3,025)

(1,488)

$
496,975

598,512
Less debt classified as current

—

(400,000)
Total long-term debt
$
496,975

198,512


	Outstanding
	principal		Carrying value
	March 31,		March 31,		December 31,
	2021		2021		2020
	amounts in thousands
Margin Loan Facility	$	2,000,000		2,000,000	2,000,000
2.75% Exchangeable Senior Debentures due 2050		575,000		588,064	608,804
1.25% Exchangeable Senior Debentures due 2050		825,000		811,536	836,971
1.75% Exchangeable Senior Debentures due 2046		14,536		24,741	26,350
Senior notes		600,000		634,697	635,683
Senior credit facility		523,000		523,000	704,000
Wells Fargo note payable		6,273		6,273	6,442
Deferred financing costs		—		(1,714)	(2,017)
Total debt	$	4,543,809		4,586,597	4,816,233
Debt classified as current				(29,425)	(31,026)
Total long-term debt			$	4,557,172	4,785,207

~~I-15~~

~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

~~2014 Margin Loans~~

On October 30, 2014, in connection with and prior to the effectiveness of the Broadband Spin-Off, a wholly-owned special purpose subsidiary of the Company (“BroadbandSPV”) entered into two margin loan agreements (the “2014 Margin Loan Agreements”) with each of the lenders party thereto. The 2014 Margin Loan Agreements permitted BroadbandSPV, subject to certain funding conditions, to borrow term loans up to an aggregate principal amount equal to $400 million (the “2014 Margin Loans”). The maximum borrowing capacity of $400 million under the 2014 Margin Loan Agreements was outstanding at December 31, 2016. The maturity date of the 2014 Margin Loans was October 30, 2017, accordingly the debt was classified as current as of December 31, 2016. Borrowings under the 2014 Margin Loan Agreements bore interest at the three-month LIBOR rate plus a per annum spread of 1.55%, and had an unused commitment fee of 0.25% per annum based on the average daily unused portion of the 2014 Margin Loans. Interest was payable quarterly in arrears beginning on December 31, 2014. On August 31, 2017, the outstanding borrowings of $400 million were repaid, as discussed below.

~~2016 Margin Loans~~

On March 21, 2016, a wholly-owned special purpose subsidiary of the Company (“Cheetah 5”), entered into two margin loan agreements (the “2016 Margin Loan Agreements” and together with the 2014 Margin Loan Agreements, the “Margin Loan Agreements”) with each of the lenders party thereto. The 2016 Margin Loan Agreements permitted Cheetah 5, subject to certain funding conditions, to borrow initial term loans up to an aggregate principal amount equal to $200 million and delayed draw loans (the “Draw Loans”) up to an aggregate principal amount equal to $100 million, for an aggregate total of $300 million (collectively the “2016 Margin Loans”). Cheetah 5 had borrowed $200 million as of December 31, 2016 and had $100 million available to be drawn until September 21, 2017. The maturity date of the 2016 Margin Loans was March 21, 2018, accordingly the debt was classified as noncurrent as of December 31, 2016. Borrowings under the 2016 Margin Loans bore interest at the applicable LIBOR rate plus 2.10% per annum and had an unused commitment fee of 0.5% per annum based on the average daily unused portion of the Draw Loans. Interest was payable quarterly in arrears beginning on March 31, 2016. The proceeds of the 2016 Margin Loans were used for the Company’s additional investment in Charter during May 2016, as discussed in note 4. On August 31, 2017, the outstanding borrowings of $200 million were repaid, as discussed below.

~~2017~~ Margin Loan Facility

On August ~~31, 2017,~~12, 2020, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”), entered into aAmendment No. 3 to its multi-draw margin loan credit facility and Amendment No. 2 to its Collateral Account Control Agreement (the ~~“2017~~“Third Amendment”), which amends SPV’s margin loan agreement, dated as of August 31, 2017 (as amended by Amendment No. 1 to Margin Loan ~~Facility”~~Agreement, dated as of August 24, 2018, and ~~the credit agreement governing such facility, the “2017~~as further amended by Amendment No. 2 to Margin Loan Agreement and Amendment No. 1 to Collateral Account Control Agreement, dated August 19, 2019, the

I-16

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

“Existing Margin Loan Agreement”; the Existing Margin Loan Agreement, as amended by the Third Amendment, the “Margin Loan Agreement”), with ~~Bank of America, N.A~~Wilmington Trust, National Association, as the administrative agent, BNP Paribas, as the calculation agent, and the lenders ~~thereunder. SPV is permitted, subject to certain funding conditions, to borrow~~party thereto. The Margin Loan Agreement provides for, among other things, a multi-draw term ~~loans up to an aggregate principal amount equal to $1.0 billion. SPV will also have the ability from time to time to request additional loans~~loan credit facility (the “Margin Loan Facility”) in an aggregate principal amount of up to ~~$1.0~~$2.3 billion, including the Incremental Facility (as defined below). SPV’s obligations under the Margin Loan Facility are secured by first priority liens on the shares of Charter owned by SPV.

SPV drew down an additional $25 million on July 31, 2020 and an additional $100 million on August 20, 2020 on the Margin Loan Facility. Upon the completion of the Combination on December 18, 2020, SPV borrowed an additional $1.3 billion on the Margin Loan Facility in order to repay an ~~uncommitted basis~~existing margin loan at GCI Liberty (the “Incremental Facility”). Outstanding borrowings under the Margin Loan Facility were $2.0 billion at both March 31, 2021 and December 31, 2020. As of March 31, 2021, SPV was permitted to borrow an additional $300.0 million, subject to certain ~~conditions. SPV had borrowed $500 million as of September 30, 2017 and had $500 million available to~~funding conditions, which may be drawn ~~until~~through August ~~31, 2018.~~12, 2021. The maturity date of the loans under the ~~2017~~ Margin Loan Agreement is August ~~30, 2019~~24, 2022 (except for any ~~incremental~~additional loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). ~~Accordingly,~~Prior to the ~~debt is classified as noncurrent as~~completion of ~~September 30, 2017. Borrowings~~the Combination, borrowings under the ~~2017~~ Margin Loan Agreement ~~bear~~bore interest at the three-month LIBOR rate plus a per annum spread of 1.5%, ~~unless it is unlawful for~~which increased to a per annum spread of 1.85% from and after the ~~applicable lender to fund or maintain loans based on LIBOR or there are material restrictions on~~completion of the ~~applicable lender to do so, in which case borrowings under the 2017~~Combination. The Margin Loan Agreement ~~will either (a) bear interest at 0.5% plus the higher of (i) the federal funds rate plus ½ of 1%, (ii) the prime rate and (iii)~~also provides for customary LIBOR plus 1% for each day during such period or (b) be prepaid. Borrowings outstanding under these margin loans bore interest at a rate of 2.74% per annum at September 30, 2017. Interest is payable quarterly in arrears beginning on September 29, 2017. SPV used available cash and a portion of the proceeds of the loans under the 2017 Margin Loan Facility to repay the Margin Loan Agreements. Borrowings may also be used for distribution as a dividend or a return of capital, for the purchase of margin stock and for general corporate purposes. replacement provisions.

The ~~2017~~ Margin Loan Agreement contains various affirmative and negative covenants that restrict the activities of the SPV (and, in some cases, the Company and its subsidiaries with respect to shares of Charter owned by the Company and its

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~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

subsidiaries). The ~~2017~~ Margin Loan Agreement does not include any financial covenants. The ~~2017~~ Margin Loan Agreement also contains restrictions related to additional indebtedness and events of default customary for margin loans of this type.

SPV’s obligations under the ~~2017~~ 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 ~~2017~~ Margin Loan Agreement. The ~~2017~~ Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares transferred, 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 agreements.As of ~~September 30, 2017, approximately 6.8~~March 31, 2021, 12.3 million shares of Charter with a value of ~~$2.5~~$7.6 billion were pledged as collateral pursuant to the ~~2017~~ Margin Loan Agreement.

Exchangeable Senior Debentures

~~(7)~~The Company has elected to account for all of its exchangeable senior debentures at fair value in its condensed consolidated financial statements. Accordingly, changes in the fair value of these instruments are recognized in unrealized gains (losses) in the accompanying condensed consolidated statements of operations. See note 4 for information related to unrealized gains (losses) on debt measured at fair value. As of March 31, 2021, a holder of the Company’s 2.75% Exchangeable Senior Debentures due 2050 (the “2.75% Debentures”) or a holder of the Company’s 1.25% Exchangeable Senior Debentures due 2050 (the “1.25% Debentures) does not have the ability to exchange and, accordingly, the 2.75% Debentures and 1.25% Debentures are classified as long-term debt in the condensed consolidated balance sheets. As of March 31, 2021, the holders of the 1.75% exchangeable senior debentures due 2046 (the “1.75% Debentures), which were issued by GCI Liberty and assumed in connection with the closing of the Combination, will have the ability to exchange their debentures for the period from April 1, 2021 through June 30, 2021 given that the trading value of the reference shares exceeded 130% of the par value for twenty of the last thirty trading days in the fourth quarter of 2020. Given the holders’ ability to exchange the debentures within a one-year period from the balance sheet date and the Company’s option to settle any exchange in cash, shares of Charter Class A common stock, or a combination of cash and shares of Charter Class A common stock, the 1.75% Debentures have been classified as current within the condensed consolidated balance sheets as of March 31, 2021. The Company reviews the terms of all the debentures on a quarterly basis to determine whether an event has occurred to require current classification on the condensed consolidated balance sheets.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Senior Notes

In connection with the closing of the Combination on December 18, 2020, GCI, LLC became an indirect wholly owned subsidiary of the Company. GCI, LLC is the issuer of $600.0 million 4.75% senior notes due 2028 (the “Senior Notes”). The Senior Notes were issued by GCI, LLC on October 7, 2020 and are unsecured. Interest on the Senior Notes is payable semi-annually in arrears. The Senior Notes are redeemable at the Company’s option, in whole or in part, at a redemption price defined in the respective indentures, and accrued and unpaid interest (if any) to the date of redemption. The Senior Notes are stated net of an aggregate unamortized premium of $34.7 million at March 31, 2021. Such premium is being amortized to interest expense in the accompanying condensed consolidated statements of operations.

Senior Credit Facility

In connection with the closing of the Combination on December 18, 2020, GCI, LLC became an indirect wholly owned subsidiary of the Company. GCI, LLC is the borrower under the Senior Credit Facility (as defined below).

On October 15, 2020, GCI, LLC entered into a Seventh Amended and Restated Credit Agreement (the “Senior Credit Facility”), which includes a $550.0 million revolving credit facility, with a $25 million sub-limit for standby letters of credit, and a $400.0 million Term Loan B. The borrowings under the Senior Credit Facility bear interest at either the alternate base rate or LIBOR (based on an interest period selected by GCI, LLC of one month, two months, three months or six months) at the election of GCI, LLC in each case plus a margin. The revolving credit facility borrowings that are alternate base rate loans bear interest at a per annum rate equal to the alternate base rate plus a margin that varies between 0.50% and 1.75% depending on GCI, LLC’s total leverage ratio. The revolving credit facility borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 1.50% and 2.75% depending on GCI, LLC’s total leverage ratio. Term Loan B borrowings that are alternate base rate loans bear interest at a per annum rate equal to the alternate base rate plus a margin of 1.75%. Term Loan B borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin of 2.75% with a LIBOR floor of 0.75%.

The borrowings under the revolving credit facility and the Term Loan B are scheduled to mature on October 15, 2025; provided that, if the Term Loan B is not refinanced or repaid in full prior to April 15, 2025, then the borrowings under the revolving credit facility will mature on April 15, 2025. Principal payments are due quarterly on the Term Loan B equal to 0.25% of the original principal amount. The loans are subject to customary mandatory prepayment provisions. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs and, in the case of the Term Loan B, subject to a customary six month “soft call.” Any amounts prepaid on the revolving credit facility may be reborrowed.

GCI, LLC’s Senior Credit Facility Total Leverage Ratio (as defined in the Senior Credit Facility) may not exceed 6.50 to 1.00, the Secured Leverage Ratio (as defined in the Senior Credit Facility) may not exceed 4.50 to 1.00 and the First Lien Leverage Ratio (as defined in the Senior Credit Facility) may not exceed 4.00 to 1.00.

The terms of the Senior Credit Facility include customary representations and warranties, customary affirmative and negative covenants and customary events of default. At any time after the occurrence of an event of default under the Senior Credit Facility, the lenders may, among other options, declare any amounts outstanding under the Senior Credit Facility immediately due and payable and terminate any commitment to make further loans under the Senior Credit Facility. The obligations under the Senior Credit Facility are secured by a security interest on substantially all of the assets of GCI Holdings and the subsidiary guarantors, as defined in the Senior Credit Facility, and on the stock of GCI Holdings.

