lbrda_Current folio_10Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                to                

Commission File Number 001-36713

LIBERTY BROADBAND CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

 

State of Delaware

 

47-1211994

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

12300 Liberty Boulevard
Englewood, Colorado

 

80112

(Address of principal executive offices)

 

(Zip Code)

Registrant's telephone number, including area code: (720) 875-5700

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

LBRDA

The Nasdaq Stock Market LLC

Series B common stock

LBRDB

The Nasdaq Stock Market LLC

Series C common stock

LBRDK

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

 

Large accelerated filer ☒

 

Accelerated filer ☐

 

Non-accelerated filer ☐

 

Smaller reporting company ☐

 

Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐    No ☒

The number of outstanding shares of Liberty Broadband Corporation's common stock as of April 15, 2019 was:

 

 

 

 

 

 

 

 

 

 

Series A

 

Series B

 

Series C

Liberty Broadband Corporation Common Stock

 

26,339,950

 

2,454,520

 

152,636,809

 

 

 

 

 

 

 

 

 

 

 


 

Table of Contents

Table of Contents

Part I - Financial Information 

 

 

 

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

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited) 

I-4

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statement of Equity (unaudited) 

I-5

LIBERTY BROADBAND CORPORATION Notes to Condensed Consolidated Financial Statements (unaudited) 

I-7

 

 

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

I-17

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

I-24

Item 4.  Controls and Procedures

I-24

 

 

Part II - Other Information 

 

 

Item 1.  Legal Proceedings

II-1

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

II-3

Item 6.  Exhibits

II-4

 

 

SIGNATURES 

II-5

 

 

 

 

I-1


 

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2019

 

2018

 

 

 

(amounts in thousands)

 

Assets

    

 

    

    

    

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

73,178

 

83,103

 

Other current assets

 

 

1,121

 

1,471

 

Total current assets

 

 

74,299

 

84,574

 

Investment in Charter, accounted for using the equity method (note 4)

 

 

11,999,494

 

12,004,376

 

Other assets

 

 

9,585

 

9,487

 

Total assets

 

$

12,083,378

 

12,098,437

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

2,922

 

3,504

 

Deferred revenue and other current liabilities

 

 

2,902

 

4,691

 

Total current liabilities

 

 

5,824

 

8,195

 

Debt (note 5)

 

 

523,238

 

522,928

 

Deferred income tax liabilities

 

 

961,665

 

965,829

 

Other liabilities

 

 

2,896

 

2,867

 

Total liabilities

 

 

1,493,623

 

1,499,819

 

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 26,338,807 shares at March 31, 2019 and 26,311,681 shares at December 31, 2018

 

 

263

 

263

 

Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,454,520 shares at March 31, 2019 and December 31, 2018

 

 

25

 

25

 

Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 152,636,809 shares at March 31, 2019 and 152,591,939 shares at December 31, 2018

 

 

1,526

 

1,526

 

Additional paid-in capital

 

 

7,943,795

 

7,938,357

 

Accumulated other comprehensive earnings, net of taxes

 

 

7,778

 

7,778

 

Retained earnings

 

 

2,636,368

 

2,650,669

 

Total equity

 

 

10,589,755

 

10,598,618

 

Commitments and contingencies (note 7)

 

 

 

 

 

 

Total liabilities and equity

 

$

12,083,378

 

12,098,437

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

 

 

I-2


 

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

 

2019

    

2018

 

 

 

(amounts in thousands, except per share amounts)

 

Revenue:

 

 

 

 

 

 

Software sales

 

$

3,458

 

11,791

 

Total revenue

 

 

3,458

 

11,791

 

Operating costs and expenses

 

 

 

 

 

 

Operating, including stock-based compensation (note 6)

 

 

2,253

 

1,909

 

Selling, general and administrative, including stock-based compensation (note 6)

 

 

6,938

 

6,727

 

Depreciation and amortization

 

 

468

 

909

 

 

 

 

9,659

 

9,545

 

Operating income (loss)

