Liberty Broadband Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Segment Information

Segment Information

12 Months Ended

Dec. 31, 2017

(12) 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, Adjusted OIBDA. In addition, Liberty Broadband reviews nonfinancial measures such as subscriber growth.

Liberty Broadband defines Adjusted OIBDA as revenue less cost of sales, 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 year ended December 31, 2017, 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. For periods in which Liberty Broadband owned Charter shares and warrants, 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 consolidated financial statements.

Performance Measures


	Years ended December 31,
	2017			2016		2015
			Adjusted		Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA	Revenue	OIBDA
	amounts in thousands
Skyhook	$	13,092	(9,496)	30,586	(2,681)	91,182	43,600
Charter		41,581,000	14,955,000	29,003,000	9,607,000	9,754,000	3,317,000
Corporate and other		—	(6,920)	—	(8,761)	—	(11,958)
		41,594,092	14,938,584	29,033,586	9,595,558	9,845,182	3,348,642
Eliminate equity method affiliate		(41,581,000)	(14,955,000)	(29,003,000)	(9,607,000)	(9,754,000)	(3,317,000)
Consolidated Liberty Broadband	$	13,092	(16,416)	30,586	(11,442)	91,182	31,642

Other Information


	December 31, 2017				December 31, 2016
	Total		Investments	Capital	Total	Investments	Capital
	assets		in affiliates	expenditures	assets	in affiliates	expenditures
	amounts in thousands
Skyhook	$	24,481	—	70	30,463	—	267
Charter		146,623,000	—	8,681,000	149,067,000	—	5,325,000
Corporate and other		11,907,308	11,835,613	—	9,560,497	9,315,253	—
		158,554,789	11,835,613	8,681,070	158,657,960	9,315,253	5,325,267
Eliminate equity method affiliate		(146,623,000)	—	(8,681,000)	(149,067,000)	—	(5,325,000)
Consolidated Liberty Broadband	$	11,931,789	11,835,613	70	9,590,960	9,315,253	267

Revenue by Geographic Area


	Years ended December 31,
	2017		2016	2015
	amounts in thousands
United States	$	10,315	27,806	87,739
Other countries		2,777	2,780	3,443
	$	13,092	30,586	91,182

The following table provides a reconciliation of segment Adjusted OIBDA to Operating income (loss) and earnings (loss) from continuing operations before income taxes:


	Years ended December 31,
	2017		2016	2015
	amounts in thousands
Consolidated segment Adjusted OIBDA	$	(16,416)	(11,442)	31,642
Stock-based compensation		(5,292)	(5,713)	(6,380)
Depreciation and amortization		(3,770)	(4,005)	(6,088)
Gain on legal settlement		—	—	60,450
Impairment of intangible assets		—	—	(20,669)
Operating income (loss)		(25,478)	(21,160)	58,955
Interest expense		(19,570)	(14,956)	(7,424)
Dividend and interest income		1,449	5,020	3,797
Share of earnings (loss) of affiliates, net		2,508,991	641,544	(120,962)
Realized and unrealized gains (losses) on financial instruments, net		3,098	94,122	2,619
Gain (loss) on dilution of investment in affiliate		(17,872)	770,766	(7,198)
Other, net		(18)	336	158
Earnings (loss) from continuing operations before income taxes	$	2,450,600	1,475,672	(70,055)