QVC Group Inc. (QVCAQ) Earnings Call Transcript & Summary

Good morning, and thank you for joining us today. We are excited to have this opportunity to update you on our progress and our plans for the future. And for those of you who are new to following our company, we are the world's leading video commerce platform under the QVC and HSN brands. Zulily is the scaled e-commerce retailer focused on moms, provides a really powerful daily destination for moms. And Cornerstone is a group of aspirational lifestyle brands, omnichannel, largely focused in the booming home market. But I'm going to really focus my comments on our video shopping business and why we're so bullish about the future. But before I do that, let me just take a moment to appreciate our 25,000 team members. They have responded to this amazing year in the most remarkable way, fighting through a lot of adversity, demonstrating agility and adapting everything we do to the urgent needs of the moment. They have been there for our consumer when she needed us the most, they have been there for our communities And they have been there for each other. And of course, the customer response has been quite remarkable as well. It's enabled us to drive outsized growth in revenue and OIBDA and free cash flow, all buoyed by these record levels of new customers we're adding across the business. And we recognize this is a significant change in trend. And it begs the question all of you are asking, which is what do these results tell us about the long-term growth potential of our business post-pandemic. And that's a question we're going to do our best to answer today. I hope to leave you with 3 takeaways. First, that the pandemic has largely accelerated pre-existing trends towards a more digitally driven lifestyle. Second, that we're confident we can win and thrive in the new normal because of our demonstrated success evolving to a more digitally-driven model while continuing to attract high-value customers. And third, we're confident in our ability to drive long-term healthy growth in revenue and profits and in cash flow, and we're committed to attractive shareholder friendly ways of returning that capital. We know this digital lifestyle is here to stay, whether it's the dramatic increase in usage of streaming services or the fact that shopping journeys are increasingly digitally driven with the physical store just being one touch point, among many other more digital interactions. And this explosion of interest recently in live stream shopping speaks to the consumer's hunger. They have more engaging, more immersive digital experiences that can begin to replace the energy of the physical environment. And all that's coupled with a significant shift in spend towards all things home and the consumer, especially in this environment, who wants to do business with brands who operate with integrity and wants to find ways to be connected virtually, if necessary. The communities who share her hopes, her interest and her aspirations. These megatrends perfectly fit with our business, with who we have always been and who we aspire to be every day. And we've been in the news a lot lately as others try to emulate our live stream shopping model. We view this as a fantastic endorsement of what we do, not a competitive threat, because it's not a zero-sum game. As more and more consumers embrace live stream shopping, we stand to be the beneficiary because we uniquely have the scale, have the resources, have the customer base and have the vision and the innovation pipeline. We are a premier media company. We reach into 380 million pay TV homes around the world and many more through extensive over-the-top services. We have 36 studios around the world producing more live and more on-demand content than anyone on the planet. And we're, at the same time, a scaled e-commerce retailer who's able to deliver significant value to consumers because we've got the scale in buying, in sourcing, in customer service, in distribution, low customer acquisition costs, extensive digital reach and traffic. And we bring all of this together in a shopping experience that has been honed over decades. It's absolutely unique. It's all about the joy of serendipitous discovery. It's about products that inspire. It's about the energy that comes from live and alive experiences. And it is about the universal power of storytelling to bring products to life, to create trust, to build community. And this experience attracts amazing customers, savvy shoppers with above-average household wealth. And our customer is highly engaged in life. She's more likely to be in a caring profession like nursing or teaching. She's likely to be involved in her community and her church. She loves to garden. She loves to travel. She loves to cook. She loves to entertain family and friends. She takes pride in maintaining her home. And we attract customers -- we over-indexed with customers in their 30s to 70s because that's the age range folks have the range of interests, hobbies and the financial resources to take full advantage of our platform. But the important thing to understand is that this live stage curve is remarkably stable, has been for decades. And yes, even today's millennial consumer, when she hits her mid-30s, is adopting our platform at about the same rate as her Gen X and baby boomer forbearers did in past years. This customer buys frequently, this customer is highly loyal. These metrics are amazingly stable over long periods of time and across every market we operate in. But as impressive as these averages are to really understand the business, you need to go below these averages and you need to look at the super users that we attract to our business. These best customers, who we define as those making 20 purchases or more a year, represent almost 70% of our sales. They visit our websites 33x, they -- a month. They view our TV programming 19 days a month. And they make, on average, 69 purchases. It's about as good a set of customer behaviors as you could hope for as a retailer. But we also know that it raises concern. There's a fear that some have that, boy, these super users must have joined you decades ago and built up this habit, and they're going to slowly fade away to be replaced by today's low loyalty transactional price-driven e-commerce consumer. Well, here's the good news. We retain 99% of best customers every year, year after year after year. And here's the better news, we are bringing in new best customers at about the same rate as we have always brought them in. And far from taking years to become a best customer, new customers who become best customers typically do so in the very first year they join. Now a lot of you have been curious about this surge of new customers we brought in during the pandemic and what kind of quality do all these new customers represent. So let's go deep on that. We've isolated here the pandemic class of new customers and we've compared it to the same time period over the prior 3 years. If you look on the upper left of the slide, you'll see that, yes, we've been increasing the number of new customers every year, followed by this huge jump up during the pandemic. If you go across the slide, you'll see that every class at a sort of predictable rate becomes more and more digitally-driven. For the pandemic class, 89% of them made their first purchase online, 73% bought an item that we had not featured on our airwaves that day, 36% came in through paid marketing. But the important thing to understand is that the predicted lifetime value of each of these customer classes is remarkably stable, even as they become more digitally-driven, even as a higher percentage come in through paid marketing and even with this huge surge in the pandemic class. We measure that in so many ways. Here's just a couple of examples on this slide. Your likelihood of making a repeat purchase within 60 days is a very consistently predictive dimension of becoming a good lifetime customer. That metric is stable across classes at 22% to 23%. Of course, the ultimate measure of the quality of a new customer class is how many go on to be best customers, and you need a year to see that behavior. But let's look at just how many new customers became best customers and then they hit that 20 purchase threshold in just their first 60 days as a customer. That metric is amazingly stable over time. It is a shade lower with the pandemic class, but