Liberty Broadband Corporation (LBRDK) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining us for those of you in the room and those of you joining by webcast for MoffettNathanson's 9th Annual Media & Communications Summit. I am delighted to be joined by Greg Maffei. We do this almost every year. I think we missed 1 or 2, but we've been doing this just about every year. And if I read all of your titles, it would be like reading the safe harbor slide, we'd be out of time and have to wrap it there. So I'm not going to read any of your titles. I'm just going to start right in.

Fire it up. Thank you [indiscernible].

I'm going to start with a bunch of questions about cable and Liberty Broadband and Charter. But before I do that, just given the turmoil in the market, I want to just hear kind of what's the Greg Maffei and John Malone house view for whether we're going to hell in a handbasket or not.

Well, we were talking for a minute before they started. I think John is inherently more conservative. I don't think I'm giving away any secret. He's 81. Your perspective may be more conservative. Look, we're happy we have cash in most of our businesses. We have free cash flow businesses. For a lot of time, those haven't necessarily been as favored, and moonshots have done well. So I think we're pretty happy with the portfolio in general, and we're pretty happy about the opportunity to buy back more of our shares where they're attractive or expand into new opportunities. So we made most of our money in bad markets, meaning Sirius, doing something, Charter before it took off.

That buy low, sell high thing actually kind of works.

It turns out. It turns out. You just have to hopefully have fortitude and be prepared.

So let's talk about something that was a buy low and then went high and has come back down, and that's Charter. So I think it's fair to say that the issues that cable and Charter are dealing with are sort of, in some ways, the cornerstone of this year's summit for us. This time last year, Charter stock was nearly $700 a share. Now it's in the mid-400s. Based on your commentary in the conference call, it sounds like you seem to agree that the narrative that the slowdown in broadband growth is primarily the result of lower move activity and lower sort of economic activity rather than competition, but say more about that, if you would? Like how do you think about the broadband business?

Yes. I think it's a very healthy business still, and it's not a business that's shrinking, and I don't foresee it shrinking. Could growth be slower for a period of time as it has been over the last several quarters? Seems quite reasonable. I look at 5 or 6 factors out there that are -- some of them are interrelated, but all of them are impacting our growth rates. Some amount of just saturation, we're 85% or something like that. We don't have the same level of new household formation, construction that we had. All of that has created probably a slower environment. The move -- lack of move is also somewhat related to that higher interest rates, higher housing prices means there's been less move activity. The general economic environment slowing is probably not going to accelerate that even though you may see some diminution of interest rates, which may make it easier to move. Some amount of pull-forward during COVID. Clearly, COVID accelerated. You had an increased amount of demand. You had an increased amount of capital provided by the government for -- some money to people to buy broadband. All of those accelerate some growth. And then there are competitive factors and those would largely be around FWA and fiber. So I'll take fiber first. That's gone over. We've seen competition in fiber for a lot of years. Has it increased dramatically in terms of construction? I doubt it. If anything, shortages of labor, shortage of supply chain elements are probably making that more difficult, not easier. And I don't mean to diminish fiber competition, it's real. But you've pointed out that the most attractive is the densest and aerial, and you would expect that competitors would pick that off first, not last. So I'm not sure that path ahead is more accelerated. And on FWA, we definitely see both an expansion of the market because people want Internet access in more number of new places. And we may see some share taken of the market growth in markets, places where cable isn't or they're particularly less attractive economics. But it's probably not that we're losing that much, somebody switching off of broadband on cable over to FWA. That's probably not what's happening much in the market. So that's my sort of general setup. And if you look what's happened, if you -- we definitely compete with fiber. We have something like in our markets already, we have about 40% of the market already has 1 gig capable fiber in about 40% of our footprint. And we still have over a 50% market share where that exists. As I said, Time Warner -- it's going to be a T-Mobile rather and Verizon have had some success, particularly T-Mo, as I don't think it's on parity with either HFC or fiber, but it does work for the subsegment of, as I mentioned, some of the examples. It's interesting that if you look in particular around both of them, that fixed wireless space, for Verizon, about 50% of its business customers, which is not really what you think of, that's 10% of our market, not the 90% is obviously consumer. So a lot of their growth, I think, is expanding in new markets, not stealing stuff.