As of March 31, 2021, there was $398.0 million outstanding under the Term Loan B, $125.0 million outstanding under the revolving portion of the Senior Credit Facility and $3.2 million in letters of credit under the Senior Credit Facility, leaving $421.8 million available for borrowing.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

During the three months ended March 31, 2021, GCI, LLC repaid $180 million on its revolving credit facility and completed an internal restructuring whereby GCI, LLC transferred the subsidiary that holds the Charter shares formerly beneficially owned by GCI Liberty to Liberty Broadband parent.

Wells Fargo Note Payable

In connection with the closing of the Combination on December 18, 2020, the Company assumed GCI Holdings’ outstanding $6.4 million under its Wells Fargo Note Payable (as defined below).

GCI Holdings issued a note to Wells Fargo that matures on July 15, 2029 and is payable in monthly installments of principal and interest (the "Wells Fargo Note Payable"). The interest rate is variable at one month LIBOR plus 2.25%.

The note is subject to similar affirmative and negative covenants as the Senior Credit Facility. The obligations under the note are secured by a security interest and lien on the building purchased with the note.

Debt Covenants

GCI, LLC is subject to covenants and restrictions under its Senior Notes and Senior Credit Facility. The Company and GCI, LLC are in compliance with all debt maintenance covenants as of March 31, 2021.

Fair Value of Debt

The fair value of the Senior Notes was $531.1 million at March 31, 2021.

Due to the variable rate nature of the Margin Loan, Senior Credit Facility and Wells Fargo Note Payable, the Company believes that the carrying amount approximates fair value at March 31, 2021.

(8) Preferred Stock

Liberty Broadband's preferred stock is issuable, from time to time, with such designations, preferences and relative participating, optional or other rights, qualifications, limitations or restrictions thereof, as shall be stated and expressed in a resolution or resolutions providing for the issue of such preferred stock adopted by Liberty Broadband's board of directors.

Liberty Broadband Preferred Stock was issued as a result of the Combination on December 18, 2020. Each share of GCI Liberty Preferred Stock outstanding immediately prior to the closing of the Combination was converted into 1 share of newly issued Liberty Broadband Preferred Stock. The Company is required to redeem all outstanding shares of Liberty Broadband Preferred Stock out of funds legally available, at the liquidation price plus all unpaid dividends (whether or not declared) accrued from the most recent dividend payment date through the redemption date, on the first business day following March 8, 2039. There were 7,300,000 shares of Liberty Broadband Preferred Stock authorized and 7,192,369 shares issued and outstanding at March 31, 2021. An additional 42,700,000 shares of preferred stock of the Company are authorized and are undesignated as to series. The Liberty Broadband Preferred Stock is accounted for as a liability on the Company’s condensed consolidated balance sheets because it is mandatorily redeemable. As a result, all dividends paid on the Liberty Broadband Preferred Stock are recorded as interest expense in the Company’s condensed consolidated statements of operations.

The liquidation price is measured per share and shall mean the sum of (i) $25, plus (ii) an amount equal to all unpaid dividends (whether or not declared) accrued with respect to such share have been added to and then remain part of the liquidation price as of such date.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The holders of shares of Liberty Broadband Preferred Stock are entitled to receive, when and as declared by the Liberty Broadband Board of Directors, out of legally available funds, preferential dividends that accrue and cumulate as provided in the certificate of designations for the Liberty Broadband Preferred Stock.

Dividends on each share of Liberty Broadband Preferred Stock accrue on a daily basis at a rate of 7.00% per annum of the liquidation price.

Accrued dividends are payable quarterly on each dividend payment date, which is January 15, April 15, July 15, and October 15 of each year, commencing January 15, 2021. If Liberty Broadband fails to pay cash dividends on the Liberty Broadband Preferred Stock in full for any 4 consecutive or non-consecutive dividend periods then the dividend rate shall increase by 2.00% per annum of the liquidation price until cured. On March 15, 2021, the Company announced that its board of directors had declared a quarterly cash dividend of approximately $0.44 per share of Liberty Broadband Preferred Stock which was paid on April 15, 2021 to shareholders of record of the Liberty Broadband Preferred Stock at the close of business on March 31, 2021.

(9) Stock-Based Compensation

Liberty Broadband grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock units and stock options to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (amounts in thousands):


	Three months			Nine months
	ended			ended
	September 30,			September 30,
	2017		2016	2017	2016

						Three months
						ended
						March 31,
						2021		2020
Operating expense	$	3	4	5	2	$	3	1
Selling, general and administrative		1,429	1,596	4,032	4,363		9,867	1,800
Research and development		67	136	339	217
	$	1,499	1,736	4,376	4,582
						$	9,870	1,801

Liberty Broadband – Grants of ~~Stock Options~~Awards

During the three months ended March 31, 2021, Liberty Broadband granted 167 thousand options to purchase shares of Series C Liberty Broadband common stock to our CEO in connection with his employment agreement. Such options had a GDFV of $40.05 per share and vest on December 31, 2021.

There were no0 options to purchase shares of Series A or Series B ~~or Series C~~ common stock granted during the ~~nine~~three months ended ~~September 30, 2017.~~ March 31, 2021.

The Company ~~calculates~~has calculated the GDFV for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. ~~Since Liberty Broadband common stock has not traded on the stock market for a significant length of time, the~~The volatility used in the calculation for Awards is based on ~~a blend of~~ the historical volatility of Liberty Broadband ~~and Charter~~ common stock and the implied volatility of publicly traded Liberty Broadband and Charter options; as the most significant asset within Liberty Broadband, the volatility of Charter was considered in the overall volatility of Liberty Broadband.stock. The Company uses a ~~zero~~0 dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject ~~option.~~

options.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liberty Broadband – Outstanding Awards

The following ~~tables present~~table presents the number and weighted average exercise price (“WAEP”) of Awards to purchase Liberty Broadband common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.


				Weighted
				average
				remaining	Aggregate
				contractual	intrinsic
	Series A	WAEP		life	value
	(in thousands)			(in years)	(in millions)
Outstanding at January 1, 2017	454	$	32.47

										Weighted
										average
										remaining	Aggregate
										contractual	intrinsic
							Series C	WAEP		life	value
							(in thousands)			(in years)	(in millions)
Outstanding at January 1, 2021							3,327	$	92.35
Granted	—	$	—				199	$	152.25
Exercised	(49)	$	26.85				(3)	$	73.85
Forfeited/cancelled	—	$	—				—	$	—
Outstanding at September 30, 2017	405	$	33.15	2.2	$	25
Exercisable at September 30, 2017	402	$	33.06	2.2	$	25
Outstanding at March 31, 2021							3,523	$	95.74	4.9	$	202
Exercisable at March 31, 2021							2,052	$	59.39	3.8	$	186

Weighted



average

remaining

Aggregate

contractual

intrinsic

Series C

WAEP

life

value

(in thousands)

(in years)

(in millions)
Outstanding at January 1, 2017

2,467

$
42.45

Granted

—

$
—

Exercised

(94)

$
27.08

Forfeited/cancelled

—

$
—

Outstanding at September 30, 2017

2,373

$
43.06

5.4

$
124
Exercisable at September 30, 2017

851

$
33.59

2.3

$
52

As of ~~September 30, 2017~~,March 31, 2021, Liberty Broadband also had 1 thousand Series A options and 722 thousand Series B options outstanding and exercisable at a WAEP of $35.81 and $96.79, respectively, and a weighted average remaining contractual life of 1.7 years and 1.8 years, respectively.

As of March 31, 2021, the total unrecognized compensation cost related to unvested Awards was approximately ~~$11 million~~.$68.9 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 21.9 years.

As of ~~September 30, 2017,~~March 31, 2021, Liberty Broadband reserved ~~2.8~~4.2 million shares of Series A, Series B and Series C common stock for issuance under exercise privileges of outstanding stock Awards.

~~Skyhook Equity Incentive Plans~~

Skyhook issued 3.3 million phantom stock appreciation rights (“PARs”) and no phantom stock units (“PSUs”) during the nine months ended September 30, 2017. As of September 30, 2017, the fair value of outstanding PARs and PSUs was approximately $2.4 million. As of September 30, 2017, $1.6 million (Level 3) is included in Other current liabilities in the accompanying condensed consolidated balance sheet for the fair value of Skyhook’s vested long-term incentive plan obligations.

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~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

~~(8)~~(10) Commitments and Contingencies

~~Leases~~

Skyhook leases various properties under operating leases expiring at various times through 2018. Skyhook’s two principal facilities are under lease through December 2017 and December 2019, respectively. Including amounts due to Liberty under the facilities sharing agreement, the Company’s total rental expense was $368 thousand and $452 thousand for each of the three months ended September 30, 2017 and 2016, respectively, and $890 thousand and $1.0 million for each of the nine months ended September 30, 2017 and 2016, respectively.

General Litigation

InThe Company has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business, the Company and its consolidated subsidiary are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims, including infringement of the intellectual property rights of the Company and its consolidated subsidiary by third parties.business. Although it is reasonably possible ~~that~~ the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

~~Indemnification Claims~~Hollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc., et al. On October 9, 2020, a putative class action complaint was filed by 2 purported GCI Liberty stockholders in the Court of Chancery of the State of Delaware under the caption Hollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc., et al., Case No. 2020-0880. A new version of the complaint was filed on October 11, 2020. The complaint named as defendants GCI Liberty, as well as the members of the GCI Liberty board of directors. The complaint alleged, among other things, that Mr. Gregory B. Maffei, a director and the President and Chief Executive Officer of Liberty Broadband and, prior to the Combination, GCI Liberty, and Mr. John C. Malone, the Chairman of the Board of Directors of Liberty Broadband and, prior to the Combination, GCI Liberty, in their purported capacities as controlling stockholders and directors of GCI Liberty, and the other directors of GCI Liberty, breached their fiduciary duties by approving the Combination. The complaint also alleged that various prior and current relationships

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InLIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

among members of the ~~normal course~~GCI Liberty special committee, Mr. Malone and Mr. Maffei rendered the members of ~~business, Skyhook provides indemnification to certain customers against specified claims that might arise against those customers from~~ the ~~use of Skyhook’s products. To date, Skyhook has~~GCI Liberty special committee not made any significant reimbursements to any of its customers for any losses related to these indemnification provisions. However, four such claims are currently pending. Skyhook is unable to estimate the maximum potential impact of these indemnification provisions on its future results of operations, although Skyhook’s liabilities in certain of those arrangements are customarily limited in various respects, including monetarily. Accordingly, no accrual was recorded related to indemnification claims as of September 30, 2017 or December 31, 2016.

~~Certain Risks and Concentrations~~independent.

The ~~Skyhook business is~~complaint sought certification of a class action, declarations that Messrs. Maffei and Malone and the other directors of GCI Liberty breached their fiduciary duties and the recovery of damages and other relief.

On December 23, 2020, the plaintiffs filed a Second Amended Complaint, which, among other things, included a new count of breach of fiduciary duty against Mr. Maffei and Mr. Gregg Engles, the other former member of the GCI Liberty special committee, and new allegations that the price of GCI Liberty was depressed as a result of statements and omissions by Mr. Maffei in November of 2019. During the first quarter for 2021, the parties were conducting discovery with the trial scheduled for November 2021. We believed the lawsuit was without merit.

During March 2021 and in advance of the expenditure of significant time and costs to conduct the depositions proposed to have been taken in this action, the parties began negotiations for a potential settlement of this action. On May 5, 2021, the plaintiffs (on behalf of themselves and other members of a proposed settlement class) and defendants entered into an agreement in principle to settle the litigation pursuant to which the parties agreed that the plaintiffs will dismiss their claims with prejudice, with customary releases, in return for a settlement payment of $110 million, which has been accrued as a current liability in the condensed consolidated balance sheet and recorded as a litigation settlement expense within operating income in the condensed consolidated statements of operations. This agreement will be further codified in a final Stipulation and Agreement of Settlement, which will be subject to certain risks and concentrations including dependence on relationships with its customers. The Company’s largest customers, that accounted for greater than 10% of revenue, aggregated 57% and 85% of total revenue forapproval by the ~~three months ended September 30, 2017 and 2016, respectively, and 57% and 64% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.~~Court.

~~Off-Balance Sheet Arrangements~~

Liberty Broadband did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources.

~~(9)~~(11) Segment Information

Liberty Broadband identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Liberty Broadband’s annual pre-tax ~~earnings.~~earnings (losses).