 

 

(6,201)

 

2,246

 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(6,543)

 

(5,037)

 

Dividend and interest income

 

 

418

 

225

 

Share of earnings (losses) of affiliates (note 4)

 

 

34,849

 

9,302

 

Gain (loss) on dilution of investment in affiliate (note 4)

 

 

(41,403)

 

(26,757)

 

Other, net

 

 

 5

 

 —

 

Net earnings (loss) before income taxes

 

 

(18,875)

 

(20,021)

 

Income tax benefit (expense)

 

 

4,574

 

4,951

 

Net earnings (loss) attributable to Liberty Broadband shareholders

 

$

(14,301)

 

(15,070)

 

Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

 

$

(0.08)

 

(0.08)

 

Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

 

$

(0.08)

 

(0.08)

 

 

See accompanying notes to the condensed consolidated financial statements.

 

I-3


 

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

(amounts in thousands)

 

Cash flows from operating activities:

    

 

    

    

    

 

Net earnings (loss)

 

$

(14,301)

 

(15,070)

 

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

468

 

909

 

Stock-based compensation

 

 

2,616

 

1,405

 

Share of (earnings) losses of affiliates, net

 

 

(34,849)

 

(9,302)

 

(Gain) loss on dilution of investment in affiliate

 

 

41,403

 

26,757

 

Deferred income tax expense (benefit)

 

 

(4,574)

 

(4,950)

 

Other, net

 

 

302

 

394

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Current and other assets

 

 

349

 

1,282

 

Payables and other liabilities

 

 

(2,975)

 

(5,121)

 

Net cash provided (used) by operating activities

 

 

(11,561)

 

(3,696)

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expended for property and equipment

 

 

(17)

 

(14)

 

Net cash provided (used) by investing activities

 

 

(17)

 

(14)

 

Cash flows from financing activities:

 

 

 

 

 

 

Other financing activities, net

 

 

1,653

 

541

 

Net cash provided (used) by financing activities

 

 

1,653

 

541

 

Net increase (decrease) in cash

 

 

(9,925)

 

(3,169)

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

83,103

 

81,257

 

Cash, cash equivalents and restricted cash, end of period

 

$

73,178

 

78,088

 

 

See accompanying notes to the condensed consolidated financial statements.

 

I-4


 

Table of Contents

 

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statement of Equity

(unaudited)

Three Months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2019

    

$

 —

 

263

 

25

 

1,526

 

7,938,357

    

7,778

    

2,650,669

    

10,598,618

 

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(14,301)

 

(14,301)

 

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

2,523

 

 —

 

 —

 

2,523

 

Issuance of common stock upon exercise of stock options

 

 

 —

 

 —

 

 —

 

 —

 

1,653

 

 —

 

 —

 

1,653

 

Noncontrolling interest activity at Charter

 

 

 —

 

 —

 

 —

 

 —

 

1,262

 

 —

 

 —

 

1,262

 

Balance at March 31, 2019

 

$

 —

 

263

 

25

 

1,526

 

7,943,795

 

7,778

 

2,636,368

 

10,589,755

 

 

See accompanying notes to the condensed consolidated financial statements.

I-5


 

Table of Contents

Condensed Consolidated Statement of Equity

(unaudited)

Three Months ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2018

    

$

 —

 

262

 

25

 

1,526

 

7,907,900

    

8,424

    

2,568,764

    

10,486,901

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(15,070)

 

(15,070)

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

1,352

 

 —

 

 —

 

1,352

Issuance of common stock upon exercise of stock options

 

 

 —

 

 1

 

 —

 

 —

 

540

 

 —

 

 —

 

541

Cumulative effect of accounting change

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

1,223

 

1,223

Cumulative effect of accounting change at Charter

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

5,802

 

5,802

Noncontrolling interest activity at Charter

 

 

 —

 

 —

 

 —

 

 —

 

30,646

 

 —

 

 —

 

30,646

Balance at March 31, 2018

 

$

 —

 

263

 

25

 

1,526

 

7,940,438

 

8,424

 

2,560,719

 

10,511,395

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

 

 

I-6


 

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock (the “Broadband Spin-Off”). These financial statements refer to Liberty Broadband Corporation as “Liberty Broadband,” “the Company,” “us,” “we” and “our” in the notes to the condensed consolidated financial statements.

Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter Communications, Inc. (“Charter”). Pursuant to proxy agreements with GCI Liberty, Inc. (“GCI Liberty”) and Advance/Newhouse Partnership (“A/N”), Liberty Broadband controls 25.01% of the aggregate voting power of Charter.

The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (“Skyhook”), focuses on the development and sale of Skyhook’s device-based location technology. Skyhook markets and sells two primary products: (1) a location determination service called the Precision Location Solution; and (2) a location intelligence and data insights service called Geospatial Insights.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty Broadband's Annual Report on Form 10-K for the year ended December 31, 2018. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers the application of the equity method of accounting for investments in affiliates and accounting for income taxes to be its most significant estimates.

Liberty Broadband holds an investment in Charter that is accounted for using the equity method. Liberty Broadband does not control the decision making process or business management practices of this affiliate. Accordingly, Liberty Broadband relies on the management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty Broadband relies on audit reports that are provided by the affiliate's independent auditor on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Liberty Broadband's condensed consolidated financial statements.

Spin-Off Arrangements

Following the Broadband Spin-Off, Liberty and Liberty Broadband operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Broadband Spin-Off, Liberty (for accounting purposes a related party of the Company) and Liberty Broadband entered into certain agreements in order to

I-7


 

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

govern certain of the ongoing relationships between the two companies after the Broadband Spin-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.

The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Broadband Spin-Off, certain conditions to the Broadband Spin-Off and provisions governing the relationship between Liberty Broadband and Liberty with respect to and resulting from the Broadband Spin-Off. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and Liberty Broadband and other agreements related to tax matters. Pursuant to the tax sharing agreement, Liberty Broadband has agreed to indemnify Liberty, subject to certain limited exceptions, for losses and taxes resulting from the Broadband Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by Liberty Broadband (applicable to actions or failures to act by Liberty Broadband and its subsidiaries following the completion of the Broadband Spin-Off). Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement, Liberty Broadband shares office space with Liberty and related amenities at Liberty’s corporate headquarters. Liberty Broadband will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services which will be negotiated semi-annually. Under these various agreements, approximately $924 thousand and $950 thousand was reimbursable to Liberty for the three months ended March 31, 2019 and 2018, respectively.

 

 

(2) Earnings (Loss) per Share

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty Broadband shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. The basic and diluted EPS calculations are based on the following weighted average number of shares of outstanding common stock.

 

 

 

 

 

 

 

 

Liberty Broadband Common Stock

 

 

 

Three months

 

Three months

 

 

 

ended

 

ended

 

 

    

March 31, 2019

    

March 31, 2018

 

 

 

(numbers of shares in thousands)

 

Basic WASO

 

181,366

 

181,316

 

Potentially dilutive shares (1)

 

1,299

 

1,398

 

Diluted WASO

 

182,665

 

182,714

 


(1)   Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

 

 

 

 

(3) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company’s assets and (liabilities) measured at fair value are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

 

Quoted prices

 

Significant

 

 

 

Quoted prices

 

Significant

 

 

 

 

 

 

in active

 

other

 

 

 

in active

 

other

 

 

 

 

 

 

markets for

 

observable

 

 

 

markets for

 

observable

 

 

 

 

 

 

identical assets

 

inputs

 

 

 

identical assets

 

inputs

 

Description

 

Total

 

(Level 1)

 

(Level 2)

 

Total

 

(Level 1)

 

(Level 2)

 

 

 

(amounts in thousands)

 

Cash equivalents

 

$

63,735

 

63,735

 

 —

 

67,329

 

67,329

 

 —

 

 

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt bears interest at a variable rate and therefore is also considered to approximate fair value.