And Verizon just said that in the last session. It was interesting to say that they estimate that at least 50% of the business portion is entirely new growth of segments that couldn't be reached by traditional...

Yes, and the classic example is the -- 15 years ago, you're building a house, the shed or the mobile home or whatever they pulled up alongside, didn't have wireless access, didn't have Internet access and clearly does today. Every build has got today.

Yes. The fiber builds that you talked about are interesting because you and John have been doing this for a while. I mean, John, especially has been in this business for a long time and has seen a lot of cycles of fiber becoming all the rage and long-term capital projects that are really attractive during booms. And then suddenly, the funding is a little bit less available when financial conditions tighten. Is there something different about this time in fiber for all of these overbuilders that -- or do you feel like this has kind of seen this movie before and I have a pretty good idea how it ends?

Look, technology has changed, maybe there's higher demand we can talk about. But fundamentally, the latter part remains stronger. Overbuilders have been in the market before. It's been a tough business. It may -- when capital is cheap, and we've had infrastructure funds for whom returns seem to be -- the need for return seems to be very low if it's all positive. Yes, that creates a more competitive environment, but that fades also. And I don't think they necessarily have great business models on the share. We'll see. It is -- that doesn't mean it won't be a problem in terms of reducing our growth in the market or reducing -- create some competitiveness. Obviously, there are a lot of things we are doing to try and be competitive, stay competitive even against fiber builds, high split, bundling with mobile. There are a lot of alternatives out there. But I don't think this fundamentally is the market dynamics haven't changed.

So if I put that together with the current penetration levels that you talked about of it is, as you say, quite reasonable to think that we're getting closer to saturation. It sounds like you still believe that Charter -- we'll talk about GCI in a minute, but the Charter can grow broadband? Even if it's slow, your base case is that they still grow broadband, it stays positive.

Yes. I think the penetration, as I said, 85%, I think that goes up over time. Our footprint isn't static. We've added about 1.1 million new passings a year since the Time Warner merger, and we'll continue to do that. Our existing DSL base in the United States, not ours, but the whole DSL base is about 14 million subscribers, still an opportunity to go win those. Lots of market share to be gained. Maybe not as aggressively as in prior years because of these fiber builds, but still an opportunity to take our share of that. RDOF will create about 1 million new passings additional for us on top of that. So while growth, I think, will moderate as penetration increases, I don't think it's done.

So -- and yesterday, Tom, I think it framed the question in a really interesting way, which is to say, if I include wireless, and we're going to get to wireless now. But when -- if I include wireless, we've got 24% of the communications wallet in our footprint. And the implication is we got plenty of ceiling left to grow this business. Wireless is a big part of that story. And one of the things we've been sharing with investors because I think it's just sort of one of those "knock you between the eye" stats is, if you include the 3G subs that disappeared, just phone subs, not elevators and road signs and things that were on 3G, but the 3G phone subs that were disclosed by AT&T and T-Mobile that they excluded from their net adds, and recalculate net adds is if those real people were actually real people. Cable took 98% of the net growth of the wireless industry last quarter. It's an astonishing thing that...

Yes, you're used to us getting 100% of the broadband growth, not 100% of the wireless growth.

Yes. But it really speaks to how important wireless has become to the cable growth story. And how -- you've been looking at that for a long time. But how big do you think about -- or how do you think about wireless as part of this business?

I think it's very important. I mean, great statistic that Tom shared there. The other one I think you showed very well is historically, if you go back 20, 22 years ago, where mobile -- excuse me, where the cable guys were in being VOIP and where they weren't providing consumer telephony to the home, 0. And now Comcast and Charter, the two largest in the United States. I don't know -- what is your guys' estimate if I could pick your brain for mobile phone ads and ad space this year?

They're running $6 million to $9 million.

Yes, they've been running $6 million to $9 million. We've been saying that, that has to come down to something like 4.5% to be a sustainable number?

So in that case, if you're at 4.5%, and we'll put aside all that 3G discussion. I don't see how cable doesn't do 3 million to 4 million on its own, at least.

Yes. And it leaves very little for everybody else. And that tells you that cable...

Yes. And I think it can be a great business for us. It's growing 40%. Our net line adds have accelerated just under $400,000 on our own per quarter and seem to be growing. And as you like point out, our share is only gained over the last couple of quarters, and I don't see that dissipating. Put aside this 3G anomaly, I see us gaining more share, not less.