During the first quarter of 2021, as a result of the closing of the Combination on December 18, 2020, Skyhook Holding, Inc., a wholly owned subsidiary of the Company, is no longer significant to the Company and has been included in Corporate and other for presentation purposes. The revised segment reporting structure includes the following reportable segments: (1) GCI Holdings and (2) Charter. All prior period segment disclosure information has been reclassified to conform to the current reporting structure. These reclassifications had no effect on our condensed consolidated financial statements in any period.

Liberty Broadband evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Liberty Broadband reviews nonfinancial measures such as subscriber growth.

For the three months ended March 31, 2021, Liberty Broadband has identified the following consolidated company and equity method investment as its reportable segments:

●

GCI Holdings – a wholly owned subsidiary of the Company that provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska.

●

Charter—an equity method investment that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The accounting policies of the segment that is also a consolidated company are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter, 100% of the Charter amounts are included in the tables below and subsequently eliminated in order to reconcile the account totals to the Liberty Broadband condensed consolidated financial statements.

Performance Measures

Revenue by segment from contracts with customers, classified by customer type and significant service offerings follows:


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
GCI Holdings
Consumer Revenue
Wireless	$	31,971	—
Data		52,225	—
Video		18,929	—
Voice		3,554	—
Business Revenue
Wireless		18,901	—
Data		90,286	—
Video		802	—
Voice		6,148	—
Lease, grant, and revenue from subsidies		19,400	—
Total GCI Holdings		242,216	—
Corporate and other		4,318	4,104
Total	$	246,534	4,104

Charter revenue totaled $12,522 million and $11,738 million for the three months ended March 31, 2021 and 2020, respectively.

The Company had gross receivables of $206.0 million and deferred revenue of $31.0 million at March 31, 2021 from contracts with customers, which amounts exclude receivables and deferred revenue arising from leases, grants, and subsidies. Our customers generally pay for services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in the accompanying condensed consolidated statements of operations as the services are provided. Changes in the contract liability balance for the Company during the three ended March 31, 2021 were not materially impacted by other factors.

The Company expects to recognize revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) of approximately $177.4 million in the remainder of 2021, $159.3 million in 2022, $63.3 million in 2023, $25.2 million in 2024 and $54.3 million in 2025 and thereafter.

For segment reporting purposes, Liberty Broadband defines Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excluding stock-based ~~compensation)~~compensation and transaction costs). Liberty Broadband believes this measure is an important indicator of the operational strength and performance of its businesses ~~including~~by identifying those items that are not directly a reflection of each ~~business’s ability to service debt and fund capital expenditures.~~business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, transaction costs, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net earnings, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty Broadband generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

~~For the nine months ended September 30, 2017, Liberty Broadband has identified the following consolidated subsidiary and equity method investment~~Adjusted OIBDA is summarized as ~~its reportable segments:~~

~~Skyhook—a wholly owned subsidiary of the Company that provides a Wi-Fi based location platform focused on providing positioning technology and contextual location intelligence solutions.~~

Charter—an equity method investment of the Company that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers.

follows:


	Three months ended March 31,
	2021		2020

	amounts in thousands
GCI Holdings	$	96,059	—
Charter		4,643,000	4,389,000
Corporate and other		(13,306)	(4,981)
		4,725,753	4,384,019
Eliminate equity method affiliate		(4,643,000)	(4,389,000)
Consolidated Liberty Broadband	$	82,753	(4,981)

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liberty Broadband’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated companies are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter, 100% of the Charter amounts are included in the schedule below and subsequently eliminated in order to reconcile the account totals to the Liberty Broadband condensed consolidated financial statements.

~~Performance Measures~~

Three months ended  September 30,

2017

2016

Adjusted

Adjusted

Revenue

OIBDA

Revenue

OIBDA

(amounts in thousands)

Skyhook

$
3,430

(980)

20,616

11,422

Charter

10,458,000

3,674,000

10,037,000

3,429,000

Corporate and other

—

(2,366)

—

(2,091)

10,461,430

3,670,654

10,057,616

3,438,331

Eliminate equity method affiliate

(10,458,000)

(3,674,000)

(10,037,000)

(3,429,000)

Consolidated Liberty Broadband

$
3,430

(3,346)

20,616

9,331

Nine months ended September 30,

2017

2016

Adjusted

Adjusted

Revenue

OIBDA

Revenue

OIBDA

(amounts in thousands)

Skyhook

$
9,643

(6,839)

27,413

1,234

Charter

30,979,000

10,946,000

18,728,000

5,963,000

Corporate and other

—

(5,423)

—

(7,170)

30,988,643

10,933,738

18,755,413

5,957,064

Eliminate equity method affiliate

(30,979,000)

(10,946,000)

(18,728,000)

(5,963,000)

Consolidated Liberty Broadband

$
9,643

(12,262)

27,413

(5,936)

~~I-21~~

~~Table of Contents~~

~~LIBERTY BROADBAND CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

Other Information


					March 31, 2021
					Total		Investments	Capital
					assets		in affiliates	expenditures

	September 30, 2017
	Total		Investments	Capital
	assets		in affiliates	expenditures
	(amounts in thousands)
Skyhook	$	26,136	—	27
					amounts in thousands
GCI Holdings					$	3,507,595	391	28,605
Charter		148,228,000	—	6,096,000		143,439,000	—	1,821,000
Corporate and other		9,455,758	9,326,871	—		16,983,447	15,735,280	12
		157,709,894	9,326,871	6,096,027
						163,930,042	15,735,671	1,849,617
Eliminate equity method affiliate		(148,228,000)	—	(6,096,000)		(143,439,000)	—	(1,821,000)
Consolidated Liberty Broadband	$	9,481,894	9,326,871	27	$	20,491,042	15,735,671	28,617

The following table provides a reconciliation of ~~consolidated segment~~ Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:


						Three months ended
						March 31,
						2021		2020

	Three months			Nine months
	ended September 30,			ended September 30,
	2017		2016	2017	2016
		(amounts in thousands)
Consolidated segment Adjusted OIBDA	$	(3,346)	9,331	(12,262)	(5,936)
							amounts in thousands
Adjusted OIBDA						$	82,753	(4,981)
Stock-based compensation		(1,499)	(1,736)	(4,376)	(4,582)		(9,870)	(1,801)
Depreciation and amortization		(942)	(971)	(2,844)	(2,935)		(63,762)	(493)
Litigation settlement							(110,000)	—
Operating income (loss)		(5,787)	6,624	(19,482)	(13,453)		(100,879)	(7,275)
Interest expense		(5,518)	(4,090)	(14,899)	(10,547)		(33,143)	(5,861)
Dividend and interest income		422	190	1,219	4,697
Share of earnings (loss) of affiliates		(5,280)	19,046	25,109	570,178
Share of earnings (loss) of affiliates, net							188,979	61,682
Gain (loss) on dilution of investment in affiliate							(82,215)	(59,325)
Realized and unrealized gains (losses) on financial instruments, net		2,675	—	5,026	92,990		99,348	—
Gain (loss) on dilution of investment in affiliate		(3,718)	(16,331)	(42,515)	760,074
Other, net		9	5	11	112		(8,126)	163
Earnings (loss) before income taxes	$	(17,197)	5,444	(45,531)	1,404,051	$	63,964	(10,616)

~~I-22~~I-25

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding ~~our~~ business, product and marketing strategies; new service and product offerings; revenue growth; future expenses; anticipated changes to regulations; the ~~return on~~recognition of deferred revenue; the performance, results of operations and cash flows of our ~~investment in, and performance of,~~equity affiliate, Charter Communications, Inc. (“Charter”); ~~Charter’s ongoing integration of its acquired operations; the recoverability of our goodwill and other long-lived assets; our~~ projected sources and uses of cash; the effects of regulatory developments; the impact of COVID-19 (as defined below); the Rural Healthcare Program; indebtedness and the anticipated ~~non-material~~ impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors ~~(as they relate to our consolidated subsidiary and equity affiliate)~~ that could cause actual results or events to differ materially from those anticipated:

●

~~Charter’s~~our, GCI Holdings, LLC (“GCI Holdings”), GCI, LLC, and Charters’ ability to ~~promptly, efficiently~~obtain cash in sufficient amounts to service financial obligations and ~~effectively integrate acquired operations;~~

meet other commitments;

●

~~the~~our ability ~~of Charter~~ to ~~sustain~~use net operating loss carryforwards and grow revenue and cash flow from operations by offering video, Internet, voice, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in its markets and to maintain and grow its customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;

disallowed business interest carryforwards;

●

our, GCI Holdings, GCI, LLC and Charters’ ability to obtain additional financing, or refinance existing indebtedness, on acceptable terms;

●

the impact of ~~competition from other market participants, including but not limited~~our, GCI Holdings, GCI, LLC and Charters’ significant indebtedness and our, GCI Holdings and Charters’ ability to ~~incumbent telephone companies, direct broadcast satellite operators, wireless broadband~~comply with any covenants in our and ~~telephone providers, digital subscriber line providers, fiber to the home providers, video provided over the Internet~~ by (i) market participants that have not historically competed in the multichannel video business, (ii) traditional multichannel video distributors, and (iii) content providers that have historically licensed cable networks to multichannel video distributors, ~~and providers of advertising over the Internet;~~

their respective debt instruments;

●

general business conditions, ~~economic uncertainty or downturn, high~~ unemployment levels and the level of activity in the housing ~~sector;~~

sector and economic uncertainty or downturn, including the impact of the novel coronavirus (“COVID-19”) pandemic to GCI Holdings and Charter’s customers and vendors and local, state and federal governmental responses to the pandemic;

●

~~Charter’s ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);~~

competition faced by GCI Holdings and Charter;

●

the ~~development~~ability of GCI Holdings and ~~deployment of new products~~Charter to acquire and ~~technologies, including wireless products, Charter’s cloud-based user interface, Spectrum Guide~~®~~, and downloadable security for set top boxes and any other cloud-based consumer services and service platforms;~~

retain subscribers;

●

~~failure to protect~~ the ~~security~~impact of ~~personal information about the customers of our operating subsidiary~~governmental legislation and ~~equity affiliate, subjecting us to costly government enforcement actions or private litigation and reputational damage;~~

~~changes in, or failure or inability to comply with, government regulations,~~regulation including, without limitation, regulations of the Federal Communications Commission (the "FCC"), on GCI Holdings and Charter, their ability to comply with regulations, and adverse outcomes from regulatory proceedings;

●

changes in the ~~effects~~cost of ~~governmental regulation on our business or potential business combination transactions~~ ~~including costs, disruptions~~programming expenses and possible limitations on Charter’s operating flexibility related to, and its ability to comply with, regulatory conditions applicable to Charter as a result of the Time Warner Cable Merger and the Bright House Transaction (each as defined below and collectively, the “Transactions”);

~~any events that disrupt Charter’s networks, information systems or properties and impair its operating activities and negatively impact its reputation;~~

the ability of ~~suppliers~~GCI Holdings and ~~vendors~~Charter to ~~deliver~~pass on related costs to their customers;

●

changes in the amount of data used on the networks of GCI Holdings and Charter;

●

the ability of third-party providers to supply equipment, services, software or licenses;

●

the ability of GCI Holdings and Charter to respond to new technology and meet customer demands for new products ~~equipment, software~~ and services;

●

changes in customer demand for the products and services of GCI Holdings and Charter and their ability to adapt to changes in demand;

●

the ability of GCI Holdings and Charter to license or enforce intellectual property rights;

●

natural or man-made disasters, terrorist attacks, pandemics; cyberattacks, network disruptions, service interruptions and system failures and the impact of related uninsured liabilities;

●

the ability to hire and retain key personnel;

●

risks related to the Investment Company Act of 1940;

●

the outcome of any pending or threatened litigation;

and

~~I-23~~I-26

Table of Contents

~~changes in the nature of key strategic relationships with partners, vendors and joint venturers;~~

●

~~the availability~~changes to general economic conditions, including economic conditions in Alaska, and ~~access, in general, of funds to meet debt obligations prior to or when they become due~~their impact on potential customers, vendors and ~~to fund operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets;~~

third parties.

the ability of Charter and our company to comply with all covenants in our respective debt instruments, any violation of which, if not cured in a timely manner, could trigger a default of other obligations under cross-default provisions;

~~our ability to successfully monetize certain of our assets; and~~

~~the ability to retain and hire key personnel.~~

For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes ~~thereto. Additionally, see note 1 to~~thereto and our Annual Report on Form 10-K for the ~~accompanying condensed consolidated financial statements for~~year ended December 31, 2020.