 

 

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

Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter. The investment in Charter is accounted for as an equity method affiliate based on our ownership interest and the board seats held by individuals appointed by Liberty Broadband. As of March 31, 2019, the carrying value of Liberty Broadband’s ownership in Charter was approximately $11,999 million. The market value of Liberty Broadband’s ownership in Charter as of March 31, 2019 was approximately $18,758 million, which represented an approximate economic ownership of 24.2% of the outstanding equity of Charter as of that date.

Pursuant to proxy agreements with GCI Liberty and A/N (the “GCI Liberty Proxy” and “A/N Proxy”, respectively), Liberty Broadband has an irrevocable proxy to vote certain shares of Charter common stock owned beneficially or of record by GCI Liberty and A/N, for a five year term expiring May 18, 2021, subject to extension upon the mutual agreement of both parties, subject to certain limitations.

As a result of the A/N Proxy and the GCI Liberty Proxy, Liberty Broadband controls 25.01% of the aggregate voting power of Charter and is Charter’s largest stockholder.

Additionally, 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 New Charter held by A/N, Liberty Broadband will have a right of first refusal (“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.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Investment in Charter

The excess basis in our investment in Charter of $3,351 million as of March 31, 2019 is allocated within memo accounts used for equity accounting purposes as follows (amounts in millions):

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2019

 

2018

Property and equipment

    

$

302

 

328

Customer relationships

 

 

736

 

721

Franchise fees

 

 

1,836

 

1,821

Trademarks

 

 

29

 

29

Goodwill

 

 

1,238

 

1,202

Debt

 

 

(87)

 

(105)

Deferred income tax liability

 

 

(703)

 

(698)

 

 

$

3,351

 

3,298

 

Property and equipment and customer relationships have remaining useful lives of 7 years and 11 years, respectively, and franchise fees, trademarks and goodwill have indefinite lives. The excess basis of outstanding debt is amortized over the contractual period using the straight-line method.  The increase in excess basis for the three months ended March 31, 2019, was primarily due to Charter’s share buyback program. The Company’s share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $25.6 million and $28.7 million, net of related taxes, for the three months ended March 31, 2019 and 2018, 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 $41.4 million and $26.8 million during the three months ended March 31, 2019 and 2018, respectively. The dilution losses for the periods presented were attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per share.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Charter condensed consolidated balance sheets

 

 

 

 

 

 

 

 

 

    

March 31, 2019

 

December 31, 2018

 

Current assets

 

$

3,926

 

2,944

 

Property and equipment, net

 

 

34,859

 

35,126

 

Goodwill

 

 

29,554

 

29,554

 

Intangible assets, net

 

 

76,316

 

76,884

 

Other assets

 

 

2,602

 

1,622

 

Total assets

 

$

147,257

 

146,130

 

Current liabilities

 

 

11,950

 

12,095

 

Deferred income taxes

 

 

17,473

 

17,389

 

Long-term debt

 

 

70,567

 

69,537

 

Other liabilities

 

 

3,624

 

2,837

 

Equity

 

 

43,643

 

44,272

 

Total liabilities and shareholders’ equity

 

$

147,257

 

146,130

 

Charter condensed consolidated statements of operations

 

 

 

 

 

 

 

Three months ended 

 

March 31,

 

2019

 

2018

Revenue

$

11,206

 

10,657

Cost and expenses:

 

 

 

 

Operating costs and expenses (excluding depreciation and amortization)

 

7,236

 

6,836

Depreciation and amortization

 

2,550

 

2,710

Other operating (income) expenses, net

 

(5)

 

69

 

 

9,781

 

9,615

Operating income

 

1,425

 

1,042

Interest expense, net

 

(925)

 

(851)

Other income (expense), net

 

(64)

 

60

Income tax benefit (expense)

 

(119)

 

(28)

Net income (loss)

 

317

 

223

Less: Net income attributable to noncontrolling interests

 

(64)

 

(55)

Net income (loss) attributable to Charter shareholders

$

253

 