Yes. So you've been much longer believers, I think, in the convergence thesis than most. And if I were going to paraphrase what I think I've always heard from you and John, it is 2 things. It's that wireless and wireline eventually come together, and that the bulk of the value in that convergence is on the wire side rather than the wireless side because at the end of the day, it's more expensive to put wires under a wireless network than it is to put spectrum on top of wires. And did Tom gave you the playbook, no?

I think that would be -- that's our belief, absolutely.

And that's the way -- you've clearly had that belief in Europe?

Yes.

How does it -- I guess the question to me is, does Charter have the right set of assets to compete? Is there a wireless MVNO, a sufficient answer to that convergence future?

So I think the hybrid model that Charter and Comcast are pursuing is really very attractive. We started obviously with a large fixed footprint. And the ability to leverage those assets to improve our mobile performance, and there are a bunch of things that we're doing to make our return on investment, profile more attractive. We like the inverse, don't create an -- a big national network, but leverage that where it's not attractive, then build out on our fixed network where it is attractive and use that CBRS spectrum to our economics where it is attractive, but not be required to do a national network. And then on top of that, be able to take advantage of the interplay between the fact we have that HFC plant, and do things like speed boost, which is going to increase utility for our customers by offering spectrum mobile, higher speeds inside that use -- leveraging the fixed network when you're on top of that. We're doing a bunch of things around WiFi routers, take advantage of the fact we have both sides of it, offload more of our MVNO traffic to our fixed line. So you get both sides. You get a better consumer experience and you also get us getting better on our economics. 85% of mobile day-to-day is already on [ Qurate's ] home WiFi, and we can offload another 5% through public WiFi and our partner hotspots, obviously, Comcast and be we're going to be sharing. The MVNO data usage...

And that makes it a really -- it makes it a truly profitable business. I think it offload that much.

Absolutely. The MVNO data usage is concentrated in certain dense high-traffic areas. And as I said, we can deploy CBRS where that is and pick our owner economics. And we've seen -- we've seen a huge growth, and I expect we're going to continue to see that growth because of that ability to offer it, attractive economics to us and consumers taking -- really split that aside.

So if I pursue this one more question, I guess, on convergence, which is Verizon has a wired network that covers 11% of the country. So they can't really pursue a converged strategy. AT&T covers 14% of country. They can't pursue a converged strategy. T-Mobile has covered 0, unless you throw in fixed wireless, but there's limitations on that. What are the wireless operators do to respond if Charter's converge strategy really starts to work? Is there an M&A story here in the future that they are forced into starting to buy assets? And would it ever be allowed by regulators if they tried?

Good question. I don't think this group of regulators looks particularly likely to be approving anything. We'll see. We obviously have issues both at the FTC and now, potentially the FCC. We'll see if -- who gets confirmed. So I think that's hard. But you've already seen interest in the past. I mean these wireless operators have looked out at various times and tried to buy fixed assets or have discussions about buying fixed assets. I don't think that doesn't change. I don't know why. If I were them, I would say now would be the time I'd try to do something because the multiples have converged more closely than they ever have. So the historical discount that they trade at, we've come down so much in multiple. If there were ever a time to do it, now would be the time. But I don't see anybody having the firepower to get it done. That's the problem.

So I guess putting all that together, it sounds like you're still feeling pretty good about your investment in Charter. Is the playbook that they've always had, which is generate cash, buy back stock, shrink the equity and squeeze it higher and higher, is that still the right playbook?

I think that's absolutely the playbook for now for the capital market side, right? I mean we've never seen these free cash flow multiples -- these EBITDA multiples are sort of middle of the range on valuation if historical for cable, but the free cash flow multiples have probably never been decided.

Yes, never been decided. Yes, because capital intensity was never this slow and margins were never this high.

Yes, everything has gone on that side, and we're seeing -- we've seen -- we saw multiples at the top of the cycle will be higher than ever been for cable, probably for some good reasons. And now we're seeing them be sort of middle of the range, maybe a little higher than the average, but by no means high for cable historical multiples. As we said, the free cash flow side looking way, way, way better than it ever has.

So one of the questions I ask you every year is...

And I answered that poorly. No.