Overview

Liberty Broadband Corporation (“Liberty Broadband,” “the Company,” “us,” “we,” or “our”) is primarily comprised of a wholly owned subsidiary, GCI Holdings (as of December 18, 2020) and an ~~overview of new accounting standards that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.~~

~~Overview~~equity method investment in Charter.

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a ~~wholly-owned~~wholly owned subsidiary, Liberty Broadband, ~~Corporation (“Liberty Broadband” or the “Company”),~~ and to distribute subscription rights to acquire shares of Liberty Broadband’s ~~Series C~~ common stock (the “Broadband Spin-Off”). At

On December 18, 2020, pursuant to the ~~time~~Agreement and Plan of ~~the Broadband Spin-Off,~~Merger, dated as of August 6, 2020, entered into by GCI Liberty, Inc. (“GCI Liberty”), Liberty Broadband, was comprised of (i) Liberty’s former interest in Charter Communications, Inc. (“Legacy Charter”), (ii) Liberty’s former wholly-owned subsidiary TruePosition, Inc., (iii) Liberty’s former minority equity investment in Time Warner Cable, Inc. (“Time Warner Cable”, “TWC”, or “Legacy TWC”), (iv) certain deferred tax liabilities, as well as liabilities related to the Time Warner Cable written call options and (v) initial indebtedness, pursuant to margin loans entered into prior to the completion of the Broadband Spin-Off. The Broadband Spin-Off was accounted for at historical cost due to the pro rata nature of the distribution to holders of Liberty common stock.

~~On May 18, 2016, Time Warner Cable merged with Legacy Charter (the “Time Warner Cable Merger”). In connection with the Time Warner Cable~~Grizzly Merger ~~Legacy Charter underwent a corporate reorganization, resulting in CCH I,~~Sub 1, LLC, a ~~former~~wholly owned subsidiary of Legacy Charter (“Charter”), becoming the new publicly traded parent company. Also on May 18, 2016, the previously announced acquisition of Bright House Networks, LLC (“Bright House”) from Advance/Newhouse Partnership (“A/N”) by Charter (the “Bright House Transaction”) was completed. In connection with the Time Warner Cable Merger and Bright House Transaction, Liberty Broadband entered into certain agreements with Legacy Charter, Charter, Liberty Interactive Corporation (“Liberty Interactive”) and Time Warner Cable. In connection with the Time Warner Cable Merger and Bright House Transaction, Liberty Broadband exchanged its shares of Time Warner Cable for shares of Charter and purchased additional shares of Charter. As a result, and pursuant to proxy agreements entered into with Liberty Interactive and A/N, Liberty Broadband controls 25.01% of the aggregate voting power of Charter. In addition, in connection with the Time Warner Cable Merger, Liberty Broadband funded its purchase of shares of Charter Class A common stock using proceeds of $4.4 billion related to subscriptions for approximately 78.3 million newly issued shares of Liberty Broadband ~~Series C common stock.~~

~~The Company’s~~(“Merger LLC”), and Grizzly Merger Sub 2, Inc., a wholly owned subsidiary ~~Skyhook Holding, Inc. (formerly known~~of Merger LLC (“Merger Sub”), Merger Sub merged with and into GCI Liberty (the “First Merger”), with GCI Liberty surviving the First Merger as ~~TruePosition, Inc.~~an indirect wholly owned subsidiary of Liberty Broadband (the “Surviving Corporation”), ~~was originally incorporated to provide technology for locating wireless phones~~ and ~~other mobile devices through~~immediately following the First Merger, GCI Liberty (as the Surviving Corporation in the First Merger) merged with and into Merger LLC (the “Upstream Merger”, and together with the First Merger, the “Combination”), with Merger LLC surviving the Upstream Merger as a ~~passive network overlay system using its patented U-TDOA technology (“U-TDOA service”). In February 2014, Skyhook Holding, Inc. acquired 100%~~wholly owned subsidiary of the outstanding common shares of Skyhook Wireless, Inc., which operates a global location network containing billions of geolocated Wi-Fi access points and cell towers that serve as the reference infrastructure for providingLiberty Broadband.

~~I-24~~

~~Table of Contents~~

location services. In 2015, one of Skyhook Holding, Inc.’s customers, a wireless carrier utilizing the legacy U-TDOA service which accounted for approximately 80% - 90% of consolidated revenue at the time, gave notice that it planned to discontinue use of the U-TDOA service and did not intend to renew its contract, which expired on December 31, 2015. The loss of this customer had a material adverse effect on Skyhook Holding, Inc.’s business. As a result of the ~~loss~~Combination, each holder of a share of Series A common stock and Series B common stock of GCI Liberty received 0.58 of a share of Series C common stock and Series B common stock, respectively, of Liberty Broadband. Additionally, each holder of a share of Series A Cumulative Redeemable Preferred Stock of GCI Liberty (“GCI Liberty Preferred Stock”) received one share of newly issued Liberty Broadband Series A Cumulative Redeemable Preferred Stock (“Liberty Broadband Preferred Stock”), which has substantially identical terms to GCI Liberty’s former Series A Cumulative Redeemable Preferred Stock, including a mandatory redemption date of March 9, 2039. Cash was paid in lieu of issuing fractional shares of Liberty Broadband stock in the Combination. No shares of Liberty Broadband stock were issued with respect to shares of GCI Liberty capital stock held by (i) GCI Liberty as treasury stock, (ii) any of GCI Liberty’s wholly owned subsidiaries or (iii) Liberty Broadband or its wholly owned subsidiaries.

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

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Table of Contents

Update on Economic Conditions

GCI Holdings

GCI Holdings offers wireless and wireline telecommunication services, data services, video services, and managed services to customers primarily throughout Alaska. Because of this ~~wireless carrier customer, further changes~~geographic concentration, growth of GCI Holdings’ business and operations depends upon economic conditions in Alaska. In December 2019, Chinese officials reported a novel coronavirus outbreak. COVID-19 has since spread through China and internationally. On March 11, 2020, the ~~regulatory environment~~World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices, which has caused a ~~shift~~significant disruption to most sectors of the economy.

Although the COVID-19 pandemic has significantly impacted Alaska, GCI Holdings has continued to deliver services uninterrupted by the pandemic and expects to be able to continue to respond to the increase in network activity. As a major provider of Internet services in Alaska, GCI Holdings believes it plays an instrumental role in enabling social distancing through telecommuting and e-learning across the ~~overall market~~state and remains focused on its service to customers, as well as the health and safety of its employees and customers.

The majority of GCI Holdings’ workforce has transitioned to working at home full time and it expects to keep those employees working from home through at least August 2021.

GCI Holdings cannot predict the ultimate impact of COVID-19 on its business, including the depth and duration of the economic impact to its customers’ ability to pay for products and services including the impact of extended unemployment benefits and other stimulus packages and what assistance may be provided to its customers. There is a risk that GCI Holdings’ accounts receivable and bad debt expense will increase substantially due to the economic impact of the COVID-19 pandemic. In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to GCI Holdings and the risk of limitations on the deployment and maintenance of its services.

The Alaska economy is dependent upon the oil industry, state government spending, United States military spending, investment earnings and tourism. A decline in oil prices would put significant pressure on the Alaska state government budget. Although Alaska state government has significant reserves that GCI Holdings believes will help fund the state government for the ~~legacy U-TDOA service, Skyhook Holding, Inc. ceased making further investment in its U-TDOA products. In 2016, Skyhook Holding, Inc. and Skyhook Wireless, Inc. combined operations~~next couple of years, major structural budgetary reforms will be required in order to ~~focus~~offset the impact of the COVID-19 pandemic and a decline in oil prices. Although GCI Holdings cannot predict the long-term impact COVID-19 will have on these sectors of the Alaska economy, adverse circumstances in these industries may have an adverse impact on the ~~development~~demand for its products and ~~sale~~services and on its results of operations and financial condition.

The Alaska economy is in a recession that started in late 2015 and has continued as a result of the ~~suite~~COVID-19 pandemic and continued low oil prices. While it is difficult for GCI Holdings to predict the future impact of ~~location~~a continuing recession on its business, these conditions have had an adverse impact on its business and ~~context~~could continue to adversely affect the affordability of and demand for some of its products and services and cause customers to shift to lower priced products and services or to delay or forgo purchases of its products and services. Additionally, GCI Holdings’ customers may not be able to obtain adequate access to credit, which could affect their ability to make timely payments to GCI Holdings. If that were to occur, GCI Holdings could be required to increase its allowance for doubtful accounts, and the number of days outstanding for its accounts receivable could increase. If the recession continues, it could continue to negatively affect GCI Holdings’ business including its financial position, results of operations, or liquidity, as well as its ability to service debt, pay other obligations and enhance shareholder returns.

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Table of Contents

Rural Health Care (“RHC”) Program

GCI Holdings receives support from various Universal Service Fund ("USF") programs including the RHC Program. The USF programs are ~~referred~~subject to ~~collectively herein as “Skyhook.”~~

~~The financial information represents a consolidation~~change by regulatory actions taken by the FCC, interpretations of or compliance with USF program rules, or legislative actions. Changes to any of the ~~historical~~USF programs that GCI Holdings participates in could result in a material decrease in revenue and accounts receivable, which could have an adverse effect on GCI Holdings’ business and the Company’s financial ~~information~~position, results of ~~Skyhook, Liberty Broadband’s interest in Charter, Liberty Broadband’s former minority equity investment in Time Warner Cable and~~operations or liquidity. The following paragraphs describe certain ~~deferred tax liabilities. This financial information refers~~separate matters related to the ~~consolidation~~RHC Program that impact or could impact the revenue earned by the Company. As of March 31, 2021, the Company had net accounts receivable from the RHC Program of approximately $100 million, which is included within Trade and other receivables in the condensed consolidated balance sheets.

The Company disclosed, in additional detail, the following items related to GCI Holdings’ involvement in the RHC Program in its Annual Report on Form 10-K for the year ended December 31, 2020:

●

The FCC reduced the rates charged to RHC customers by approximately 26% for the funding year that ended June 30, 2018. An Application for Review is currently with the FCC.

●

The FCC approved the cost-based rural rates GCI Holdings historically applied for the funding years that ended on June 30, 2019 and June 30, 2020. GCI Holdings collected $174.6 million in accounts receivable relating to these two funding years during the first quarter of 2021.

●

GCI Holdings submitted cost studies for the funding year ending June 30, 2021, which require approval by the FCC. Those studies remain pending before the FCC and we cannot predict when the FCC will act upon them.

●

The RHC Program has a funding cap for each individual funding year that is annually adjusted for inflation, and which the FCC can increase by carrying forward unused funds from prior funding years. In recent years, including the current year, this funding cap has not limited the amount of funding received by participants; however, management continues to monitor the funding cap and its potential impact on funding in future years.

●

GCI Holdings received a letter of inquiry and request for information from the Enforcement Bureau of the FCC (the “Enforcement Bureau”) in March 2018 relating to the period beginning January 1, 2015 and including all future periods. GCI Holdings has also received other related inquiries to which it is in the process of responding.

●

GCI Holdings became aware of potential RHC Program compliance issues related to certain of its currently active and expired contracts with certain of its RHC customers.

●

The FCC released an order adopting changes to the RHC Program that will revise the manner in which support issued under the RHC Program will be calculated and approved. On January 19, 2021, the Wireline Competition Bureau of the FCC issued an Order that waives the requirement to use the database for health care providers in Alaska for the two funding years ending June 30, 2022 and June 30, 2023. The Order requires GCI Holdings to determine its rural rates based on previously approved rates or under reinstitution of the rules currently in effect through the funding year ending on June 30, 2021.

The Company does not have any significant updates regarding the items noted above except as discussed in the remainder of this paragraph. On April 8, 2021, the Wireline Competition Bureau issued an Order further extending the January 19, 2021 waiver to carriers nationwide and eliminating the ability or requirement to use the database to establish the healthcare provider payments for services subsidized by the RHC Telecom Program. On April 21, 2021, representatives of the ~~aforementioned subsidiary, investments, and financial instruments, as “Liberty Broadband,” “the Company,” “us,” “we” and “our” here and~~Department of Justice informed GCI Holdings that a qui tam action has been filed in the ~~notes~~Western District of Washington arising from the subject matter under review by the Enforcement Bureau. Given the confidentiality of the qui tam process, the Company is unable to assess the ultimate outcome of this action and whether any type of fine or penalty would ultimately be assessed as is permitted under the applicable law.

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Charter

In the first quarters of both 2021 and 2020, the COVID-19 pandemic has significantly impacted how Charter’s customers use its products and services, how they interact with Charter, and how Charter’s employees work and provide services to customers. During the first quarter of 2021, customer activity levels remained below normal which contributed to lower operating expense from reduced service transactions and significantly lower bad debt, however, Charter expects those trends to slowly return to pre-COVID-19 levels throughout 2021 as the economy reopens and normal activities resume.