against a much larger class. So we can safely say that we have brought in more best customers during the pandemic period than at any time in history. And keep in mind that our best customers skew heavily towards fashion purchases, and 2019 was a down year for fashion and 2020 is a very down year for fashion. And that makes these numbers actually quite, quite extraordinary. So as we think about this evolving digital lifestyle that's been accelerated by the pandemic, we bring to it incredible strengths. We bring to it scale and media, scale as a retailer. We bring to this unique shopping experience. We bring to these avid, loyal, super users. We also bring to it a history of innovation from our founding. And all of our strategic priorities are squarely focused on continuing to evolve from the kind of one way linear TV experience of the long ago past to where we are today and where we're increasingly going, an agile, digitally-driven model with video at the center of it, one that can stay relevant to new generations of consumers, one that can enable us to sustain growth for the long term. And at the center of this digital ecosystem is still great product, great content. That product and content increasingly comes together in these really powerful shopping, digital shopping services we're developing. Those services are increasingly deployed over the ever-growing range of ways in which consumers can access video content. We're inviting more and more consumers into that ecosystem through innovative marketing, we're personalizing the ecosystem to consumers and we're empowering the communities within this ecosystem. And so I want to unpack each of those elements and how they fit together, starting in the center with product discoveries. We've spoken extensively about our investments to expand our merchandising capability, so that we can absolutely stay on the forefront of product discovery in a world of increasing consumer choice. We're bringing on prestige brands who see more than ever the value of our platform to tell their story. We're investing heavily in our design, development and sourcing capabilities. We're building exclusive product lines with influencers. And we're going deeper into the entrepreneurial community to find the latest ideas, the latest innovations, the latest new ideas for consumers. And then we bring that product to life with compelling content. And over the last 2 years, we have completely transformed our content development capabilities. In the old days, content for us was meant one thing. It meant live selling and we have refined the art and the signs of live selling in ways that are virtually impossible to match. Others try to copy the flash, no one captures the heart. And now we complement live selling with amazing on-demand content that is tailored to the specific needs of each distribution platform, to the viewing occasions, the purchase occasions that are relevant to today's consumer. For example, we are creating powerful tutorials that live on YouTube. We are creating this really engaging intimate behind-the-scenes, at home footage with our hosts and influencers that build really powerful connections to consumers. We're even investing in our original series. We developed dozens of original series that are extraordinarily compelling for our customers and for new audiences that we're attracting. And we bring content and we bring product together through these new live stream shopping and shopping on-demand services. Through these services and apps, a consumer can access the content she cares about, whether it's live content across our 5 QVC and HSN networks or on-demand content, content she cares about and the ones you want to access it, how she wants to access it. And we are tailoring these services in ways that add value to each distribution partner. For example, we partnered with LG Electronics on their Shop Time app. So we're the lead shopping partner on their app, we're prominent on their launch bar. We're offering unique content, unique deals only available to the LG shopper. And an important feature of the new LG app is a text to buy feature. That's one step in this journey we're on to create truly frictionless, truly interactive video commerce. Our goal is simple. We want consumers to be able to search for, browse, shop and purchase product without ever leaving the live stream experience through an interface as simple and as intuitive as your voice. And these innovative apps and services, we're deploying them across this fast array of platforms in which consumers can access content. Now let's be really clear here. We're trying to reach the cord cutter and we're trying to reach the pay TV viewer, and add value to both. Think about a partner like Comcast, for example, while we want to provide these rich user controlled experiences to that Comcast customer who has a video sub with Comcast through their Xfinity platform. And for that cord cutter who has a Comcast broadband connection, we're going to apply all the same content, and all the same content is available, the live channels, the on-demand content through their Flex box. We've talked a lot in the past about this immodest aspiration to be the Netflix of commerce. And with this innovative service layer increasingly available to every home, adding more and more rich content, and we expect 1 day to be adding content from third-party retailers as well, and we start to really bring that aspiration to life. We want this to be the universal video shopping app for all consumers, all ages, all interest, all preferences. And we're making progress on distribution since we last talked. We're seen views and visits on Roku and downloads are way up. YouTube live stream views to our own QVC and HSN websites. And we continue to add new partners, such as our new partnership with Hulu on their virtual MVPD platform. And we're leaning into marketing innovation to attract more and more customers into this ecosystem, whether that's building a network of influencers that can bring their followers to us, leaning into paid and organic social, using our own best customers as brand ambassadors. And also learning how to develop audiences on a platform like Roku or Fire. And as we add more and more content to this experience, we also want to do more and more to personalize the experience. You have access to what you care about as a consumer. And, for example, we're in the middle of reimagining our web experience to create a really sticky, really personalized web experience, one feature, which will be to let you, as the consumer, curate your own shopping network. You get to control the network and pick the programs host, influencers that you care about. And we're finding new ways to tap into these incredibly passionate communities that form around our company. For example, our team in Europe is driving great innovation in the beta phase of a new social discovery app that allows every customer to become an influencer. She's able to share her experiences with our community through her own live stream in a way that perfectly taps into the brand DNA of our company. So I hope that gives you a flavor for the level of innovation we're driving across every element of this interconnected digital ecosystem. But I think to really understand it, you need to think about the experience through the eyes of the customer. So let me try to paint that picture for you with a few examples. If you're a follower of influencer, Giuliana Rancic, and maybe you enjoy her apparel line on HSN, which has done quite well. Well, now we have a new home decor line we've developed with her, produced by our team. Fabulous fun, contemporary product, amazing prices and all exclusive to us. But more than that, we can take the customer on a journey. We take her on a journey through Giuliana's own home, through Giuliana's stories, through Giuliana's social expression and ways that add meaning and inspiration to every piece. We built a great franchise around Curtis Stone, celebrity chef. And now we're extending that into an original series that I would put up against the best original series on food network or elsewhere. And so now all of a sudden, someone who may have no interest in QVC or HSN, but as a cooking and travel enthusiast, will discover this original series through its prominent placement on Roku and be intrigued and be engaged and be connected to our ecosystem. So let's take a look at that. [Presentation]