Is -- so here we are, and I get the question from investors all the time of should I buy Charter through Charter or should I buy Charter through Liberty? And the discount to NAV just gets bigger and bigger.

Not this one. It's actually shrunk a little the last couple of days, but over the -- it was 20, it got down like 15.

But what do you do to close it? And is the temptation there to say, eventually, there's value to be had here?

Yes. So we -- look, historically, these holdcos have gone away at some point when we thought it was appropriate. But the model today where we're paying a relatively modest tax, taking our share of the -- share repurchase and buying back our own stock at a deeper discount than Charter is buying the stock. So it's a net positive arbitrage. I don't think that's a bad model. I'm happy to do that for quite a while. And the ultimate, the likelihood is that Liberty Broadband gets combined into Charter, but I don't think there's any hustle to do that.

And on the GCI side, I think the big story for GCI, I'm guessing is just given the size of the underserved community in Alaska, the big story is going to be participating the JOBS Act subsidies. And I presume, you're pretty confident that GCI has a very long runway for broadband, just given how much lower penetration is and how much there is left to serve?

Yes. And the amount of capital, as you rightly point out that'll go up there. We have had a long record of trying to take advantage of some of those partnerships that the government provides. That's the nature of what happens a lot in Alaska, just the distances are so large, the density is so low, underserved communities. All of those led to historical need for government money to get broadband up there. We did a TERRA microwave network partnership with a $44 million federal grant and $300 million of ongoing private capital and operating investment. We are doing under a construction and elution fiber project, $25 million federal grant and a $32 million of private money alongside. So we're have a history of doing those. The infrastructure bill, the IIJA, primarily has put more money into broadband infrastructure to a something called the BEAD program with the funding of the states and Alaska is well positioned on that front. So I think we have a lot of opportunity there. They have a big broadband task force that was really aligned with us. We're the far and away the biggest broadband provider in Alaska. So I think there's a lot of upside, and we're going to pursue those opportunities with good IRRs, but we can work with the government.

I think people are just coming around, too. It's going to take longer for that money to start to flow. But boy, when it does, there's just so much of it.

Yes. I mean it's going to take longer to flow and it's not going to solve all the problems in a heartbeat, obviously, because shortage of labor, shortage of components, supply issues. This is a longer cycle.

Yes. Let's talk about SiriusXM. In some ways, there are some similarities to the story that we just talked about, including the discount to NAV, but I'll come back to that in a second. But SiriusXM had negative self-pay net adds for the first time since 2009. On the other hand, ARPU is record high at over $15. And penetration in new vehicles is all-time high at 83, and churn is low. How do you -- what are the right numbers to focus on to sort of get a sense of the health of that business. And I think with the market that is very focused on subscriber growth in all things, especially post the Netflix print, how do you think about the growth prospects for that business?

Well, I think you're right to point out some of the elements, not exactly the same, but some of the elements of the subscription businesses. And just as Charter has had slower growth because some of the move environment issues, it has generated had less churn, higher EBITDA margins, higher free cash flow, Sirius a little the same. If we don't have current period activity largely due to reduced SAAR, SAARs come down substantially over the last couple of quarters, you've got supply chain issues around chips into cars, you've got supply chain issues around our chips into radios into cars. All of that has slowed some of our growth. But as you rightly point out, churn never lower, high free cash flow. We're in a relatively slower growth environment for that. There is investment we're making to grow digital subs. That will be different than just SAAR-tied subs. And I think you'll see more of that pay off in the second half. This will be a slower year for growth than we certainly had in 2021. I don't expect that to change, but I do expect we'll go from a slight negative in the first quarter to a slight positive in the second quarter and accelerating growth in the third and fourth and in the third.

And are you still comfortable with guidance of 500,000 self-pay net adds?

Yes, the most scary piece of guidance they have is 500,000 self-pay net adds, but I still think we're comfortable with that.

And digital subs?

The digital will be a big part of that.

Okay. You made some acquisitions in the post Pandora or now Stitcher and Earwolf, and the focus on podcasts. I presume that's a view of -- how do you spend time in your vehicle changing? And are there other acquisitions that you think make sense, categories?