Although the ultimate impact of the COVID-19 pandemic cannot be predicted, Charter remains focused on driving customer relationship growth by deploying superior products and services packaged with attractive pricing. Further, Charter expects to continue to drive customer relationship growth through sales of bundled services and improving customer retention despite the expectation for continued losses of video and wireline voice customers.

Results of Operations—Consolidated—March 31, 2021 and 2020

General. We provide information regarding our consolidated operating results and other income and expenses, as well as information regarding the contribution to those items from our reportable segments in the tables below. The "Corporate and other" category consists of those assets or businesses which do not qualify as a separate reportable segment. See note 11 to the accompanying condensed consolidated financial ~~statements.~~statements for more discussion regarding our reportable segments. GCI Holdings’ results are only included in the Company’s consolidated results beginning on December 18, 2020. For a more detailed discussion and analysis of GCI Holding’s results, see "Results of Operations-GCI Holdings" below.

~~I-25~~

~~Table of Contents~~

~~Results of Operations—Consolidated—September 30, 2017 and 2016~~

Consolidated operating results:

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

(amounts in thousands)

Revenue

$
3,430

20,616

9,643

27,413

Operating expense

643

778

1,963

2,097

Research and development

1,373

2,248

5,875

7,823

Selling, general and administrative

4,760

8,259

14,067

23,429

Stock-based compensation

1,499

1,736

4,376

4,582

Depreciation and amortization

942

971

2,844

2,935

Operating income (loss)

(5,787)

6,624

(19,482)

(13,453)

Less impact of stock-based compensation and depreciation and amortization

2,441

2,707

7,220

7,517

Adjusted OIBDA

$
(3,346)

9,331

(12,262)

(5,936)


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Revenue
GCI Holdings	$	242,216	—
Corporate and other		4,318	4,104
Consolidated	$	246,534	4,104

Operating Income (Loss)
GCI Holdings	$	28,748	—
Corporate and other		(129,627)	(7,275)
Consolidated	$	(100,879)	(7,275)

Adjusted OIBDA
GCI Holdings	$	96,059	—
Corporate and other		(13,306)	(4,981)
Consolidated	$	82,753	(4,981)

Revenue

Revenue ~~decreased $17.2 million and $17.8~~increased $242.4 million for the three ~~and nine~~ months ended September 30, 2017, respectively, as compared to the same periods in the prior year. The decrease in revenue for both the three and nine months ended September 30, 2017, as compared to the same periods in the prior year, was due to a new license agreement entered into during 2016 with no similar event occurring in 2017. On September 1, 2016, Skyhook entered into a license agreement pursuant to which Skyhook agreed to grant to the licensee a perpetual, non-exclusive, non-transferable, worldwide license to patents and patent applications owned by the companies. In exchange for this grant, the licensee agreed to pay a one-time lump sum payment of $17.5 million that was recognized as revenue during the three months ended September 30, 2016.

~~Operating expense, research and development, and selling, general and administrative expenses~~

Operating expense decreased by $135 thousand and $134 thousand for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year. Research and development expense decreased by $875 thousand and $1.9 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year, primarily as a result of headcount reductions and other cost containment measures taken by Skyhook related to the run-off of the U-TDOA business. Selling, general, and administrative expense decreased by $3.5 million and $9.4 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year, primarily as a result of headcount reductions and other cost containment measures taken by Skyhook related to the run-off of the U-TDOA business coupled with reduced legal expenses of $1.3 million and $3.5 million, respectively, compared to the same periods in the prior year. Legal expenses in the current year have not been as significant due to a decrease in activity associated with license sales in the current period.

~~Stock-based compensation~~

~~The decrease in stock-based compensation expense of $237 thousand and $206 thousand for the three and nine months ended September 30, 2017, respectively,~~March 31, 2021, as compared to the corresponding ~~periods in the~~ prior year ~~were~~period. The increase in revenue was primarily due to ~~adjustments made~~revenue from GCI Holdings as a result of the Combination on December 18, 2020. See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Revenue for Corporate and other increased slightly due to ~~certain outstanding awards in 2016 which~~ increased ~~their value, partially offset by additional grants~~revenue from both existing and new customers.

I-30

Table of ~~awards, and the ongoing vesting of outstanding grants.~~ Contents

Operating Income (Loss)

~~Depreciation and amortization~~

~~Depreciation and amortization expense~~Consolidated operating loss decreased ~~by $29 thousand and $91 thousand during~~$93.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021, as compared to the corresponding ~~periods in the~~ prior year ~~due to certain assets becoming fully depreciated.~~

~~I-26~~

~~Table of Contents~~

period. Operating ~~income (loss)~~

~~Operating loss~~losses for Corporate and other increased ~~$12.4 million and $6.0~~$122.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021, primarily due to a litigation settlement of $110.0 million, as well as an increase in professional service fees and, to a lesser extent, corporate compensation expense.

Operating income increased at GCI Holdings as a result of the Combination on December 18, 2020. See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Stock-based compensation

Stock-based compensation expense increased $8.1 million for the three months ended March 31, 2021, as compared to the ~~same periods in the~~corresponding prior year period. The increase in stock-based compensation expense was primarily due to upfront grants per our CEO’s employment agreement, along with the ~~items discussed above.~~impact of the Combination.

Adjusted OIBDA

To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure. We define Adjusted OIBDA as ~~revenue less~~ operating ~~expenses~~income (loss) plus depreciation and ~~selling, general~~amortization, stock-based compensation, transaction costs, separately reported litigation settlements, restructuring, and ~~administrative expenses (excluding stock-based compensation).~~impairment charges. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses ~~including~~by identifying those items that are not directly a reflection of each ~~business’s ability to service debt and fund capital expenditures.~~business’ performance or indicative of ongoing business trends. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to generally accepted accounting principles in the United States (“GAAP”). Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with ~~GAAP. See note 9 to the accompanying condensed consolidated financial statements for~~U.S. generally accepted accounting principles. The following table provides a reconciliation of ~~Adjusted OIBDA to~~ Operating income (loss) ~~and Earnings (loss) before income taxes.~~to Adjusted OIBDA.


	Three months ended
	March 31,
	2021		2020

		amounts in thousands
Operating income (loss)	$	(100,879)	(7,275)
Depreciation and amortization		63,762	493
Stock-based compensation		9,870	1,801
Litigation settlement		110,000	—
Adjusted OIBDA	$	82,753	(4,981)

Adjusted OIBDA ~~decreased $12.7~~improved $87.7 million ~~and $6.3 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year. Adjusted OIBDA~~ for the three months ended September 30, 2017 and 2016, includes $2.4 million and $2.1 million of corporate selling, general and administrative costs, respectively. Adjusted OIBDA for the nine months ended September 30, 2017 and 2016, includes $5.4 million and $7.2 million of corporate selling, general and administrative costs, respectively. The decrease in corporate selling, general and administrative costs for the nine months ended September 30, 2017, as compared to same periods in the prior year, was primarily due to decreased legal expenses. Legal expenses decreased in the current year due to legal expenses associated with the Transactions in 2016. The decrease in Skyhook Adjusted OIBDA for the three and nine months ended September 30, 2017,March 31, 2021, as compared to the corresponding ~~periods~~prior year period. The increase in ~~the prior year,~~Adjusted OIBDA was due to the ~~new license agreement entered into during~~results of operations of GCI Holdings as a result of the ~~three months ended September 30, 2016,~~Combination, as discussed above, partially offset by ~~lower operating expenses as discussed above.~~increases in corporate professional service fees and compensation expense.

I-31

Table of Contents

Other Income and Expense

Components of Other income (expense) are presented in the table below.


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Other income (expense):
Interest expense	$	(33,143)	(5,861)
Share of earnings (losses) of affiliates		188,979	61,682
Gain (loss) on dilution of investment in affiliate		(82,215)	(59,325)
Realized and unrealized gains (losses) on financial instruments, net		99,348	—
Other, net		(8,126)	163
	$	164,843	(3,341)

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

(amounts in thousands)

Other income (expense):










Interest expense

$
(5,518)

(4,090)

(14,899)

(10,547)

Dividend and interest income

422

190

1,219

4,697

Share of earnings (losses) of affiliates

(5,280)

19,046

25,109

570,178

Realized and unrealized gains (losses) on financial instruments, net

2,675

—

5,026

92,990

Gain (loss) on dilution of investment in affiliate

(3,718)

(16,331)

(42,515)

760,074

Other, net

9

5

11

112

$
(11,410)

(1,180)

(26,049)

1,417,504

~~I-27~~

~~Table of Contents~~

Interest expense

Interest expense increased ~~$1.4 million and $4.4~~$27.3 million during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, respectively, as compared to the corresponding ~~periods~~period in the prior year. The ~~increase was primarily due to an increase~~increases were driven by additional amounts outstanding on the Margin Loan Facility (as defined in ~~LIBOR during the current periods as compared to corresponding periods in the prior year.~~

~~Dividend and interest income~~

~~Dividend and interest income increased $232 thousand and decreased $3.5 million during the three and nine months ended September 30, 2017, respectively, as compared~~note 7 to the ~~corresponding periods~~accompanying condensed consolidated financial statements), the 2.75% Exchangeable Senior Debentures due 2050 that were issued in August 2020 and the ~~prior year. The increase~~1.25% Exchangeable Senior Debentures due 2050 that were issued in ~~dividend and~~November 2020, as well as interest ~~income for~~associated with all the ~~three months ended September 30, 2017,~~debt instruments assumed by the Company as ~~compared to the same period in the prior year, was the~~a result of ~~increased interest income due to higher short-term marketable securities rates during~~ the third quarter of 2017, partially offset by lower cash balances. The decrease in dividend and interest income for the nine months ended September 30, 2017, as compared to the same period in the prior year, was the result of a loss of dividend income due to the Time Warner Cable Merger during May 2016. Combination.

Share of earnings (losses) of affiliates

Share of earnings of affiliates ~~decreased $24.3 million and $545.1~~increased $127.3 million during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021, as compared to the corresponding ~~periods~~period in the prior year. The Company’s Share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of ~~$15.3~~$57.9 million and ~~$18.5~~$40.1 million, net of related taxes, for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and expenses of $44.0 million and $23.2 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively, due to the increase in amortization ~~related to~~of the excess basis of assets with identifiable useful lives and ~~debt.~~debt, which was primarily due to the acquisition of GCI Liberty’s Charter shares in the Combination, as well as Charter’s share buyback program. The ~~decrease~~change in the share of earnings of affiliates in the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, as compared to the ~~same periods~~corresponding period in the prior year, was ~~primarily~~ the result of the ~~Time Warner Cable Merger and related transactions during May 2016 (see note 4 to the accompanying condensed consolidated financial statements).~~corresponding change in net income at Charter.

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Table of Contents

The following is a discussion of Charter’s results of operations. In order to provide a better understanding of Charter’s operations, we have included a summarized presentation of Charter’s results from ~~operations, as well as pro forma information for the period ended September 30, 2016 as if the Transactions had been completed on January 1, 2015.~~ operations.



							Three months ended
							March 31,
							2021		2020

						Pro Forma
	Three months ended			Nine months ended		Nine months ended
	September 30,			September 30,		September 30,
	2017		2016	2017	2016	2016
	(amounts in millions)
							amounts in millions
Revenue	$	10,458	10,037	30,979	18,728	29,748	$	12,522	11,738
Operating expenses, excluding stock-based compensation		(6,784)	(6,608)	(20,033)	(12,765)			(7,879)	(7,349)
Adjusted OIBDA		3,674	3,429	10,946	5,963	10,092		4,643	4,389
Depreciation and amortization		(2,701)	(2,437)	(7,846)	(4,412)			(2,441)	(2,497)
Stock-based compensation		(64)	(81)	(198)	(168)			(134)	(90)
Operating income		909	911	2,902	1,383	2,813		2,068	1,802
Other expenses, net		(791)	(645)	(2,305)	(1,342)			(931)	(1,306)
Net earnings (loss) before income taxes		118	266	597	41			1,137	496
Income tax benefit (expense)		(26)	(16)	(99)	3,135			(216)	(29)
Net earnings (loss)	$	92	250	498	3,176		$	921	467

Charter net earnings ~~decreased $158 million and $2,678~~increased $454 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021, as compared to the corresponding ~~periods~~period in the prior year.

Charter’s revenue increased ~~$421 million and $12,251~~$784 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021, as compared to the corresponding ~~periods~~period in the prior year, primarily due to increases in the number of residential Internet and ~~commercial business customers as well as price adjustments, offset by a decrease in basic video~~

~~I-28~~

~~Table of Contents~~

mobile customers and ~~advertising sales, and in~~price adjustments.