And for a young customer who may not think QVC or HSN is for them, she might stumble on an Instagram post, she might stumble on a YouTube beauty blogger, raving about our favorite brand, MAC Cosmetics, and follow that thread, follow that thread to qvc.com's premier of MAC. And maybe even follow that thread all the way to the on-air premier on QVC TV last month that attracted large numbers of new customers and had many sellouts. So having tried to describe these experiences for you. I want to turn it over to our customers and let them describe the experience. [Presentation]

And so let me just wrap up by saying that I hope it's obvious we are incredibly excited about the power of this digital ecosystem, about the quality of the innovation pipeline. We think it's perfectly in tune with the megatrends of our times and ways that will let us drive growth. We're demonstrating that we can to add high-value, digitally focused new customers. We can continue to add new purchase occasions from our existing customers as we work on personalization. We can make this experience even more sticky as we lean into these community tools. And it's all built on a remarkably strong financial foundation. And that's why we've been able to return most of our free cash flow to shareholders through a variety of strategies and that's a commitment we will continue, as you'll hear more today from Brian. So with that, thank you for your time and interest, and I'll turn it over to Jeff.

Good day, and welcome, everyone. My remarks today will focus on taking a closer look at our strong financial foundation. Core elements inside the rebound across each of our business units and our multiple path to sustained growth. Let me start by reviewing the foundation of our financial strength, which is best characterized by consistent delivery of OIBDA and free cash flow throughout a challenging operating cycle. While maintaining a manageable level of leverage and access to nearly $3.5 billion in liquidity. Let's take a moment to explore the last 6 months of our video commerce business. We are confident our strategies will capitalize on the acceleration of e-commerce and the proliferation of video streaming. Across our video commerce business, we delivered an outpaced growth in the most recent 6 months period and generated $1.4 billion of free cash flow. This is a strong testament to the strength and the agility of our model, fortified by the strategic actions we have been taking in recent years. You may recall a year ago, we outlined 3 core factors that challenged our U.S. video commerce business. These factors set the groundwork for the strategic pillars that Mike discussed earlier. So when you fast forward, let's visit each one of those factors in the last 12 months. Fashion and beauty continue to soften while home accelerated, creating a vortex to lift the entire business, generating record levels of new and reactivated customers to overcome postponed spending by best customers. We've largely completed our HSN integration and investments to optimize our fulfillment network, which is now going through a stabilization phase and we continue to satisfy our commitment for multiyear synergies and cost savings. Finally, we're executing on our initiatives to discover new products and bring forward innovation to extend our reach and relevance and to invest in marketing across multiple channels. But let's move on to our customers. In Q2, net revenue grew 7%, principally supported by record levels of new and reactivated customers and a resurgence within occasional. Across fashion, best customer count and spend receded in comparison to normal spending patterns, yet maintained their spend within home. In Q3, net revenue repeated its 7% growth with new and reactivated customers moderating from their Q2 peak, but still realized strong double-digit growth. Best customers reengaged in fashion, albeit down from prior year spend and best customer total spend returned to growth, bolstered by continued strong spend in the home category. So let's take a look at our adjusted OIBDA margin. We realized sequential quarterly improvement through our strategic efforts with positive margin expansion reestablished in Q3. It was supported by 3 primary line items: product margins, commissions and bad debt. As indicated earlier, category mix pose an initial challenge, but was more than offset by reduced returns and free shipping and handling as we tightened our promotional posture. Commissions benefited from further digital penetration and contract negotiations. And proactively, we managed and reduced our payment installments, which led to lower bad debt. Administrative costs, fulfillment, obsolescence and marketing were primary headwinds. We incurred discrete expenses to protect and support our team members and contribute to our communities. And for the first time in 2 years, we're accruing for an incentive management bonus. With a competitive environment and acceleration to e-commerce, we are experiencing elevated freight and labor rates, partially offset by lower returns and improvement in network efficiency. And we continue to add 35 to 50 basis points in marketing to enhance customer acquisition and retention strategies and increase customer lifetime value. For reference, we're providing the same margin walk for you for our QVC International, which experienced similar themes that I just covered for the U.S. market. So as we look prospectively, we are on track to sustain net revenue and OIBDA growth. Mike outlined our net revenue efforts in his remarks. And I'd like to add, we are exploring opportunities to increase our private label credit card penetration to deliver increased income and reduced interchange fees. We anticipate product margins to remain healthy with a rebalance into higher-margin fashion categories, a continuation of vendor margin management programs and extending global sourcing into home categories and maintaining a tight promotional posture. And while fulfillment will present a headwind with the competitive labor market and rising freight costs, we are not standing flat-footed. We're acting to lower freight costs through package consolidation, reduce duplicate operating costs and then to improve warehouse productivity as social distancing restrictions are eased and team members become more accustomed to new systems. Commissions should largely remain favorable and partially offset increased marketing spend, and administrative expenses should normalize as we anniversary several discrete expenses incurred this year. On balance, we expect to sustain net revenue and adjusted OIBDA growth. A quick update on synergies and cost savings. We are largely on track to deliver annual run rate savings through 2022, and made appropriate adjustments to address prevailing COVID restrictions. Our resurgence in net revenue and adjusted OIBDA was just not limited to our video commerce business. Zulily experienced a strong rebound with its focus on creating the best shopping experience for mom and as its new management team executed on 4 strategic pillars. In Cornerstone, an omnichannel retailer with a portfolio of aspirational lifestyle brands is delivering record revenue and adjusted OIBDA growth across its home brands. We generate strong free cash flow from the combination of core earnings, disciplined working capital management and low capital intensity. But we recognize that 2020 free cash flow was strengthened by several discrete strategic actions that drove working capital improvement. This was primarily led by reduced customer installment payments, extension of vendor payment terms and elevated accruals for management incentive bonus, customer returns and CARES Act tax deferral. In addition, this was an off-cycle year for the renewal of TV distribution contracts. We expect each of these items to normalize over the course of 2021 and support a 40% to 50% OIBDA conversion into free capital. In summary, we've demonstrated we have a resilient profile built on a foundation of broad-based curated product offerings and a loyal expansive customer file, with an adjustable operating structure that is responsive to rapid changes and customer demand behaviors. We have a growing OIBDA and moderate capital requirements that converts into high levels of free cash flow to support future shareholder capital allocation strategies, with a manageable leverage with future maturities adequately addressed through ample liquidity from free cash flow, capacity under our revolving credit facility and access to public debt capital markets. In closing, and before I turn it over to Brian, I'd like to wish everyone a happy holiday season, and please stay safe and healthy with your family. Thank you very much.

Thank you to Mike and Jeff in Westchester, and good morning to everyone. I plan to pick up on a couple of points that Mike and Jeff brought up and then cover off a couple of other topics from the Qurate eye level. $1.8 billion. Let's just start there. As you just saw in Jeff's presentation, Qurate has generated an enormous amount of free cash flow in the last 12 months, $1.8 billion. That's equal to the most recent Forbes valuation for the Braves or the world's population in 1918. Using that free cash flow amount and Qurate's price as of last Friday, which includes the impacts of strong quarterly results for Q, Qurate is trading at 1.9x free cash flow or a 52% free cash flow yield. This makes an investor ask, what is Qurate doing with that amount of cash generation? Let's get into that. Despite the usual questions about share repurchase to our Investor Relations group, we've been busy returning capital to shareholders. We issued a special cash dividend of $1.50 per share in September, along with a $3 per share preferred dividend. The preferred dividend and the aggregate amount of $1.25 billion gives shareholders the ability to either retain an attractive investment with a yield of 8% or monetize that instrument. We note that going forward this will result in $100 million of annual preferred dividends to shareholders. We also continue to manage our debt and tax obligations. We delevered from 2.4x at year-end to 2x at quarter end at QVC, reducing our debt balance by nearly $700 million since year-end and extending maturities. We've repurchased some additional MSI bonds this year, although not at past year's levels. We pulled back a little bit due to the higher interest deductibility resulting from the CARES Act. And we continue to invest in green energy and transition the portfolio of assets, which we will discuss more in a minute. But is that it? No. There's no rest for the weary. Always working, as they say. We also just announced this morning another special dividend in the amount of $1.50 per share, which we expect to be paid before year-end. Optimal timing in case there's any tax hikes in the future. We plan to get back in the market on our shares as well and resume buybacks. We view that 52% free cash flow yield that I just mentioned as attractive and plan to pursue it. We still have just under $500 million on our repurchase authorization. We appreciate your patience over the last 12 to 15 months as we evaluated the business and the best way to return capital to our shareholders. Consistent with historical practice, we expect to turn a substantial portion of Qurate's free cash flow to our shareholders through some combination of the above items, share repurchase, liability reduction and dividends when appropriate. Now let's look and see how QVC has been trading. If you combine the preferred, the cash dividend and the value of our common equity were up 9% since the announcement of our special dividends and up 15% since the ex-dividend date. Obviously, our goal is that some of the components would be greater than the whole and we are pleased with this result. We also note that overall for the year, the stock has traded well. Despite the disruption in the market in February and March, the stock is up 49% through last Friday, reflecting the tailwinds from stay-at-home trends as well as the initiatives that you just heard Mike and Jeff discuss. This compares to just under 20% for the S&P Retail and S&P Communications services sectors, a little bit less for the S&P 500. Maybe it's good to be a hybrid cable network/retailer. You say live streaming, I say home shopping. Now let's look at the debt maturity profile. As I just mentioned, we reduced our debt balance by nearly $700 million during the year. This with improved operation has decreased our leverage at QVC from 2.4x as of year-end to 2x at the end of the quarter. We issued over $1 billion of new bonds during the year with maturities of 2027 and 2028. These actions, along with strong free cash flow generation have allowed us to fully repay our revolver and retire our senior notes due 2022, eliminating any near-term maturities and providing flexibility with an untapped revolver. This has allowed us to further push out our weighted average maturity since year-end, approximately 1.5 years at the QVC level. And we're still going green. We continue to invest in our green energy portfolio, investing $88 million year-to-date in capital contributions. These capital contributions fund the operations of these investments and result in increased share of losses of affiliates on our income statement, but they also serve to generate operating losses and tax credits that directly reduce our income taxes on the P&L. Our previously communicated effective rate of 15% to 18% reflects these benefits. And as, Greg Maffei, rightly observed, we sold our solar investment during the past quarter. This generated $272 million of pretax proceeds and a solid IRR of 23% over the life of the investment. Our portfolio of green energy investments will continue to turn as tax credits roll off that new investments and technologies come online. But we are committed to continuing to invest, both for the environment and the attractive tax benefits that are provided. Next, on the horizon, we will be looking to carbon capture projects. That should generate tax benefits that we'll be getting in 2022. This ties in nicely with existing projects that we'll be phasing out in 2021 and 2022. Lastly, on to some final Qurate retail tax considerations, I was able to fight Greg off to win this slide. There's really not much to say here. As I would note that this slide is nearly identical to last year, but hey, consistency and tax planning is important. We continue to expect a normalized annual effective tax rate in the 15% to 18% range. This has driven lower than the corporate rate due to the green energy investments we just discussed. There's no impact on this rate due to our Solana sale as there's an offsetting deferred tax benefit. We expect our cash tax rate to be in the 9% to 12% of adjusted OIBDA range. This cash rate is driven lower by the deductible portion of contingent interest on exchangeable debentures. As always, there's an additional information on our exchangeables in the appendix. Lastly, the assumptions above are based on current tax law. As always, we monitor potential tax legislation changes and take necessary planning actions when appropriate. Thank you very much for your continued interest in Qurate Retail. [Presentation]