168

 

 

 

 

 

 

 

 

 

(5) Debt

Amended 2017 Margin Loan Facility

 

On August 24, 2018, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”), entered into Amendment No. 1 to its multi-draw margin loan credit facility (the “Amended 2017 Margin Loan Facility” and, the credit agreement governing such facility, the “Amended 2017 Margin Loan Agreement”) with Wilmington Trust, National Association as the successor administrative agent, BNP Paribas, Dublin Branch, as the successor calculation agent, and the lenders thereunder. SPV is permitted, subject to certain funding conditions, to borrow 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 in an aggregate principal amount of up to $1.0 billion on an uncommitted basis subject to certain conditions. SPV had borrowed $525 million 

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

as of March 31, 2019 and December 31, 2018. SPV had $475 million available to be drawn until August 27, 2019. The maturity date of the loans under the Amended 2017 Margin Loan Agreement is August 24, 2020 (except for any incremental loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). Accordingly, the debt is classified as noncurrent as of March 31, 2019. Borrowings under the Amended 2017 Margin Loan Agreement bear interest at the three-month LIBOR rate plus a per annum spread of 1.5%.  Borrowings outstanding under this margin loan bore interest at a rate of 4.10% per annum at March 31, 2019. 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 Amended 2017 Margin Loan Facility to repay the two margin loan agreements entered into by a wholly-owned special purpose subsidiary of the Company on October 30, 2014 and two margin loan agreements entered into by another wholly-owned special purpose subsidiary of the Company on March 21, 2016. 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.  

 

The Amended 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 subsidiaries). The Amended 2017 Margin Loan Agreement does not include any financial covenants.  The Amended 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 Amended 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 Amended 2017 Margin Loan Agreement. The Amended 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 March 31, 2019,  6.8 million shares of Charter with a value of $2.3 billion were pledged as collateral pursuant to the Amended 2017 Margin Loan Agreement.

   

(6) Stock-Based Compensation

Liberty Broadband grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock 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 months ended March 31, 2019 and 2018 (amounts in thousands):

 

 

 

 

 

 

 

 

 

Three months

 

 

 

ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

Operating expense

    

$

37

    

17

 

Selling, general and administrative

 

 

2,579

 

1,388

 

 

 

$

2,616

 

1,405

 

 

Liberty Broadband – Grants of Stock Options

During the three months ended March 31, 2019, Liberty Broadband granted 41 thousand options to purchase shares of Series C Liberty Broadband common stock and 25 thousand performance-based restricted stock units (“RSUs”) of Series

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

C Liberty Broadband common stock to our CEO. Such options had a GDFV of $25.46 per share. The RSUs had a GDFV of $88.99 per share at the time they were granted. The options vest on December 31, 2019, and the RSUs cliff vest in one year, subject to satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

There were no options to purchase shares of Series A or Series B common stock granted during the three months ended March 31, 2019.  

The Company calculates 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. The volatility used in the calculation for Awards is based on the historical volatility of Liberty Broadband common stock and the implied volatility of publicly traded Liberty Broadband options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Liberty Broadband – Outstanding Awards

The following tables present 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, 2019

 

393

 

$

33.31

 

 

 

 

 

Granted

 

 —

 

$

 —

 

 

 

 

 

Exercised

 

(42)

 

$

33.05

 

 

 

 

 

Forfeited/cancelled

 

 —

 

$

 —

 

 

 

 

 

Outstanding at March 31, 2019

 

351

 

$

33.35

 

0.8

 

$

20

Exercisable at March 31, 2019

 

350

 

$

33.30

 

0.8

 

$

20

 

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Weighted

    

    

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

 

 

contractual

 

intrinsic

 

 

Series C

 

WAEP

 

life

 

value

 

 

(in thousands)

 

 

 

 

(in years)

 

(in millions)

Outstanding at January 1, 2019

 

2,356

 

$

43.77

 

 

 

 

 

Granted

 

41

 

$

88.99

 

 

 

 

 

Exercised

 

(62)

 

$

32.95

 

 

 

 

 

Forfeited/cancelled

 

 —

 

$

 —

 

 

 

 

 

Outstanding at March 31, 2019

 

2,335

 

$

44.86

 

4.2

 

$

109

Exercisable at March 31, 2019

 

1,533

 

$

41.83

 

3.3

 

$

76

As of March 31, 2019, the total unrecognized compensation cost related to unvested Awards was approximately $4.4 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 1.0 year. 