During the nine month period due to the Transactions which increased total revenue by approximately $11.4 billion. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, total revenue growth was 4.1% for the ninethree months ended ~~September 30, 2017,~~March 31, 2021, operating expenses, excluding stock-based compensation, increased $530 million as compared to the corresponding period in ~~2016.~~

~~The increase in revenue during~~ the ~~three~~prior year. Operating costs increased primarily due to increased mobile device costs and ~~nine months ended September 30, 2017 was partially offset by the net impact of an increase in~~mobile service, customer acquisition and operating ~~expenses, excluding stock-based compensation of $176 million and $7,268 million, respectively. The increase in operating expenses was primarily attributable~~costs due to ~~the Transactions.~~increased mobile lines, as well as increased programming costs. Operating costs also increased due to ~~an increase in programming~~increased litigation settlements, including the tentative settlement with Sprint Communications Company L.P. (“Sprint”) and T-Mobile USA, Inc. ("T-Mobile") for $220 million.

Programming costs increased as a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission ~~consents, higher expanded basic package customers and higher pay-per-view events,~~consent offset by ~~synergies as~~ a ~~result~~higher mix of ~~the Transactions.~~lower cost video packages within Charter’s video customer base. Charter expects programming ~~expenses to~~rates per customer will continue to increase ~~in future periods~~ due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media and broadcast station groups consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional ~~programming, particularly new services.~~programming. Charter has been unable to fully pass these increases on to its customers and does not expect to be able to ~~fully pass~~do so in the ~~cost increases on to its customers~~future without a potential loss of customers.

Charter’s Adjusted OIBDA for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 increased ~~as a result of the discussion above. On a pro forma basis, Charter’s Adjusted OIBDA increased by $854 million~~ for the nine months ended September 30, 2017, as a result of the discussion above, offset by increases in programming, marketing and transition costs which was offset by decreases in all other operating expense categories.

reasons described above.

Depreciation and amortization expense ~~increased $264~~decreased $56 million and $3,434 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year. The increase in depreciation and amortization expense was primarily the result of higher capital expenditures in the current year, as well as additional depreciation and amortization related to the Transactions, inclusive of the incremental amounts as a result of the higher fair values recorded in acquisition accounting. Stock-based compensation expense decreased $17 million and increased $30 million during the three and nine months ended September 30, 2017, respectively, compared to the same periods in the prior year primarily due to the Transactions.

Charter’s results were also impacted by an increase in other expenses, net of $146 million and $963 million for the three and nine months ended September 30, 2017, respectively. The increase in other expenses, net was primarily due to (i) decreases of $30 million and $524 million in other pension benefits for the three months and nine months ended September 30, 2017 and 2016, respectively, and (ii) $64 million and $479 million of additional interest expense that was recognized during the three and nine months ended September 30, 2017, respectively, in each case, as compared to the same period in the prior year. The decrease in other pension benefits during the three months ended ~~September 30, 2017,~~March 31, 2021, respectively, as compared to the corresponding period in the prior year primarily due to a decrease in depreciation and amortization as certain assets acquired in acquisitions become fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

Charter’s results were also impacted by other expenses, net which decreased $375 million for the three months ended March 31, 2021, as compared to the corresponding period in the prior year. The decrease in other expenses, net was primarily due to ~~a third quarter 2017 remeasurement~~increased gains on financial instruments.

Income tax expense increased $187 million for the three months ended March 31, 2021, as ~~a result of significant lump sum settlement payments~~compared to ~~participants. The decrease~~the corresponding period in ~~other pension benefits~~the prior year. Income tax expense increased during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021 as compared to the corresponding period in the prior year, ~~was~~ primarily as a result of a $675 million pension curtailment gain offset by an $157 million net remeasurement loss recognized in 2016 that resulted from an amendment to the plans made subsequent to the Time Warner Cable Merger. The increase in interest expense that was recognized during the three and nine months ended September 30, 2017, respectively, as compared to the same period in the prior year, was associated with debt assumed from Legacy TWC and an increase in weighted average debt outstanding primarily due to the issuance of notes in 2017.

Income tax expense increased $10 million and $3,234 million for the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in the prior year. Income tax expense for the three and nine months ended September 30, 2017, was reduced by approximately $17 million and $88 million, respectively, due to the recognition of excess tax benefits resulting from share based compensation as a component of the provision for income taxes following the prospective application of Accounting Standard Update 2016-09. Income tax expense for the three months ended September 30, 2016 was also impacted by a change in a state tax law that resulted in approximately $44 million of tax benefit. Income tax benefit for the nine months ended September 30, 2017 was a result of a reduction of substantially all of Legacy Charter’s preexisting valuation allowance associated with its deferred tax assets of approximately $3.3 billion as certain of the deferred tax liabilities that were assumed in connection with the closing of the Time Warner Cable Merger will reverse and provide a source of future taxablehigher pretax income.

~~I-29~~I-33

Table of Contents

~~Realized and unrealized gains (losses) on financial instruments, net~~

Realized and unrealized gains on financial instruments, net declined $2.7 million and $88.0 million for the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in the prior year. The realized gains during the three and nine months ended September 30, 2017 were related to the zero-strike call options (see discussion in note 3 to the accompanying condensed consolidated financial statements). During the three months ended September 30, 2016, there were no net realized or unrealized gains (losses) as we exited the derivative and Time Warner Cable shares were exchanged for Charter shares during the second quarter of 2016. The net realized and unrealized gain of $93.0 million for the nine months ended September 30, 2016, was attributable to gains in the fair value of our investment in Time Warner Cable, due to increases in the Time Warner Cable stock price during the period.

Gain (loss) on dilution of investment in affiliate

The loss on dilution of investment in affiliate ~~improved $12.6~~increased by $22.9 million during the three months ended ~~September 30, 2017,~~March 31, 2021, as compared to the ~~same~~corresponding period in the prior year, primarily due to a decrease of issuances of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share. The loss on dilution of investment in affiliate declined $802.6 million during the nine months ended September 30, 2017, as compared to the same period in the prior year, primarily due to the Company’s increased basis in Charter as a result of the Transactions during 2016, along with an increase in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per ~~share.~~share, slightly offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during the three months ended March 31, 2021. As Liberty Broadband’s ownership in Charter changes due to exercises of Charter ~~warrants and~~ stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter ~~warrants or~~ stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.

Realized and unrealized gains (losses) on financial instruments, net

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


	Three months ended
	March 31,
	2021		2020

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

The increase for the three months ended March 31, 2021 was primarily related to the assumption of the indemnification obligation by the Company as a result of the Combination (see note 4 in the accompanying condensed consolidated financial statements for additional discussion). The increase for the three months ended March 31, 2021 was additionally impacted by the changes in fair value of the 2.75% Exchangeable Senior Debentures due 2050, the 1.25% Exchangeable Senior Debentures due 2050 and the 1.75% Exchangeable Senior Debentures due 2046 related to changes in market price of underlying Charter stock (see notes 4 and 7 in the accompanying condensed consolidated financial statements for additional discussion).

Other, net

Other, net ~~during~~decreased $8.3 million for the three ~~and nine~~ months ended ~~September 30, 2017 is~~March 31, 2021, respectively, as compared to the corresponding period in the prior year. The decrease in 2021 was primarily ~~attributable~~due to a ~~gain on~~tax sharing receivable with Qurate Retail that resulted in losses of $9.0 million for the ~~sale of certain fixed assets at Skyhook during the year,~~three months ended March 31, 2021, partially offset by other income. See more discussion about the tax ~~penalties. Other, net during~~sharing agreement with Qurate Retail in note 1 to the ~~three~~accompanying condensed consolidated financial statements.

Income taxes

Earnings (losses) before income taxes and ~~nine months ended September 30, 2016 was attributable to a gain on the sale of shares of a certain Skyhook cost investment.~~

~~Income tax benefit (expense)~~

~~During the three and nine months ended September 30, 2017, we had an~~ income tax (expense) benefit of $7.3 million and $18.2 million, respectively, and the effective rate was approximately 42.6% and 40.1%, respectively. For the three and nine months ended September 30, 2016, we had an income tax expense of $1.7 million and $532.3 million, respectively, and the effective tax rate was approximately 30.4% and 37.9%, respectively. are as follows:


	Three months ended
	March 31,
	2021		2020

	amounts in thousands
Earnings (loss) before income taxes	$	63,964	(10,616)
Income tax (expense) benefit		(11,785)	2,774
Effective income tax rate		18.4%	26.1%

The difference between the effective income tax rate of ~~42.6%~~18.4% and the U.S. Federal income tax rate of ~~35%~~21% for the three months ended ~~September 30, 2017 is~~March 31, 2021 was primarily due to tax benefits from a change in effective tax rate used to measure deferred taxes on certain Charter shares and from the ~~effect~~accrual of ~~state income taxes and unrealized gain attributable~~non-taxable equity contributions related to the ~~Company’s own stock which is not recognized for tax purposes.~~indemnification

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Table of Contents

agreement between Liberty Broadband and Qurate Retail, partially offset by a non-deductible litigation settlement. The difference between the effective income tax rate of ~~40.1%~~26.1% and the U.S. Federal income tax rate of ~~35%~~21% for the ~~nine~~three months ended ~~September 30, 2017, is~~March 31, 2020 was primarily due to the effect of state income ~~taxes~~taxes.

Net earnings (loss)

The Company had net earnings of $52.2 million and ~~unrealized gain attributable to the Company’s own stock which is not recognized for tax purposes. The difference between the effective income tax rate~~net losses of ~~30.4% and the U.S. Federal income tax rate of 35%~~$7.8 million for the three months ended ~~September 30, 2016 is primarily due to~~March 31, 2021 and 2020, respectively. The change in net earnings (loss) was the ~~effect~~result of ~~state~~the above-described fluctuations in our revenue, expenses and other income ~~taxes. The difference between the effective income tax rate of 37.9%~~ and ~~the U.S. Federal income tax rate of 35% for the nine months ended September 30, 2016 is primarily due to the effect of state income taxes.~~expenses.

Liquidity and Capital Resources

As of ~~September 30, 2017,~~March 31, 2021, substantially all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.

The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the ~~subsidiaries)~~subsidiaries and is not otherwise restricted), ~~proceeds from asset sales,~~ monetization of our investments (including Charter Repurchases (discussed below)), outstanding or anticipated debt ~~borrowings,~~facilities, including $300.0 million available to be drawn under the Margin Loan Facility (as defined in note 7 to the accompanying condensed consolidated financial statements) until August 12, 2021, debt and equity issuances, and dividend and interest receipts.

~~I-30~~

~~Table of Contents~~

As of ~~September 30, 2017,~~March 31, 2021, Liberty Broadband had a cash balance of ~~$135~~$1,177 million.


				Three months ended March 31,
				2021		2020

	Nine months ended September 30,
	2017		2016
	(amounts in thousands)
				amounts in thousands
Cash flow information
Net cash provided (used) by operating activities	$	(23,596)	(5,033)	$	192,964	(14,501)
Net cash provided (used) by investing activities	$	(13)	(4,990,687)	$	489,929	(14,925)
Net cash provided (used) by financing activities	$	(46,694)	4,599,682	$	(923,463)	(1,941)

The increase in cash ~~used~~provided by operating activities in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to the ~~same~~corresponding period in the prior year, was primarily driven by increased activity in working capital accounts due to the ~~increase in operating loss, as well as the timing of differences in cash receipts and payments.~~Combination.

During the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021, net cash flows ~~from~~provided by investing activities were primarily related to ~~transactions~~the sale of 834,576 shares of Charter Class A common stock to Charter for $518.4 million in ~~connection~~March 2021 to maintain our fully diluted ownership percentage at 26%. In February 2021, Liberty Broadband entered into a letter agreement in order to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the ~~Time Warner Cable Merger and the Bright House Transaction, as discussed~~Equity Cap (see more information in note ~~4 of the accompanying condensed consolidated financial statements.~~

During the nine months ended September 30, 2017, net cash flows from financing activities were primarily related to the net debt repayments of $103 million and settlement of the zero-strike call options (see notes 3 and 65 to the accompanying condensed consolidated financial statements). The Company expects the Charter Repurchases to be a significant source of liquidity in future periods.

During the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021, net cash flows ~~from~~used in financing activities were primarily ~~related to the Company’s issuance~~repurchases of ~~$4.4 billion in additional shares of~~Series C Liberty Broadband ~~Series C~~ common stock ~~to purchase $4.3 billion in shares~~ of ~~New Charter, in addition to net borrowings~~$738.4 million, as well as repayment by GCI, LLC of ~~$200.0~~approximately $180 million ~~under two margin loan agreements, entered into~~ on ~~March 21, 2016, between a subsidiary of the Company and the lenders thereto.~~ its revolving credit facility.