Hello. I'm here to talk about Liberty Broadband and GCI Liberty. Broadband has enabled so much of what we all have been doing during the pandemic. There have been growth in new devices and new services and new data demands on those devices and services. And it's expected, even post the pandemic, those demands will increase. Charter during this pandemic has had a great year, growing both broadband subs, mobile subs and video subs. In fact, we've grown video subs for the last 2 consecutive quarters. And we've expanded margins, increased free cash flow, and all of these have led the peer group. You can see that, that's been reflected in the market. Our stock is outpacing all of cable, though there is certainly room to grow versus some of the other stay-at-home leaders. It has been a great year for GCI. It has grown its subs. It's grown its revenue. It's grown its EBITDA and it's grown its free cash flow. And during that whole time, it has also invested in its 5G network to set itself up well for the future. I'm going to remind you of some not so breaking news, we intend to merge Liberty Broadband and GCI Liberty. We think this has many benefits, which are outlined on slide here that hopefully you've seen before. I'd like to highlight two that I think are most important. One is we're going to significantly reduce the administrative overhead and costs associated with that. And secondly, we're going to have free cash flow in the combined entity to buy back stock and take advantage of the discount. What discount? Well, there's a double discount. There's the discount between Liberty Broadband and Charter and then there's a further discount between GCI Liberty and Charter. We will look at those discounts as an opportunity and we're going to attack them. As you can see, over the last several months, we bought back almost $500 million worth of stock at Liberty Broadband. We were prohibited for a period of time from buying back stock. But going forward, we have lots of capacity to do more. After the shareholder vote, we intend to do it. Our Charter savings will have paid for pelotons for all of you and your LPs. And with that, you're going to hear from some of our other CEOs. Thank you. [Presentation]

Good afternoon, and hello to all of you from Stanford, Connecticut. It's unfortunate that we can't be together in the same room at the Time Center in New York City as we normally are. But it's great that we now have the technology made possible by high-speed Internet that we sell the consumers and businesses to hold this event on a virtual basis as if we're in the same room. Let's get started by turning to Slide 3 of today's presentation. As most of you know, a little under 5 years ago, we put 3 cable companies together, legacy Charter, Time Warner Cable and Bright House Networks. Those transactions created an asset that operates in 41 states. And we manage a network with over 750,000 miles of two-way, high capacity, low latency, high compute capable plant. Our network passes over 52 million homes and businesses, and demand for access to that network and usage of it continues to grow very quickly as evidenced by our quickly growing customer base and the massive growth and how much data our customers are consuming on a monthly basis. Our network is very capital intentive to fully replicate and therefore, it's difficult, both from a cost perspective but also from a time to market perspective, giving us a significant advantage in the marketplace now and in the future. So what we have at Charter is a very unique, powerful network that consumers want to access and use with features and capabilities that are very expensive and slow to replicate. And we have the ability to increase our network capabilities in the future with current and newly specified technologies that are economically efficient. Turning to the upper left-hand side of Slide 4, you can see we now have nearly 31 million customer relationships, over 28 million Internet customers, 16 million video customers, over 10 million landline voice customers, and we also have newly 2 million mobile lines, which is an impressive -- which is really impressive when you consider that we launched our mobile service only 2 years ago. So we've seen very good sales growth and so far continuously increasing uptake. Over the last 12 months, our revenue has grown by 4.4%, and we grew our EBITDA by 9.5% during the same period. From a multichannel video provider perspective, we're the third largest company in the country. And from a wireline Internet perspective, we're the second largest. Today, we only do business with about 58% of the homes and businesses that we pass with our network. And yet, our services and products are priced and packaged better than what the competition offers. And we are growing our network service area, which means that we have lots of room to grow customers. And while the marketplace for our services continues to evolve, our core strategy remains the same, which is to drive our revenue and EBITDA growth by growing our customer base and gaining market share. We do that by offering superior products and service at an attractive price. We also enhanced our financial growth by improving our cost structure. Every customer we connect to our network costs us less to serve than the prior customer, and they connect it at a higher margin. And the reason that is, is we're taking more customers than dividing the cost of a fixed network by a greater number. So every customer we create is more profitable than the last. We also continue to improve our operating cost per customer by reducing customer transactions or customer contact points. We do that by executing well and investing in our highly skilled in-sourced workforce. So we invest more in each interaction we have with a customer, but we've reduced the total number of transactions per customer, ultimately saving us money, increasing customer satisfaction, extending customer lives and driving better returns on our investments. So with that as a framework and background, let's turn to Slide 5, and let's review what happened over the last several months because it's been a very unique time. Since March, we've remained focused on our customers and the communities we serve through what has been a very challenging time. Our services have been a key part of that in keeping American economy running and have enabled remote working, distance learning, telehealth services, social communication and more. In mid-March, as part of our effort to keep Americans connected during the shelter-in-place orders, we pledged to do a number of things. We committed to offer Spectrum-branded Internet for free for 60 days to households with students or educators who did not already have an internet subscription. Under that program, which we ended for new subscriptions on June 30, we added 450,000 customers. We recently relaunched this program given its early success. Back in March, we also committed to suspend collection activities and not terminate service for residential or small or medium businesses customers, who are experiencing COVID-19-related economic challenges. And through the Keep Americans Connected program, which also ended on June 30, we helped approximately 700,000 customers who indicated an economic hardship due to COVID-19. In addition, we opened our WiFi hotspots across our footprint for public use, opened up our Spectrum news website to ensure people have access to high-quality local news and information and we rapidly connected and upgraded fiber services to health care providers. We've donated significant our time to run public service announcements to our full footprint of 16 million video customers. And our employees -- for our employees, we implemented 2 weeks of additional sick time for COVID-related illnesses and an additional 15 days of flex time to address other COVID issues. We also increased our wages for all hourly field operations and customer service call center employees by $1.50 an hour in April. Going back to February and committed to raise our minimum wage for hourly workers to at least $20 an hour over the next 2 years, which is consistent with our strategy of employing high-quality, in-sourced, well-trained people who produce less transactionally intensive products. Despite the challenges of the last several months, we've accelerated our growth on a year-to-date basis. As Slide 6 shows, for the first 9 months of the year, we added 1.9 million residential and SMB Internet customers compared to 970,000 for the first 9 months of last year. And as Slide 7 shows, our last 12-month Internet customer growth reached 8.8% during the third quarter, much faster than the industry growth rate. Additionally, our mobile net adds continued to accelerate, reaching over 360,000 net adds in the third quarter. Our ability to attract, connect and service these customers have been the result of our hard work and the investments that we've made over the last 4.5 years in developing and delivering a superior package of products at attractive prices. Our in-sourced and U.S.-based high-quality workforce significant system integration and automation, and our online and digital sales and self-service platforms and our self installation program, all of these programs are allowing us to more efficiently service both new and existing customers, allowing us to grow more quickly. And that strong customer growth, and in turn, faster revenue growth, combined with our improving cost control and declining capital intensity has led to a very strong free cash flow growth. At the bottom of Slide 7, it shows that we grew our free cash flow by nearly 70% for the 12 months ending September 30. Slide 8 shows how our adjusted EBITDA, less CapEx, is growing at a very attractive rate. In the last 12 months, we generated $10.4 billion in EBITDA less CapEx. At the end of the third quarter of 2016, that same figure stood at just $6.5 billion. So very strong growth. We've always believed that our collection of assets if managed properly could grow very quickly, and they're doing that now. To maintain that fast growth, however, it's critical that we keep investing in our network so that we can continue to offer new and better products and satisfy the demands for IP-based data services, which continue to grow. Our network has performed very well despite surge in use, and that's because of the significant investments we've made in various projects in the last 7 years, like all digital and DOCSIS 3.1. Data usage and traffic on our network continues to grow at over 20% per year, even absent the pandemic. With our nontraditional video customers now using over 600 gigabytes per month during the third quarter. In the coming years, we expect data demand to continue to grow and we are going to need to deliver more throughput across our network. The growth in demand for bandwidth is and will be driven by a number of factors, including the growth of IP video services, the growing number of IP devices connected to our network, which today is closing in on 400 million devices and new and emerging products and services that are being developed as we speak. Slide 9 shows how the bandwidth on our network is allocated today. While this chart over simplifies the reality of our plant, and it isn't really at scale, it shows how our network is divided among our key services with downstream traditional video service in the middle, IP downstream on the right-hand side and IP upstream on the left-hand side. We're always increasing capacity in our core and hubs, and also splitting nodes and pushing fiber deeper into neighborhoods to improve speed and performance and reliability. In the near term, however, we have a large opportunity to improve throughput and latency by continuing to use more cable plant spectrum dedicated to the DOCSIS 3.1 technology. In other words, DOCSIS 3.1 has a lot of life in it to deliver faster speeds with very modest capital investments. We can improve speeds with DOCSIS 3.1 in several ways. As we penetrate more of our customer base with more 3.1 CPE, that adds efficiency to our plant because that DOCSIS specification uses capacity much more efficiently than 3.0, which is the historically deployed DOCSIS standard by as much as 50%. We can also improve efficiency and throughput by using more advanced 3.1 modulation technology, which enables us to increase throughput on the same frequencies. Additionally, as you can see, the majority of our plant remains allocated to traditionally delivered video services. We have the ability to allocate more and more of our plant bandwidth to both upstream and downstream IP services, where demand continues to grow at a very rapid pace. We have several ways to do that, including moving our video services to MPEG-4 compression, moving more video channels to switch digital and more efficiently packaging our non-IP service channels in general. By allocating more plant spectrum to IP services, we have the ability to offer faster downstream and upstream speeds, all in advance of migrating toward the next standard DOCSIS 4.0. Over a multiyear period, however, we'll deploy DOCSIS 4.0 technology. There are several ways to do that. As the DOCSIS 4.0 specifications allow for multiple paths to reach 10-gig services, including full duplex and extended spectrum. Both technologies offer pathways to greater speeds and capacity and will allow us to offer multi-gigabit symmetrical speeds and greater reliability to our consumers and business customers, serving the next-generation of services and customers as well. I would also note that the development of WiFi 6 will also allow for the wireless delivery of multi-gigabit speeds to wireless and mobile devices around the homes and businesses. Our ability to grow our connectivity service this year for both new and existing customers is a testament to the quality of our products and network and operating strategy and our significant investment in systems and people over the last several years. Looking forward, we have a cost-efficient pathway to serve the growing demand for next-generation products and services by efficiently upgrading our network thoughtfully, and in response to marketplace opportunities and allowing us to continue to grow our revenue, EBITDA and free cash flow at very healthy rates for the foreseeable future. And while this has been a challenging year and the environment in which we operate continues to change, our goal is to stay focused on executing a proven operating and investment strategy that works for customers, employees and the communities we serve to create shareholder value. Thanks for your support, and I hope to see you all in person next year at Liberty Investor Day. [Presentation]