As of March 31, 2019, Liberty Broadband reserved 2.7 million shares of Series A and Series C common stock for issuance under exercise privileges of outstanding stock Awards.

Skyhook Equity Incentive Plans

Long-Term Incentive Plans

 

Skyhook has a long-term incentive plan which provides for the granting of phantom stock appreciation rights (“PARs”) and phantom stock units (“PSUs”) to employees, directors, and consultants of Skyhook that is not significant to Liberty Broadband. As of March 31, 2019 and December 31, 2018, $1.2 million and $1.1 million, respectively, are included in other liabilities for the fair value (Level 2) of the Company’s long-term incentive plan obligations.

(7) Commitments and Contingencies

General Litigation

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. 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.

Certain Risks and Concentrations

The Skyhook business is 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 73% and 72% of total revenue for the three months ended March 31, 2019 and 2018, respectively. 

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.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(8) 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 (losses).

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.

Liberty Broadband defines Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Liberty Broadband believes this measure is an important indicator of the operational strength and performance of its businesses, including each business’s ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes 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 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 three months ended March 31, 2019, Liberty Broadband has identified the following consolidated company and equity method investment as its reportable segments:

·

Skyhook—a wholly owned subsidiary of the Company that provides the Precision Location Solution (a location determination service) and Geospatial Insights product (a location intelligence and data insights service).    

·

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.

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.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  March 31,

 

 

 

2019

 

2018

 

 

 

 

 

 

Adjusted

 

 

 

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

 

(amounts in thousands)

 

Skyhook

    

$

3,458

    

(1,193)

    

11,791

    

6,099

 

Charter

 

 

11,206,000

 

4,060,000

 

10,657,000

 

3,824,000

 

Corporate and other

 

 

 —

 

(1,924)

 

 —

 

(1,539)

 

 

 

 

11,209,458

 

4,056,883

 

10,668,791

 

3,828,560

 

Eliminate equity method affiliate

 

 

(11,206,000)

 

(4,060,000)

 

(10,657,000)

 

(3,824,000)

 

Consolidated Liberty Broadband

 

$

3,458

 

(3,117)

 

11,791

 

4,560

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

 

Total

 

Investments

 

Capital

 

 

 

assets

 

in affiliates

 

expenditures

 

 

 

(amounts in thousands)

 

Skyhook

    

$

18,037

    

    

17

 

Charter

 

 

147,257,000

 

 

1,665,000

 

Corporate and other

 

 

12,065,341

 

11,999,494

 

 

 

 

 

159,340,378

 

11,999,494

 

1,665,017

 

Eliminate equity method affiliate

 

 

(147,257,000)

 

 —

 

(1,665,000)

 

Consolidated Liberty Broadband

 

$

12,083,378

 

11,999,494

 

17

 

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,

 

 

 

2019

 

2018

 

 

 

 

(amounts in thousands)

 

Consolidated segment Adjusted OIBDA

    

$

(3,117)

    

4,560

 

Stock-based compensation

 

 

(2,616)

 

(1,405)

 

Depreciation and amortization

 

 

(468)

 

(909)

 

Operating income (loss)

 

 

(6,201)

 

2,246

 

Interest expense

 

 

(6,543)

 

(5,037)

 

Dividend and interest income

 

 

418

 

225

 

Share of earnings (loss) of affiliates, net

 

 

34,849

 

9,302

 

Gain (loss) on dilution of investment in affiliate

 

 

(41,403)

 

(26,757)

 