The projected ~~use~~uses of our cash ~~will be primarily to fund~~for the remainder of 2021 are the potential buyback of common stock under the approved share buyback program, capital expenditures of approximately $100 million, approximately $95 million for interest payments on outstanding debt, approximately $10 million for preferred stock dividends, funding of any operational needs of our ~~subsidiary,~~subsidiaries, to ~~service debt,~~reimburse Liberty for amounts due under various agreements, to fund potential investment opportunities, and to refinance Liberty Broadband’s margin ~~loans that come due~~loan, under its Margin Loan Facility, maturing in ~~2019.~~2022. We expect ~~our potential~~corporate cash and other available sources of liquidity ~~(discussed above) and corporate cash~~ to cover corporate expenses ~~and future obligations.~~

for the foreseeable future.

~~I-31~~I-35

Table of Contents

Results of Operations—GCI Holdings, LLC

As described in notes 1 and 3 to the accompanying condensed consolidated financial statements, Liberty Broadband acquired GCI Holdings in the Combination on December 18, 2020. As GCI Holdings’ results are only included in the Company’s results since December 18, 2020, we believe a discussion of GCI Holdings’ results for a comparative two year period promotes a better understanding of GCI Holdings’ operations. For comparison and discussion purposes the Company is presenting (a) the results of GCI Holdings for the three months ended March 31, 2021 as included in the condensed consolidated financial statements of the Company and (b) the actual historical results of GCI Holdings for 2020, exclusive of the effects of acquisition accounting since the period is prior to the Combination. The most significant effect of acquisition accounting is an increase to depreciation and amortization as compared to prior periods as a result of an increase in fair values of depreciable and amortizable assets. This historical financial information of GCI Holdings can be found in historical filings of GCI Liberty, Inc. The financial information below is presented voluntarily and does not purport to represent what the results of operations of GCI Holdings would have been if it were a wholly owned subsidiary of Liberty Broadband for the periods presented or to project the results of operations of GCI Holdings for any future periods.

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Table of Contents

GCI Holdings provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska. The following table highlights selected key performance indicators used in evaluating GCI Holdings.


	March 31,
	2021	2020
Consumer
Wireless:
Revenue generating wireless lines in service¹	181,000	175,000
Non-revenue generating wireless lines in service²	1,800	4,500
Wireless lines in service	182,800	179,500
Data:
Revenue generating cable modem subscribers³	143,900	128,400
Non-revenue generating cable modem subscribers⁴	—	3,600
Cable modem subscribers	143,900	132,000
Video:
Basic subscribers⁵	71,000	79,200
Homes passed⁶	253,400	253,400
Voice:
Total local access lines in service⁷	37,900	38,900
Business
Wireless:
Revenue generating wireless lines in service¹	21,400	23,700
Data:
Revenue generating cable modem subscribers⁴	12,900	8,800
Voice:
Total local access lines in service⁷	30,400	34,000

¹A revenue generating wireless line in service is defined as a wireless device with a monthly fee for services.

² A non-revenue generating wireless line in service is defined as a data-only line with no monthly fee for services.

³A revenue generating cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber.

⁴A non-revenue generating cable modem subscriber is defined by the provision of basic cable modem service as a promotion to aid those impacted by COVID-19.

⁵ A basic subscriber is defined by the purchase of basic video service.

⁶ A home passed is defined as a dwelling unit that can be connected to GCI Holdings’ network without the need of otherwise extending its network.

⁷A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.

I-37

Table of Contents

GCI Holdings’ operating results for the three months ended March 31, 2021 and 2020 are as follows:


	March 31,
	2021		2020

	amounts in thousands
Revenue	$	242,216	231,561
Operating expenses (excluding stock-based compensation included below):
Operating expense		(66,753)	(64,951)
Selling, general and administrative expenses		(79,404)	(80,215)
Adjusted OIBDA		96,059	86,395
Stock-based compensation		(3,599)	(848)
Depreciation and amortization		(63,712)	(62,361)
Operating income (loss)	$	28,748	23,186

Revenue

The components of revenue are as follows:


	March 31,
	2021		2020

	amounts in thousands
Consumer
Wireless	$	44,388	40,773
Data		52,225	44,294
Video		18,933	20,762
Voice		3,683	4,005
Business
Wireless		20,387	22,489
Data		91,130	84,214
Video		802	4,022
Voice		10,668	11,002
Total revenue	$	242,216	231,561

Consumer wireless revenue increased $3.6 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The increase in revenue in 2021 was primarily due to increased plan service fee revenue of $1.6 million, driven by an increase in the number of subscribers and subscribers’ selection of plans with higher recurring monthly charges that offer higher usage limits and increased equipment sales revenue of $1.5 million driven by an increase in the number of handsets sold in 2021.

Consumer data revenue increased $7.9 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The increase in 2021 was driven by an increase in the number of subscribers and the subscribers' selection of plans with higher recurring monthly charges that offer higher speeds and higher usage limits.

Consumer video revenue decreased $1.8 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The decrease in 2021 was due to a $2.7 million decrease in plan service fee revenue driven by a decrease in the number of subscribers. The decrease was partially offset by a $1.3 million increase in advertising revenue driven by a reorganization effective August 1, 2020. The Company transitioned its advertising sales to Consumer video following the sale of the Company’s broadcast television station.

Consumer voice revenue decreased $0.3 million for the three months ended March 31, 2021, as compared to the corresponding prior year periods. The decrease in 2021 was primarily due to a reduction in the number of customers.

Business wireless revenue decreased $2.1 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The decrease in 2021 was primarily due to a decrease in grant revenue.

I-38

Table of Contents

Business data revenue increased $6.9 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The increase in 2021 was due to a $16.2 million increase in data and transport revenue driven by increased sales to school and medical customers for service upgrades. The increases were partially offset by the absence of $9 million recorded in the first quarter of 2020 for a RHC customer whose funding was initially denied and a $3.9 million decrease in professional services revenue driven by a reduction in time and materials project work.

Business video revenue decreased $3.2 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The decrease in 2021 was primarily due to the sale of the Company’s broadcast television station in the third quarter of 2020.

Business voice revenue decreased $0.3 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The decrease in 2021 was driven by a decrease in local service lines.

Operating expenses increased $1.8 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The increase in 2021 was primarily due to a $5.2 million increase in costs to operate our network driven by the increase in demand from school and medical customers and a $2.3 million increase in wireless equipment costs driven by an increase in the number of handsets sold. The increase is partially offset by decreases of $2.7 million in professional services costs driven by a reduction in time and materials project work and $2.9 million in video costs driven by the sale of the Company’s broadcast television station in the third quarter of 2020 and a decrease in costs paid to content producers driven by a decrease in video subscribers.

Selling, general and administrative expenses decreased $0.8 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The decrease in 2021 was primarily due to a $2.3 million decrease in bad debt expense and $0.7 million decrease in legal and compliance costs. The decrease was partially offset by a $2.1 million increase in labor costs.

Stock-based compensation increased $2.8 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. Stock-based compensation expense for the three months ended March 31, 2020 included the reversal of expense for performance-based awards that did not vest due to a shortfall in certain financial metrics and qualitative criteria. Stock-based compensation also increased due to the fair value assigned to converted Awards as part of the modification as a result of the Combination.

Depreciation and amortization increased $1.4 million for the three months ended March 31, 2021, as compared to the corresponding prior year period. The increase in 2021 was primarily due to an increase in assets placed in service since January 1, 2020 and higher amortization expense because of an accelerated recognition pattern for amortizing intangibles as a result of the Combination.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities. Market risk refers to the risk of loss arising from adverse changes in stock prices and interest rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

I-39

Table of Contents

We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which could include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We ~~expect to~~ manage our exposure to interest rates by ~~achieving~~maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We ~~anticipate achieving~~could achieve this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates ~~and/or~~and (iii) entering into interest rate swap arrangements when we deem appropriate.

Liberty Broadband’s borrowings under the Margin Loan Agreement (as defined in note 7 of the accompanying condensed consolidated financial statements) and the Senior Credit Facility (as defined in note 7 of the accompanying condensed consolidated financial statements) carry a variable interest rate based on LIBOR as a benchmark for establishing the rate of interest. LIBOR is the subject of national, international and other regulatory guidance and proposals for reform. In 2017, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR. On November 30, 2020, ICE Benchmark Administration, the administrator of LIBOR, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the one week and two month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate. The outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of borrowings under the aforementioned debt instruments. In preparation for the expected phase out of LIBOR, and to the extent alternate reference rates were not included in existing debt agreements, Liberty Broadband has incorporated alternative reference rates when amending these facilities, as applicable.

As of ~~September 30, 2017,~~March 31, 2021, our debt is comprised of the following amounts:


	Variable rate debt				Fixed rate debt
	Principal		Weighted avg		Principal		Weighted avg
	amount		interest rate		amount		interest rate

	dollar amounts in millions
GCI Holdings	$	529,273	3.1	%	$	600,000	4.8	%
Corporate and other	$	2,000,000	2.1	%	$	1,414,536	1.9	%

Variable rate debt

Fixed rate debt

Principal

Weighted avg

Principal

Weighted avg

amount

interest rate

amount

interest rate

(dollar amounts in millions)

$
500

2.7%

$
—

NA

Our ~~stock~~investment in Charter (our equity method affiliate) is publicly traded and not reflected at fair value in our balance sheet. Our investment in Charter is also subject to market risk that is not directly reflected in our financial statements.

~~We are exposed to changes in stock prices primarily as a result~~I-40

Table of our significant holdings in publicly traded securities. We continually monitor changes in stock markets, in general, and changes in the stock prices of our holdings, specifically. We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological changes, specific industry changes and other factors. We periodically use equity collars and other financial instruments to manage market risk associated with certain investment positions. These instruments are recorded at fair value based on option pricing models.Contents

Item 4. Controls and Procedures

Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were not effective as of ~~September 30, 2017 to provide reasonable assurance that information required to be disclosed~~March 31, 2021 because of the material weakness in ~~its reports filed or submitted under~~our internal control over financial reporting at our wholly owned subsidiary, GCI Holdings, as discussed in more detail in our Annual Report on Form 10-K for the ~~Exchange Act~~year ended December 31, 2020 (the “2020 Form 10-K”). Management is ~~recorded, processed, summarized and reported within~~monitoring the ~~time periods specified~~implementation of the remediation plan described in the ~~Securities~~2020 Form 10-K, as described below.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2021, we continued to review the design of our controls, made adjustments and ~~Exchange Commission's rules and forms.~~

~~There~~continued implementing controls to alleviate the noted control deficiencies at GCI Holdings. Other than these items, there has been no change in the Company's internal control over financial reporting that occurred during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Remediation Plan for Material Weakness in Internal Control Over Financial Reporting

In response to the material weakness as set forth in Part II, Item 9A in the 2020 Form 10-K, the Company developed a plan to remediate the material weakness at GCI Holdings. Remediation activities include:

•

Continue to hire, train and retain individuals with appropriate skills and experience related to designing, operating and documenting internal control over financial reporting.

•

Enhance the comprehensive and continuous risk assessment process to identify and assess financial statement risks and ensure that the financial reporting process and related internal controls are in place to respond to those risks.

•

Enhance the design of and implement additional process-level control activities and ensure they are properly evidenced and operating effectively.

•

Communicate expectations, monitor for compliance with expectations, and hold individuals accountable for their roles related to internal control over financial reporting.

The Company believes the foregoing efforts will effectively remediate the material weakness described in Part II, Item 9A in the 2020 Form 10-K. Because the reliability of the internal control process requires repeatable execution, the successful on-going remediation of the material weakness will require on-going review and evidence of effectiveness prior to concluding that the controls are effective. The Company's remediation efforts are underway; however, there is no assurance that the remediation efforts will be effective in the future or that additional material weaknesses will not develop or be identified.

~~I-32~~I-41

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 includes "Legal Proceedings" under Item 3 of Part I. ~~Other than as described in Part II, Item 1. Legal Proceedings of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, there~~There have been no material changes from the legal proceedings described in the Forms 10-K, except as described below.

Hollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc., et al.