We certainly have been a big player in podcast. I think we're the largest -- as you may recall, also, we bought AdsWizz a while back as part of Pandora. We're the largest supplier of third-party technology for podcast in terms of ad monetization. So the Simplecast was another one we did in there that helped us in the podcasting business as well as Stitcher. All to say that's an expanding category. It's one where we think we can bring a lot to the table. It's been one that's been heated at times and some of the math we've seen on some of the acquisitions from -- that have been done by others, doesn't work for us. And we're pretty usual about making a rational business model. I do think there will be potentially other categories, but we have a good set of assets to certainly pursue and protect the SIRI brand and capture a bunch of that growth. So we'll see what else is out there in the horizon. This market change may create opportunity.

Say more about that because I mean here's the -- let's -- in addition to maybe buying other things, there's buying SiriusXM, right? I mean the same question I asked about the spread between the tracker and the underlying asset is really big here.

And when we try to take advantage of buying a lot of stock back at good numbers and the given that discount. The -- it's just worth pointing out for the Sirius business has been stronger than many through this market downturn because it's got all the elements. It's got relatively immune to a lot of the seemingly supply and demand issues on the supply side may grow, but the demand side is still remain -- excuse me, the supply side may have challenges in terms of getting new cards, but everything is suggesting no change in churn, demand is high, the customer base is very happy. So our demand side looks very good. So we've maintained a lot of strength and the strength of the business model that SIRI has, makes us still a huge attractive free cash flow generator. And we'll weigh how to use that, whether there are things to be done outside that are attractive to take advantage of the market disruption or whether to continue to do things like pay a special dividend, let shareholders do what they wish with it, including us, do a bunch receiving a tax free and doing a bunch more share repurchase. Also not a terrible time just to think about some of -- cleaning up the LSXM balance sheet issues and making sure that is bulletproof going forward. So we'll weigh all those choices.

Is there ever a scenario where you just buy in the rest of it and say, I like the free cash flow yield of the asset?

Yes, harder with our discount being so high at LSXM to use our own stock and then you'd be fairly levered if we were using cash. So we'll see.

Okay. Let's now talk about Live Nation, which I think this broad theme that everybody is talking about of moving from buying goods to buying services. I mean, boy, you couldn't have an asset that is more square in the center of the reopening story than Live Nation. First quarter, best quarter ever. Second quarter, I think 2022 is likely to be the best year ever. How much pent-up demand -- how much of this is just a pent-up demand story from COVID? And does that peter out? Or how much of it is fundamentally that there has been a kind of a sea change that will last -- be much more lasting than the kind of a burst of activity?

Well, it's a little bit like the example on COVID, we had talking about how much is pull forward for Charter. Clearly, there's been some pent-up demand. I also think you're seeing a lot of fundamentally positive things in the business, which are enduring. A much lower cost basis is because of actions taken, much improved caps in terms of what people are willing to spend when they go to concerts, both on the ticket on the experience, when they're there in terms of hospitality. All of those don't feel -- that doesn't feel bubbly, doesn't feel -- that feels more permanent.

And by the way, I think people underestimate just how big the supply side change has been that bands went a long time without making any money.

And I think there have been fundamental changes in just the overall competitiveness, our ability to bid for what we have to offer to get towards what we have to offer to secure venues. A lot of that has gone our way in a positive sense.

Look, everybody is on the road and needs to make money, and they've got a lot of mouths to feed. And so the supply has been fantastic.

So there are deals we don't have to do in '22 that we would have done in '18 in terms of offering -- what we will offer the artists or offer the band.

But is there anything structural you do with that business? Or is that business just a -- that's on the right track and just kind of let them do what they do?

Well, I don't think we -- how we hold it may involve some changes because I'm not sure it's being fully recognized in our tracker, but the business is on fire. I think Michael Rapino and his team are doing a wonderful job. Are there other things they can continue to add the model of growing their business by extending their promoter relationships around the world, buying up those guys usually in partnership. That's been a pretty good model. We assess a deal in Mexico is going to be a great deal, which is one of the larger ones they've done on that model. So there may be other ones that come about, but they're -- they don't -- their organic growth looks very good for the next 2 years at least, so.

And Trip is sort of the same sort of story.

Yes, we got a lot of -- we got a lot of guys who are benefiting from reopen, think about Braves, Formula 1. Obviously, Live Nation and now, Trip, all definitely the same.

Yes. So talk about Trip, I mean, how -- what's your assessment of how close we are to the return to normal?