GCI is keeping Alaska connected. I'll start with a quick refresher on who we are and what we do, then update on our COVID response, current network and customer performance, 5G and a new project to serve the Aleutian Islands. GCI is strategically positioned in a very unique market. Obviously, Alaska is very large. We're also far away from the rest of the country, more than 1,500 miles northwest of Seattle and we have fewer than 0.75 million people. Alaska has the second highest median income in the nation. We were just slowly emerging from a recession when the virus hit. COVID impacts on oil prices, tourism and commercial fishing have a serious effect in Alaska. The economy is currently hanging in there due to government support, but the near future will be challenging. On the positive side, we have large developable oil reserves and pent-up investment demand from the oil industry, even at today's low prices. It looks like voters defeated an initiative to raise taxes on the oil industry, so the prospect for continued oil development look good. Alaska's vast distances, harsh climate, rugged terrain, combined with the lack of physical connections, increases the dependence on virtual connectivity. That, plus good income levels, make it a great telecom market. GCI's network serves 98% of Alaskans with wired and wireless technologies. I started the company 40 years ago. We spent the ensuing years building the network, investing more than $3 billion along the way. Today, we're a lot more than just hybrid fiber coax. Our network components include undersea and terrestrial fiber, satellite, mobile wireless as well as HFC. Much of Alaska wouldn't have modern telecom without GCI, and that's reflected in the amount of support we receive from the Universal Service Fund. Looking at that map, it may appear that much of Alaska remains unconnected. But those areas are wilderness. There's no one there. We'd only be connecting the wildlife that you saw in my intro video. Ours is a solid business with unique opportunities and special challenges. Today, we're the largest telecom company in Alaska. We have state-of-the-art networks, including Alaska's first 5G in Anchorage. 80% of Alaska homes have access to high-speed broadband and 1-gig is available to more than 90% of those. Alaska ranks fourth in the nation for 1-gig service. For example, Sitka, a small community of less than 9,000 people with no connection to the rest of the state by road, has the same service availability of Chicago, L.A. or New York, yet infinitely better quality of life. We're migrating to a single integrated IP network supporting multiple services. This is necessary to provide efficiency in a market that's large in geography, but small in population. Our competitors largely have 1 or 2 products and lack state-wide reach. We have more share in customers than any single competitor in all, but our wireless business, and there, we're a strong and growing #2. We have 5 technologies in the toolkit that we use to deliver our products. In order to deliver broadband in Alaska, we must bring the pipe there in the first place. That's why we operate 5,200 miles of submarine fiber. That undersea fiber connects to 2,700 miles of long-haul terrestrial and local fiber. We continue to build more. The Aleutian project will add to all 3 categories. Today, we have the most extensive fiber footprint in Alaska, but fiber is not always feasible. There are permitting, maintenance and access challenges that sometimes make it impossible. Where it's not, we use long-haul microwave. We operate a hybrid fiber microwave ring around Western Alaska to bring terrestrial connectivity to 85 villages and high-speed data access to 45,000 people. There are 2,750 miles of microwave, comprised of 107 towers and 99 microwave hops. We've used satellite technology since our inception. It's still critical for middle mile connectivity and for backup. 50 communities are still served exclusively by satellite. While the number of those will decrease over time, our elutions fiber project takes 6 more off the list. For some locations, fiber and microwave will always be a challenge. On the local side, we operate the largest LTE wireless network in Alaska and the northern most 5G network in the United States. GCI covers 98% of the state's population with wireless. With over 249 megahertz of wireless spectrum, we're very well positioned. On the Cable side, we have 1 gig capabilities where our copper wire competitor generally stops at a maximum of 50 megabytes. We serve 95% of our homes passed with high-speed data. Our current DOCSIS 3.1 platform and existing plant configuration will allow us to offer 5 gigs down and 2 gigs up in urban areas once we complete our IP video migration and our Quam reclamation. Future upgrades will get us to Cable 10G. This year, we leveraged our technology and investment to deliver Alaska's first 5G service. We built a brand-new wireless network in Anchorage, comparable in quality and performance to GCI's industry-leading Cable modem platform. Today, all of Anchorage has 5G. Anchorage customers are seeing results and not just those with 5G phones. Independent third-party speed tests indicate our Anchorage wireless network, both LTE and 5G, and is twice as fast as our competition. In 2021 and beyond, we will extend that new wireless network throughout Alaska. GCI has been awarded a $25 million grant from the U.S. Department of Agriculture's reconnect program for our elutions fiber project. This will provide true high-speed broadband service delivered through the undersea fiber to Unalaska Dutch Harbor and 5 other communities. You all know Dutch Harbor is the setting for the deadliest cash. Until you see it on the map, you may not realize just how far away it is. It's further west than Hawaii, and like Hawaii it was bombed during World War II. Fiber service will enable Unalaska, the nation's largest fishing port and a gateway to the American artic and other elution communities to realize their full economic potential while advancing the national security interests of the US. The fiber backbone will support both wired and wireless services and is expected to be complete in 2022. While we're all excited about launching 5G in the elution project, I'm also proud of the way the company has performed during the pandemic. Prior to COVID, about 10% of our employees worked remotely. Within 2 weeks of the initiation of our COVID response, 70% of our employees were working from home or at a remote facility. We plan to continue to use the distributed workforce model through at least the first half of 2021. It's safer for our employees. And as you saw in my introduction, I've used the opportunity to work from some interesting locations. Our network has performed exceptionally well during the pandemic. Over the past 6 months, we've added 11,000 new high-speed data customers and network traffic has increased by about 25%. In spite of the virus, our financial results have exceeded expectations, and we've made progress in resolving some of the regulatory challenges facing our rural business. Just last month, the FCC approved our rural health care rates for 2018 and 2019, and we now expect payment of the approximately $175 million receivable in 2021. Today, more than 4,000 Alaska students are receiving free or low-cost connectivity through GCI school partnerships program. We want to make sure that all Alaskans stay connected. We've built a great foundation in Alaska. We're proud of the technology we've developed across the state. As this video shows, despite what we've accomplished, we're always looking for the next big challenge. [Presentation]