On October 9, 2020, a putative class action complaint was filed by two purported GCI Liberty stockholders in the Court of Chancery of the State of Delaware under the caption Hollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc., et al., Case No. 2020-0880. A new version of the complaint was filed on October 11, 2020. The complaint named as defendants GCI Liberty, as well as the members of the GCI Liberty board of directors. The complaint alleged, among other things, that Mr. Gregory B. Maffei, a director and the President and Chief Executive Officer of Liberty Broadband and, prior to the Combination, GCI Liberty, and Mr. John C. Malone, the Chairman of the Board of Directors of Liberty Broadband and, prior to the Combination, GCI Liberty, in their purported capacities as controlling stockholders and directors of GCI Liberty, and the other directors of GCI Liberty, breached their fiduciary duties by approving the Combination. The complaint also alleged that various prior and current relationships among members of the GCI Liberty special committee, Mr. Malone and Mr. Maffei rendered the members of the GCI Liberty special committee not independent.

The complaint sought certification of a class action, declarations that Messrs. Maffei and Malone and the other directors of GCI Liberty breached their fiduciary duties and the recovery of damages and other relief.

Other Charter Proceedings

The California Attorney General and the Alameda County, California District Attorney are investigating whether certain of Charter’s waste disposal policies, procedures and practices are in violation of the California Business and Professions Code and the California Health and Safety Code. That investigation was commenced in January 2014. A similar investigation involving TWC was initiated in February 2012. Charter is cooperating with these investigations. While Charter is unable to predict the outcome of these investigations, it does not expect that the outcome will have a material effect on its operations, financial condition, or cash flows.

Sprint filed a patent suit against Charter and Bright House on December 2, 2017 in the United States District Court for the District of Delaware. This suit alleges infringement of 9 patents related to the Company's provision of Voice over Internet Protocol (“VoIP”) services. Sprint previously sued TWC with respect to eight of these patents and obtained a final judgment of $151 million inclusive of interest and costs, which Charter paid in November 2019. Charter has also brought a patent suit against Sprint (TC Tech, LLC v. Sprint) in the United States District Court for the District of Delaware implicating

II-1

Table of Contents

Sprint's LTE technology and a similar suit against T-Mobile in the United States District Court for the Western District of Texas.

Sprint filed a subsequent patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia. This suit alleges infringement of two patents related to Charter's video on demand services. The court transferred this case to the United States District Court for the District of Delaware on December 20, 2018 pursuant to an agreement between the parties.

On February 18, 2020, Sprint filed a lawsuit against Charter, Bright House and TWC. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter, TWC and Bright House. The case is now pending in the United States District Court for the District of Kansas.

Charter, T-Mobile and Sprint have tentatively reached a settlement of all of the foregoing suits that would result in a payment of $220 million by Charter to T-Mobile. Charter can give no assurance that this tentative settlement will be finalized. Pending finalization of the settlement and in the event the settlement is not finalized, Charter will vigorously defend these Sprint suits and prosecute the suits it has brought against T-Mobile and Sprint. While Charter is unable to predict the outcome of these lawsuits, it does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.

In addition to the Sprint litigation described above, Charter is a defendant or co-defendant in several additional lawsuits involving alleged infringement of various intellectual property relating to various aspects of its businesses. Other industry participants are also defendants in certain of these cases or related cases. In the event that a court ultimately determines that Charter infringes on any intellectual property, Charter may be subject to substantial damages and/or an injunction that could require Charter or its vendors to modify certain products and services it offers to its subscribers, as well as negotiate royalty or license agreements with respect to the intellectual property at issue. While Charter believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to Charter’s consolidated financial condition, results of operations, or liquidity. Charter cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss.

Charter is party to other lawsuits, claims and regulatory inquiries that arise in the ordinary course of conducting its business. The ultimate outcome of these other legal matters pending against Charter or its subsidiaries cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on our ~~Form 10-K.~~or Charters’ consolidated financial condition, results of operations, or liquidity, such lawsuits could have in the aggregate a material adverse effect on ours or Charter’s consolidated financial condition, results of operations, or liquidity. Whether or not Charter ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure its reputation.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Programs

In December 2016, the Board of Directors authorized the repurchase of $250 million of Liberty Broadband Series A and Series C common stock. In August 2020, the Board of Directors increased its repurchase authorization by $1.0 billion, with an aggregate repurchase amount not to exceed $1.3 billion. On February 23, 2021, the Board of Directors authorized an additional $2.23 billion under the Company’s share repurchase program.

II-2

Table of Contents

A summary of the repurchase activity for the three months ended March 31, 2021 is as follows:


	Series C Common Stock
				(c) Total Number	(d) Maximum Number
				of Shares	(or Approximate Dollar
				Purchased as	Value) of Shares that
	(a) Total Number	(b) Average		Part of Publicly	May Yet Be Purchased
	of Shares	Price Paid per		Announced Plans or	Under the Plans or
Period	Purchased	Share		Programs	Programs
January 1 - 31, 2021	1,204,926	$	152.89	1,204,926		$421	million
February 1 - 28, 2021	1,202,145	$	149.22	1,202,145		$2,472	million
March 1 - 31, 2021	2,448,831	$	153.06	2,448,831		$2,097	million
Total	4,855,902	$	152.06	4,855,902

There were no repurchases of Liberty Broadband Series A B or CSeries B common stock during the ~~period.~~three months ended March 31, 2021.

During the three months ended ~~September 30, 2017, no~~March 31, 2021, zero shares of Liberty Broadband Series A orcommon stock, zero shares of Liberty Broadband Series B common stock, 1,948 shares of Series C common stock and 1,062 shares of Liberty Broadband Preferred Stock were surrendered by ~~certain of~~ our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted ~~stock.~~stock, restricted stock units and options.

~~II-1~~

~~Table of Contents~~

Item 6. Exhibits

(a)

Exhibits

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

10.1		Form of Performance-Based Restricted Stock Units Agreement under the Liberty Broadband Corporation 2019 Omnibus Incentive Plan, as amended from time to time, for certain officers.*
~~10.1~~
31.1		Margin Loan Agreement, dated as of August 31, 2017, among LBC Cheetah 6, LLC, as Borrower, various lenders and Bank of America, N.A., as Calculation Agent and Bank of America, N.A., as Administrative Agent.*
~~31.1~~		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32		Section 1350 Certification**
101.INS		XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document*
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document*
101.LAB		Inline XBRL Taxonomy Label Linkbase Document*
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document*
101.DEF		Inline XBRL Taxonomy Definition Document*
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

*Filed herewith

**Furnished herewith

~~II-2~~II-3

Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	LIBERTY BROADBAND CORPORATION

Date: ~~November 1, 2017~~May 7, 2021	By:	/s/ GREGORY B. MAFFEI
		Gregory B. Maffei President and Chief Executive Officer

Date: ~~November 1, 2017~~May 7, 2021	By:	/s/ ~~MARK D. CARLETON~~BRIAN J. WENDLING
		~~Mark D. Carleton~~Brian J. Wendling Chief ~~Financial Officer~~ ~~(Principal Financial~~Accounting Officer and Principal ~~Accounting Officer)~~Financial Officer

~~II-3~~II-4


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)


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


Large ~~accelerated filer~~ Accelerated Filer ☒		Accelerated ~~filer~~ Filer ☐		Non-accelerated ~~filer~~ Filer ☐ ~~(do not check if smaller~~ ~~reporting company)~~		Smaller ~~reporting company~~ Reporting Company ☐		Emerging ~~growth company~~ Growth Company ☐


~~Series A common stock~~		~~26,301,479~~
~~Series B common stock~~		~~2,455,179~~
~~Series C common stock~~		~~153,089,705~~

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-3~~I-4
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)	~~I-4~~I-5
LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited)	~~I-5~~
~~LIBERTY BROADBAND CORPORATION Condensed Consolidated Statement of Equity (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-7~~I-8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	~~I-23~~I-26
Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~I-32~~I-39
Item 4. Controls and Procedures	~~I-32~~I-41

Part II - Other Information

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

~~SIGNATURES~~Item 6. Exhibits	II-3

SIGNATURES	II-4


	September 30,		December 31,
	2017		2016
	(amounts in thousands)
Assets
Current assets:
Cash and cash equivalents	$	135,425	205,728
Trade and other receivables, net		2,233	878
Derivative instruments		—	49,019
Other current assets		4,319	2,794
Total current assets		141,977	258,419
Investment in Charter, accounted for using the equity method (note 4)		9,326,871	9,315,253
Property and equipment, net		425	710
Goodwill (note 5)		6,497	6,497
Intangible assets subject to amortization, net (note 5)		6,063	8,596
Other assets, at cost, net of accumulated amortization		61	1,485
Total assets	$	9,481,894	9,590,960
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$	4,963	7,931
Deferred revenue		6,684	2,171
Current portion of debt (note 6)		—	400,000
Other current liabilities		553	2,014
Total current liabilities		12,200	412,116
Debt (note 6)		496,975	198,512
Deferred income tax liabilities		497,414	504,644
Deferred revenue		3,765	2,596
Other liabilities		1,305	—
Total liabilities		1,011,659	1,117,868
Equity
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued		—	—
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 26,301,387 shares at September 30, 2017 and 26,251,533 shares at December 31, 2016		262	262
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,455,179 shares at September 30, 2017 and 2,467,509 shares at December 31, 2016		25	25
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 153,089,705 shares at September 30, 2017 and 153,019,547 shares at December 31, 2016		1,531	1,530
Additional paid-in capital		7,952,316	7,945,883
Accumulated other comprehensive earnings, net of taxes		8,290	7,656
Retained earnings		507,811	517,736
Total equity		8,470,235	8,473,092
Commitments and contingencies (note 8)
Total liabilities and equity	$	9,481,894	9,590,960


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

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


							Accumulated
						Additional	other
	Preferred		Common stock			paid-in	comprehensive	Retained
	Stock		Series A	Series B	Series C	capital	earnings	earnings	Total equity
	(amounts in thousands)
Balance at January 1, 2017	$	—	262	25	1,530	7,945,883	7,656	517,736	8,473,092
Net earnings (loss)		—	—	—	—	—	—	(27,286)	(27,286)
Other comprehensive earnings		—	—	—	—	—	634	—	634
Stock-based compensation		—	—	—	—	4,017	—	—	4,017
Issuance of common stock upon exercise of stock options		—	—	—	1	2,416	—	—	2,417
Cumulative effect of accounting change at Charter (note 4)		—	—	—	—	—	—	17,361	17,361
Balance at September 30, 2017	$	—	262	25	1,531	7,952,316	8,290	507,811	8,470,235


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

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


	Liberty Broadband Common Stock
	Three months	Three months	Nine months	Nine months
	ended	ended	ended	ended
	September 30, 2017	September 30, 2016	September 30, 2017	September 30, 2016
	(numbers of shares in thousands)
Basic WASO	181,846	181,621	181,795	142,170
Potentially dilutive shares (1)	1,485	970	1,369	666
Diluted WASO	183,331	182,591	183,164	142,836


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


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


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



~~Volatility~~		~~21.1%~~
~~Interest rate~~		~~1.3%~~
~~Dividend yield~~		~~0.0%~~


	September 30, 2017		December 31, 2016
Current assets	$	4,132	3,300
Property and equipment, net		33,300	32,963
Goodwill		29,554	29,509
Intangible assets, net		79,905	81,924
Other assets		1,337	1,371
Total assets	$	148,228	149,067
Current liabilities		10,419	9,572
Deferred income taxes		26,576	26,665
Long-term debt		66,064	59,719
Other liabilities		2,591	2,745
Equity		42,578	50,366
Total liabilities and shareholders’ equity	$	148,228	149,067


	September 30, 2017				December 31, 2016
	Gross			Net	Gross		Net
	Carrying		Accumulated	Carrying	Carrying	Accumulated	Carrying
	Amount		Amortization	Amount	Amount	Amortization	Amount
Acquired patents	$	10,823	(9,633)	1,190	10,823	(8,450)	2,373
Customer relationships		10,213	(6,463)	3,750	10,213	(5,440)	4,773
Tradename		2,838	(1,809)	1,029	2,838	(1,528)	1,310
Capitalized software		857	(763)	94	850	(710)	140
	$	24,731	(18,668)	6,063	24,724	(16,128)	8,596


	Three months ended September 30,
	2017			2016
			Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA
		(amounts in thousands)
Skyhook	$	3,430	(980)	20,616	11,422
Charter		10,458,000	3,674,000	10,037,000	3,429,000
Corporate and other		—	(2,366)	—	(2,091)
		10,461,430	3,670,654	10,057,616	3,438,331
Eliminate equity method affiliate		(10,458,000)	(3,674,000)	(10,037,000)	(3,429,000)
Consolidated Liberty Broadband	$	3,430	(3,346)	20,616	9,331



Variable rate debt			Fixed rate debt
Principal		Weighted avg	Principal		Weighted avg
amount		interest rate	amount		interest rate
(dollar amounts in millions)
$	500	2.7%	$	—	NA

Liberty Broadband Corporation common stock