Well, it's a real mix message. And when you see we were looking better in December and then Omicron set it back in January, but by March, it was sort of back on the trend. April, back moving. I think the -- you can think about a couple of 3 distinct businesses there. The auction business for the traditional Trip business is not yet up to what it was, but it's probably -- depending on the venue or whether the local 75% to 100% of the '19 numbers, but probably done again in much the same way we cut the cost bases at Live Nation during COVID, with an improved cost basis. And a relatively good auction market, not -- it could always be more robust. And that's been still the main free cash flow generator. And then we have 2 smaller, faster-growing businesses. The experience of business is Viator. That is running well ahead of '19, and excellent growth and feel very good about increased repeat rates where customers are -- our retention is going up and the strength of that business growing. The restaurant business also smaller, very much depends on where markets or any. We're not as much of a player in the U.S. or U.K. that's OpenTable or under U.K. arm, Booking. Our strength was Western Europe, Brazil, some other markets. And depending on market by market, that's well ahead of '19 or approaching '19. And then we've got this -- the thing that's been somewhat of a disappointment so far, which is the subscription business and how we build that still has a twist to come. We have a new CEO joining who I think is very excited about exploring how to make that work, how to make the traditional more dynamic and probably let and expand on the growth rates, both at experiences and at dining.

And how do you feel about the competitive position of that business coming out of COVID?

I think there's work to be done on the core business, but there's a lot of opportunity, and I feel very good about the growth rates in the...

In these edge businesses?

The businesses which are -- we have a real lead.

I didn't have the Braves on here. I won't skip the Braves, but since we're talking about the reopening story, talk to me about the Braves.

Tough loss last night [indiscernible] or yesterday afternoon, but the -- Jansen has been lights out. So everybody sooner later has his stumble. He's been as good as you can get. The on-field being okay, up and down, not as exciting as we would hope, obviously. Probably a little hangover from the World Series success. But the World Series success on the -- off the field has led to an unbelievably great story in terms of highest number of premier seeds, demand, cap rates, which spent at the ballpark, all those looking as good as possible.

Does that -- is that going to be a business over the next 10 years that swings back toward more of the in-person experience and where more of the economics shift back away from television and back toward a live event?

Yes. I think the -- we, probably among the leaders in baseball and providing the live event given what we've done around Truist, the battery, the whole experience. And some of the issues that the RSNs may have in terms of their growth rates and where broadcast television, where cable are, all of that, suggests their growth remains maybe less. So I would expect your point that the higher growth rate, particularly for someone like us with a well setup facility, it could be live element, it could be a faster growing element than the broadcast element.

And the -- how are you feeling about the future of the broadcast value of regional sports?

Chris Ripley is in the other room. So we saw -- you should ask him. But I think, look...

I didn't think I would necessarily get the same answer from you.

We have a -- the Braves have a good deal, not the best deal in terms of what we can pay for an RSN. My guess, if we gave truth syrup -- truth serum to Chris Ripley, he can tell you that's probably his most profitable RSN because we have a 12 million-plus broadband household, it's a very large territory. We have relatively high ratings because of the success and interest in the team, and he pays us a relatively middle-of-the-road RSN fee. So I suspect it's a very good deal for him.

So let's talk about a business that is not really a reopening story, Qurate, and it's got to be, especially yesterday with the carnage in retail. That's a tough environment, right? And first quarter revenue was down 12%, EBITDA down 34%. And with inflationary pressures, it didn't get any easier, so?

Look, I think if you look at that, the 2-year stack wasn't quite as bad or back to '19 stack, rather, the pre-pandemic stack wasn't quite as bad on the growth rates. The -- your point about supply chain issues, very difficult. A ton of working capital flows and working capital backed up. A lot of it being that you had increased shipping costs in WIP, the amount that you took extra to get the goods was sitting in inventory still. So our inventory flows were very tough. I think you'll see us get better at working down that inventory in 2022. David Rawlinson and his team are very focused on that, and that should make the -- both the free cash flow easier and the flexibility and the ability to operate easier. But the percentage of TSVs, today's special values that we've had that were delayed or had to move back because of supply chain issues has been enormous. That does not make the business easier. I do think it will get easier through '22. But the first quarter was certainly a tough quarter.