Hi there. I'm Doug Lebda, Founder and CEO of LendingTree, and it's a privilege and pleasure to be with you at Liberty's Investor Day. It's always one of our favorite parts of the year. And although we're doing it virtually this year, thank you for your time and attention today. Starting off with a brief history of our company. I actually founded LendingTree in the early days of the Internet in 1996. In those days, obviously, the Internet was only taking off and the notion of starting a marketplace, which came out of my own frustration, getting a mortgage several years earlier, was a unique idea at the time, to say the least. However, we were able, very fortunately, to sign up some initial lenders and through some early testing and some fantastic early venture investors, we're able to get this thing going. And when you get a marketplace going and you're able to feed in the marketing side and the consumer side and on the supply side, you can really get these things taken ring off. So in 2000, we were fortunate that we were able to go public right before the first.com crash of the time. We're hitting our numbers, staying very focused, got profitable shortly thereafter. And then in 2003, we made the decision to sell the company to IAC InterActive Corp. That was a great part in our company's history, where we were able to work inside of a much larger enterprise focused on rounding out some of our product offerings, spend a lot of time in the online real estate space and really push deeply inside of the online mortgage space. In 2008, and that was after 2 years, where I also got to be President and COO of IAC and got to see much broader universe of companies. IAC decided to spin LendingTree out as part of a broader series of spin-offs, and I decided to take LendingTree back over again as the CEO. During that time, coming out of another financial crisis, we're starting to reenvision LendingTree in 2 ways: one, moving beyond mortgage. We never started just in -- mortgage was the first loan type to take off, but we always had other ancillary businesses, but small, but we really wanted to make a focused effort in that area. And two, we saw the customer evolving going from competitive comparison shopping to -- we thought that the next evolution was to just give you the right answer and to move much deeper into a one-on-one relationship with our customers. And so we embarked on that strategy. I mentioned a 2-sided marketplace. And so the first thing that I was able to do is to go build a very simple website and go bring consumers in. With about $1,000 in advertising back in those days, but used a very limited amount of data to go sign up a couple of our first lenders. With those first lenders and some venture capital, you're then able to go and advertise. With that advertising, you're able to drive in more customers, then you work with your lenders and you're able to help them improve their conversion rates, they're able to pay you more. As they pay you more and the demand for customers improves, you're able to then go and advertise and go market even more. And that's the virtuous cycle of how this works. That -- in addition to that, it gets better as you have more lenders. If you think of us as a search engine with advertiser, you want to have depth of advertisers. You want to have breadth of advertisers. You want to have people -- lenders who are in multiple products who have very high demand thresholds. You want to have diversity of lenders who all think of the market in slightly different ways. And the great thing about LendingTree today is we work with over 800 financial institutions, not only in lending, but also in insurance now, which is 1/3 of our business and our largest business. And we're working with not only small companies that build their business around the LendingTree marketplace, but also the who's who of every major financial services brand in the United States. This slide really talks about our addressable market, and the short story here is it's enormous. If you look at LendingTree last year at about $1 billion in revenue, and then you take it out from there. When you look at just our direct competitors, you would see us as the largest of about a $6 billion direct competitive set of companies that you know. However, the exciting thing that's happened is financial institutions are -- just as happened in every other industry, advertising spend is moving from off-line to on. And when it's online, financial institutions can, obviously, spend money in display or search, but they can also come to sites like LendingTree and get customers that meet their individual credit profiles and the exact demands that they want and in ways that they can work very collaboratively with us without the risk that they would take in some of the other online medium. So we're very value-add to the consumer because we can save the money, and we're very value-add to the lenders. And if it works for our lenders, we see them continue to increase their budgets, continue to increase their buys with us. And as they increase their buys with us, hopefully, we get them to decrease their buys with our competitors, and that continues to get the flywheel to spin and makes us more competitive with both advertising and with the consumer. Next slide talks about category expansion really through acquisition. And beginning here, in 2016, we've done a series of acquisitions and then a minority investment that have diversified our company from 80% to 90% mortgage into mortgage playing a much smaller role in the company. However, mortgage has still continued to do well, but these other categories have continued to expand. Importantly as well, when you have a relationship with the customer and one product and you have other products that helped your monetization and your expected value improve, which then enables you to also do marketing, which I just talked about. In each of these areas, another important thing is that the LendingTree brand is one of the most recognizable brands in the financial services space. And we're able to acquire companies at much lower valuations that are immediately accretive that are either bringing in a combination of management teams, capabilities or category expansion, but we don't need to go out and spend money for other big brands because LendingTree is already known, so we can tuck those inside of our brand and really just get off to the races. I talked a little bit before about moving from transactional to relational, and My LendingTree is exactly that. On the next slide, you can see what that turns into, which is right now an app that you can download, obviously, that is going to, first off, ask you a couple of simple questions to set it up and then is going to basically take care of your financial life. Not your entire financial life, but a good bit of it. Number one, we're going to give you alerts to save you money on your loans. We instantly are going out and pulling all of our lenders against your specific credited situation and then bringing you opportunities to save money. Number two, we're giving you free credit scores and free credit monitoring. That's increasingly a commodity today. But the interplay between your credit making recommendations and then being able to get real solutions for the consumer is very powerful. We've got story after story of consumers who come in, sign up for this, have a very low credit score. And then a few months later, we'll say, "why don't you consolidate -- or we'll see, why don't you consolidate your credit cards into a personal loan," their credit score goes up. Then all of a sudden, they can maybe refinance their auto loan as their credit goes up. Now you can afford to get a home. We see credit dramatic credit improvement and dramatic monetary savings, all free to the consumer and a much more efficient model for our lenders. And importantly, at 0 marketing cost to us. So it all falls to the bottom line. This is now a major driver of EBITDA and a major driver of customer satisfaction. And that leads to the financial picture that we've had over the last several years ending in '19 at $1 billion in revenue and about $200 million in EBITDA. A very attractive, what we call, variable marketing margin profile, that's revenue minus our marketing cost, that My LendingTree and recurring revenue stream has helped to really enable variable marketing margins do quite well as well as that diversification. And then in 2020, obviously, COVID hit. And this slide talks through our response to COVID. And the headline here is, I am incredibly proud of our team and very, very optimistic. This is our third financial crisis we've gone through. And during this period of time, typically our home business, which you would think would go crazy with low interest rates, our lenders are typically capped and would be shutting us off. We -- because of our strong and long partnerships with our lenders and improvements in technology over the years, our home business has done very, very well. In our consumer business, that business is down, but it's down because lenders and personal loans and credit cards aren't lending a lot of money, and we're still making money and doing okay in that area. And in insurance, we're continuing to just chug along with steady growth. So the diversification has definitely helped. And even though without the diversification in every one of our categories, I'm really, really pleased. Not to overuse a football analogy that our team internally has heard, but if we're winning -- if we're undefeated in the season, and we've won all the games 6-3 that's a win. And if we're beating our competition, delivering great value for our partners and great value for consumers. That's what our aim is, and that's what we're doing this year. And with that, just to wrap it up, again, thank you very much. We've weathered this and many other storms. Our company is in very, very sound footing. We are leaning in to get for new opportunities at times like this when things fracture. Once you know your company is doing well and your people are safe, then we lean in and try to find new opportunities, and that's what we're doing. Thanks for your time today. [Presentation]