Other, net

 

 

 5

 

 —

 

Earnings (loss) before income taxes

 

$

(18,875)

 

(20,021)

 

 

 

 

 

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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 new service and product offerings; future expenses; the performance of our equity affiliate, Charter Communications, Inc. (“Charter”); our projected sources and uses of cash; fluctuations in interest rates; and the anticipated non-material impact of certain contingent liabilities related to legal 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 ability to sustain and grow revenue and cash flow from operations by offering video, Internet, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in its service areas 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;

·

the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband 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;

·

Charter’s ability to efficiently and effectively integrate acquired operations;

·

the effects of governmental regulation on the business of Charter and Skyhook,  including costs, disruptions 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 previous mergers;

·

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

·

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);

·

Charter’s ability to develop and deploy new products and technologies, including mobile products, and any other consumer services and service platforms;

·

failure to protect the security of personal information about the customers of our operating subsidiary 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, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings; 

·

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

·

the ability to retain and hire key personnel;

·

the ability of suppliers and vendors to deliver products, equipment, software and services;

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·

the outcome of any pending or threatened litigation;

·

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

·

the availability and access, in general, of funds to meet debt obligations prior to or when they become due 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;

·

the ability of Charter and our company to comply with all covenants in their and 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; and

·

our ability to successfully monetize certain of our assets.

For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. 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 and our Annual Report on Form 10-K for the year ended December 31, 2018.

Overview

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock. Liberty Broadband was formed in 2014 as a Delaware corporation.

Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter. Pursuant to proxy agreements with GCI Liberty Inc. and Advance/Newhouse Partnership, Liberty Broadband controls 25.01% of the aggregate voting power of Charter.

The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (“Skyhook”), focuses on the development and sale of Skyhook’s device-based location technology. Skyhook markets and sells two primary products: (1) a location determination service called the Precision Location Solution; and (2) a location intelligence and data insights service called Geospatial Insights.

The financial information represents a consolidation of the historical financial information of Skyhook, Liberty Broadband’s interest in Charter and certain deferred tax liabilities. This financial information refers to the consolidation of the aforementioned subsidiary, investments, and financial instruments, as “Liberty Broadband,” “the Company,” “us,” “we” and “our” here and in the notes to the accompanying condensed consolidated financial statements.

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Results of Operations—Consolidated—March 31, 2019 and 2018

Consolidated operating results:

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

(amounts in thousands)

 

Revenue

    

$

3,458

    

11,791

 

Operating expense

 

 

2,216

 

1,892

 

Selling, general and administrative

 

 

4,359

 

5,339

 

Stock-based compensation

 

 

2,616

 

1,405

 

Depreciation and amortization

 

 

468

 

909

 

Operating income (loss)

 

 

(6,201)

 

2,246

 

Less impact of stock-based compensation and depreciation and amortization

 

 

3,084

 

2,314

 

Adjusted OIBDA

 

$

(3,117)

 

4,560

 

 

Revenue

Revenue decreased $8.3 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease in revenue for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily due to a  license agreement in the prior year. On February 16, 2018, 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 Skyhook. In exchange for this grant, the licensee agreed to pay a one-time lump sum payment of $8.5 million that was recognized as revenue during the three months ended March 31, 2018.

Operating expense and selling, general and administrative expenses

Operating expense increased by $0.3 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year.  The increases in operating expense were primarily due to increased personnel, data acquisition and cloud computing costs. Selling, general, and administrative expense decreased by $1.0 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease in selling, general and administrative expense during the three month period was primarily to legal expenses of $0.8 million and other costs associated with the license agreement in the prior year, partially offset by increased corporate costs. 

Stock-based compensation

The increase in stock-based compensation expense of $1.2 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily due to an increase in the number of options to purchase shares of Liberty Broadband Series C common stock granted during the first quarter of 2019.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.4 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year, due to certain assets becoming fully depreciated.

Operating income (loss)

Operating loss increased $8.4 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year due to the items discussed above.

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