And so what do you do? You just kind of say we've just got to tightly manage inventory and try to white-knuckle it through this period or?

Yes, I don't think there's a silver bullet. They have some interesting growth initiatives on the digital side themselves. And -- but on the traditional business, I think it's a question of better operation and trying to take advantage of an improving environment for goods, which will certainly be better than it was and just in our own case, in terms of cash flow over the next several quarters and it has been. But we have inventory to work through exacerbated by our issues around the warehouse fire we had, tragedy in Rocky Mount, didn't make it easier because we had fewer places to store inventory and inventory that was stale there that we couldn't get to. So a lot of challenges in that business. I think a lot of the worst, hopefully, is behind us, but not an easy environment.

And what is your macro view of the consumer and inflation?

My macro view, look, I think, clearly, we're going to see a slowdown in the economy, whether we have a true recession or a softest landing. I think -- I tend to think it's not going to -- it will be recessionary, but not a true hammer -- unemployment is so low -- demand, we still have 11 million job openings, 12 million job openings against 5.5 million unemployment, 2 jobs for every person. I think we'll not see the kind of spike in unemployment we've seen and some other ones would be my guess.

So how do you think about equity valuations in general then? Does that -- does it strike you that then people are too afraid? Or does it strike you that no, this is an appropriate pullback given the rise in cost of capital?

I think it's appropriate pullback, and I wouldn't claim to be the market prognosticator or I guess on that. I try and look at ours and think of which ones are attractive and how do we feel about playing the long game. I'm not -- us buying another 5% isn't going to move the margin. Ours is what's our long-term view about this business. And yes, you've got to be aware and make sure you've got capital and help to get through these challenges, but we pay attention to that, but I don't think that dominates.

All right. I've saved Formula 1. My son is here who is a huge Formula 1 fan. So he has been desperate for me to talk about Formula 1. And I've got to say, I was saying this to you before that I was -- I've been blown away by what avid fans, Hayden and his girlfriend and all of their friends from college are of Formula 1 and getting up at 5 in the morning and going to bars and 30 or 40 of them going in to watch. It's a real sea change in a way that they are more focused on Formula 1 than I -- Formula 1 is to them what NFL and NBA were to me when I was at that age. Let's talk about the Grand Prix in Miami for a second. How is that relative to your expectations? And that's, I think, sort of a tentpole for making this a much bigger business in the United States?

Well, I think overall, it was great success. Demand was crazy. I think the number of people who have said to me, best sporting event they ever went to, all this. Now were there logistics issues around first-time race, drivers don't love everything about the track or -- which is not unusual or the Paddock Club, hospitality and security, we'll see. There are things to be worked through. I think the Dolphins, our partners there, did a great job overall. I think they're very aware and the problems or issues that arose, but very fixable. But the TV experience, the excitement, the overall tone in Miami was wildly positive, I mean, crazy good. And I don't think that's going away. So I think the -- if you work through the first year issues, it's going to be a great, great, great event.

Yes. So expenses were high because it was the first time. I think Tom Garfinkel said it lost money, but even though it's sold out almost overnight, but will this be profitable next year?

Yes. Yes, I think it will be very profitable for the Dolphins. I mean their P&L and RPL are a little different, but I think they have a 10-year deal, I think they'll make a lot of money.

And I've got to ask, so I think you have one coming to Las Vegas.

We do.

And that starts in -- it's November 23?

Yes.

And you've made a big investment with, what, 39 acres there for [ thematic ] and the pit areas and stuff. When does the New York Grand Prix coming?

The Eric Adams administration has reached out asking for one. I think that's very difficult. Their proposal Randall Island -- Randall's Island is probably not our perfect venue. A lot of time and money was spent here at 15, 20 years ago by -- including by Leo Hindery, one of my predecessors, trying to build one out over in Hoboken. I think the reality is that street races in a place like New York are just very, very, very hard. Las Vegas is one of the few places in the United States you could probably get a street race done, has a different mentality. New York is a wonderful...

They have a layout.

Venue, but it's hard to see that they're going to shut Central Park for us.

I'd love to see it.

Yes, I suspect there are a few other groups, which might not. So probably a fight we don't need to have.

I always like to wrap up and talk about the broader market and the way you see things, especially when there's big dislocations like we've seen over the past 4 to 6 months. You guys tend to see opportunities. So the first is really open-ended, whether it's by industry, whether it's by geography or country or asset class, what's piquing your interest right now?