Welcome to the Q&A, the part of the day you've all been waiting for. Thanks to everyone that submitted questions. We're going to go back and forth between Qurate and Cable, so everybody gets some equal air time. But first, we'd like to discuss some announcements. First, there was one we made this morning, Greg, about the capital return announcement at Qurate, another cash dividend and restarting share repurchases. Cash dividends aren't the norm for Liberty. Why do we think it makes sense here? And why is now the right time to start repurchases?

Well, as always, we need to have some announcements for Courtnee at Investor Day. And we want to make sure that the day was full for all of you. So we announced our second special dividend at Qurate this year. We, as you know, have largely been a share repurchase company, taking advantage of the levered free cash flow at Qurate. That's had some ups and downs, and we found that the preferred dividend we issued went very well. And the common dividend we issued went very well, and we decided to do one more special dividend. I think that recognizes the unbelievably powerful year in terms of cash flow and other metrics that Qurate has, and you're going to get to hear more about that. I know you've already heard some of that from Mike, but you'll get to hear more as he answers questions. So it recognizes both that strength of cash flow and our desire to restart the buyback and begin to leg into buying back the stock. So we're trying a balanced method of capital return, and we hope shareholders find it attractive. Stock has responded pretty well this year. So we hope it continues.

Continuing with Qurate, another announcement we made this week was the extension of Mike George's contract through the end of 2021. And can we talk a bit about succession plans at Qurate?

Well, Mike has been an unbelievably great partner and a great leader at Qurate. We've been together at -- I think we joined within about a month of each other in the Liberty family. And it's been a great pleasure to work with him, and he has, as I said, done a wonderful job. I think he was, at various times, ambivalent about extending his last contract. He's been at it a while. And but he did, and he agreed to extend 1 more year as we went through COVID, which, again, he has handled so well this year. We will, together, the Board at Qurate, Mike and myself, will look for a successor to Mike. We have strong internal candidates, but we'll look externally as well. The business is on a roll. We want to continue that, and we want to find the right leadership to continue the strength that is both QXH, Q International, Cornerstone and Zulily.

All right. Well, it's been a busy week for announcement. So I've got one more that we'd like you to comment on, which was the, Tree -- LendingTree sale at GCI Liberty. Why now? And what will be the use of proceeds?

Tree has been a fantastic investment. I think when, at the bottom of the recession in '09, our stake was worth $17 million, we eventually sold for gross proceeds of $1 billion. And when you combine some tax losses we had and the refi at GCI Liberty of the Charter exchange at what we did, we're only going to have about $100 million of tax leakage, so about $900 million of net proceeds. We did this largely because there are uses of capital at GCI Liberty we're going to find attractive, including debt reduction. And then once we combine GCI Liberty with Liberty Broadband share repurchase, as some of you have noted, we're trading at a discount to the underlying Charter stock, both at GCI Liberty and at Liberty Broadband. So utilizing that cash to take advantage of the discounted Charter opportunity is attractive, and we'll go from there.

Okay. Great. Let's move into Q&A for some of the companies. So Mike, the core customer has been spending less this year due to our overexposure to fashion. Have you started to see her shift her spending to other categories and/or with colder weather starting -- are you starting to show her a different assortment of close? Is she spending less because she's working from home? Or are there other ways to get her to spend at a similar level as pre-COVID?

Thanks, Courtnee. We're actually quite pleased with the sequential improvement in our core customer or best customer performance, which Jeff touched on in his presentation today. So that customer was down slightly in sales in Q2, down a few points, and turned to positive growth in Q3, up low single digits. What that reflects is a core customer who was spending heavily on all things home and electronics in both Q2 and in Q3, double-digit growth in the home segments, but down double digits in the fashion segments in Q2, still down in Q3, but at a more moderated rate in fashion. So what I think you're seeing is just the reality of consumers, in general, including our best customers, are not spending money right now on footwear, on color cosmetics, on apparel for the workplace. And that's a reality we're facing. But our total spend was up in Q3. And that moderation in pressure in the fashion categories, I think, reflects our ability to pivot our assortments, really lean into what she did care about, which is casual and comfort apparel, lower price handbags, good for organizing all things pandemic related, skincare, hair care, those kinds of categories. So the bottom line for investors is, we've got a core customer who is still with us. We're still retaining her at all -- at our typically high rates. Her spending has bounced back somewhat in Q3. It will probably be a little bit up and down, but feel really good about where she is, and then we'll get into a lot of home spend from her and some lease moderation in the tough fashion cycle.

Perfect. Thank you, Mike. Moving on to a question on Cable. Convergence. What do we see as synergies between the wireline and wireless businesses? How critical are network owner economics for the financial success in mobile? How could Dish's network build-out impact our plans for mobile? Do you expect consumers to ultimately have one bill per household to satisfy both their fixed and mobile connectivity needs? And if so, is more substantial M&A in the space likely?

Wow, that's unfair. That's truly a lot of questions if somebody wedged into one. Tom, do you want to kick it off and maybe John has some comments as well?