Well, I think, look, we -- I don't have a particular sector. We've looked at a lot to the SPAC that's opened our eyes to a whole bunch of new areas in terms of -- I shouldn't say open our eyes, but given us license to go look at a whole bunch of new areas. And some of those valuations have come down dramatically and they're attractive, whether we do them through the SPAC or some other vehicle. I think some of our traditional businesses, I mean, Charter down at 4 25 or what the heck it was. That was very, very cheap on a free cash flow basis, even with a rising interest rate environment, that looks incredibly cheap. And I think you can make that case about a bunch of our other businesses. So we are lucky that you talked about the turnaround or the reopening trade, a lot of ours are benefiting from that. So a lot of free cash flow. I don't think there's a business that has more -- your son's example is not unusual. The zeitgeist that Formula 1 seems to have caught the momentum, and that feels great and things around that space that we can do are attractive, and there are some. So we'll try and capitalize on that strength. We're doing that in part by doing things like investing in being the promoter in the Las Vegas race. And I think -- I don't think it's going to be our model everywhere, but it's not inconceivable we could find another spot or 2 to go be the promoter whether we think they're particularly good economics or particularly good opportunity. So we'll go out there and look on the landscape. One of the things that happens is buyers are all ready, sellers are all waiting. They think, "Oh, this too will pass, and I'll get my better opportunities." So usually it takes a little longer time.

Still take some time for expectations to come back to reality.

And again, as we've said before, Craig, we can't just buy 3% of something in the market, have it go up 20%, and consider ourselves happy even though that may be a great result for many investors. Our structure, the way we operate -- corporate-level taxes doesn't really work. So we got to find the big deal, and that takes longer.

So -- and let me ask you one more thing because -- although it's -- I don't think of you as primarily a media company anymore in traditional sense, you're more diversified than that. But I always want to hear your view on media. And I mentioned before, if you think about what's happened, I mentioned the Netflix collapse, traditional pay TV has -- the declines have reaccelerated. DISH Network dropped its last RSN and now has no RSNs. Sports-based virtual MVPDs like fubo have collapsed, Disney has collapsed. If I look across the media landscape, what's your assessment of health and opportunity? Is it...

Well, we have always been -- have been doubters or questioners of that -- of the model. We sold Starz for a reason. We were subscale and we looked ahead and said, the potential to grow and make these big profitable businesses is a long way down the road. And there's still a lot to be done. I never frankly understood the Disney valuation where people will give them so much credit for growth in subs. And it has slowed more dramatically, the Netflix growth than I might have guessed. But the fundamental model where you're going to spend -- these streamers you're going to spend $150 billion a year on content and expect to return. It seems like a very hard place to be. I just -- that was our fundamental view. And churn is so much higher when it's not in a real aggregated bundle. That's a hard, hard, hard business. So we're not rushing to that. And I think you look at how they're reevaluating and looking to free cash flow. I think that's the logical outcome that they're not going to be able to pursue this forever.

But does that suggest there is eventually going to be some resilience in the traditional linear TV model? And that simply because the owners will stop strip mining it? Or is that -- has that train left the station and there's no way to put the genie back in the bottle?

I think that train has left the station. We've gone to a fundamentally change where that's a declining model to a less attractive model in the subscription over-the-top businesses, but it's just made the whole sector less attractive. I don't think it's fundamentally changed the dynamics.

And sports, where does sports fit in that?

Sports is still the best, the best house maybe on a bad block and we're certainly going to see nice increases in demand for something that has momentum like Formula 1. And it is a little interesting, too. People look at sports programming and say it's very expensive. You could argue that point. As you've seen the increase in cost per hour on the linear -- on the scripted side, is it really as expensive, right? You've seen the other side go up so much that maybe these increases don't seem as irrational and they still are the place where -- with big aggregated audience, which have to be there in real time and all those other things, so.

Closing thoughts about Liberty and what people might be missing about anywhere in the Liberty complex?

No, I think we're lucky to have a bunch of smart investors who know a lot and know exactly they should be putting money with us, so.

All right. This is always a treat. I enjoy this, and I look forward to doing it again next year.

Thank you. Thanks.

Appreciate it.