All right. Sure. Look, convergence means several different things. I think the main notion that we have about mobile and fixed is that it's all wireless. And mobile is just one form of connectivity to a lot of high-capacity network. And the ability to combine the broadband service with the mobile service is something that we're able to do, and it doesn't necessarily mean you have to own all of mobility or all of the mobile relationship in order to have a product that works as a uniform product from a consumer perspective, meaning serving all your needs. And your needs are really fixed and mobile. And most of your capacity use is in fixed, even though it's wirelessly delivered. And if you think about being a mobile company, there's no mobile company in the world that has a relationship with its customers where the customers don't roam on somebody else's network some of the time. And we look at our mobile relationship, our MVNO and some of the investments we're making in actual network, mobile network investments as whatever makes the most economic sense in the particular environment we're in, in terms of who owns the network. But the relationship, I think, can be one relationship and does have one bill in the future. That's the way I would answer it.

John, do you want to add anything?

I totally agree with Tom, the wireless is essentially an app and the wireless devices are just one of many devices, many IP devices that ultimately will hang off of, if you want to call that, an intelligent network. I think internationally, we've had quite a bit of experience on actually merging networks in Holland, we've done it. We just acquired, in Switzerland, the terrestrial business, just acquired the #2 cellular business. We've done it already in Belgium, and we've got a contract to do it in the United Kingdom. So we've experienced, in Liberty Global, a lot of network convergence, if you want to call it that. The benefits are obvious operating synergies, seamless consumer experience between networks. Obviously, the normal cost synergies of turning 2 organizations into one. But a great reduction in churn, greater stability in the consumer. And essentially, it's been a net benefit with stability. And I think Tom is experiencing the same thing in Charter as he rolls out with, frankly, a very thorough MVNO, a lot of flexibility, and the ability to go on or off network whatever optimizes his cost structure in wireless. He's purchased some spectrum that would allow him to go off of the Verizon network where appropriate and we're cost effective. So optimization.

Thank you. Mike, back to you. It was said in Q2 and Q3 that QXH was less promotional. Can you please give concrete examples of what was scaled back? And how are you approaching Q4 regarding promotions?

Yes, we think about 3 types of promotions in our business. The first is the percentage of products that are sold at some kind of a sale or event price, so at a discount to the regular price. Second form of promotion would be a usage of free SNH, either at the item level or for an event. And then, finally, we look at the number of installment payments we offer on our EasyPay and FlexPay programs. And for some events, we'll offer added installment payments. So we really try to take a systematic approach to pulling back on all 3 of those. So we materially increase the percentage of our products that are sold at the regular price, which we still view as a great value for the consumer. We've meaningfully pulled back on SNH promotions. And as a result of that, our SNH revenue, our SNH per unit sold is up nicely. And then we've on average of about had a one turn pullback in installment payments, one less installment payment per item sold. And that has a little bit of a benefit to our bad debt line, but also has a big benefit in accounts receivable -- receivables. So we pull back on all of those through the balance of Q2 and Q3. Our goal is to continue to hold that promotional posture through the holiday season. Obviously, the holidays are more promotional to begin with, but on a year-over-year basis, they have a similar kind of reduction. Now we'll watch it carefully. And if we feel like we need to be more aggressive to ensure that we're driving sales in a healthy way, we will. We've got the firepower to do that. But as long as we can drive healthy sales and not be dependent on those promotional tools, we'll aim to hold that posture.

Great. Thank you, Mike. Switching back over to Charter and Cable. Charter is crushing it without any vertical integration with content, outperforming Comcast, which has X1 Peacock and NBC, while T-Mobile is outperforming AT&T, which has HBO Max, Warner Bros, et cetera. Is the concept of vertical integration in media now officially dead? Why or why not?

Tom, do you want to take a cut, then I'm sure John has -- may have an opinion as well.

Sure. Look, I think there are vertical -- there are opportunities in being vertically integrated. If your scale is the same of your distribution and your content opportunity. But in most situations, that isn't the case. Now we actually have a local news business, where we are the distributor in the local DMA and the scale of both businesses fit each other. And so there is a synergistic relationship. But in general, if you look at Time Warner, which was the vertically integrated media company, it's now -- well, mostly AT&T now, but it's come apart. And if you look at the modern television distribution opportunity, the streaming opportunity on a worldwide basis of entertainment on demand, the scale is so much different than distribution. It's hard to see where you get an advantage. So I would say that there are some opportunities in some places, but in a lot of places, there aren't. And so if you're not selective about it, you don't get those opportunities.

John, do you want to add any thoughts?

Yes. Tom is absolutely right. It's all about scale. And entertainment programming has gone global scale. Charter or Comcast with 30% footprint in the U.S. and maybe 60% market share in that footprint, it represents a very small slice of global scale. So the players that are putting out platforms that have global footprints and are achieving global scale, their economics is going to be dominant. And it's very difficult for a cable company that's limited to a subset of a national footprint to have enough scale to play in global program, a global content, where the globality is the driving economic reality. Local sports, regional scores, news, personalities are possible to be vertical. But once you get multination or global, it's very difficult for a cable distributor to have enough reach to control this market and make program creation and ownership economically viable.

Good. Okay. Greg, we're on qurate, but this one is for you. You seem to believe that there's a lot of value to curate, being focused on retail, but retail is a competitive business. Your Zulily and HSN acquisitions have been underwhelming and Qurate is trading at a very low multiple. You've made spectacular acquisitions outside of retail, such as SiriusXM and Charter. But why not take a no hold part approach to capital allocation and consider opportunities outside of retail? You already do that to some extent by investing in green energy.

That's a good question. We have been very lucky. It -- Qurate on some of our historical investments. I'd like to go back and disagree with a little bit of the premise of your question, though, I think where you can make questions about the Zulily acquisition, the HSN acquisition has been very good by any stretch. Even at the low multiple Qurate currently trades at, the HSN deal is accretive, and we would largely have felt much of the pain that's going on in the marketplace with our 38% ownership of HSN and not been able to affect the synergies that we have been able to affect by owning 100%. So I think actually HSN has been a very good deal on a lot of levels. As far as what we do with our capital going forward, a couple of things. We haven't seen that opportunity yet that would make us want to break our focus on retail. We have tried to answer the marketplaces seeming favoritism of a pure-play and stick within retail, and though I acknowledge it's a difficult segment. And that also recognizes that we've seen a lot of things go up in price. It's not an easy market to find bargains. Maybe at the bottom of the pandemic, there were quick turnarounds and things that shut up, but those were not generally acquisitions of 100% or even meaningful stakes. You can go out and buy 2%. When the stocks knock down, you can't buy 100%, which is generally our model or significant influential stakes. And so, look, we would be open to creating ventures, too, if we found the right opportunity. We'd like to think we could convince you, our shareholders, that why we were taking this divergence of our previously stated goals, but we haven't found that opportunity. And in the absence of an opportunity, which causes us to verge from our goals or our stated goals, we're going to stick with them.

Okay. Moving back to Tom. Charter, unlike Comcast with their Flex product, Charter has not been aggressive in their attempts to be an aggregator of streaming content. Do you think Cable still has the opportunity to retake that role? Or is it too late? And Amazon, Roku and Google have a permanent distribution advantage.

Well, I'd like to argue a little bit with the premise of your question. I think Charter is actually the biggest live streamer of TV in the United States. We have over 10 million customers who receive our services through an app. So the big question about streaming is, what's the business model. And we have a traditional cable TV business model in some cases with some of the products we're selling, but we also have over-the-top products, which just mean that they're not subject to Title VI, but they're still live programming in many cases, but also VOD programming. So the big issue with us is what technology do you use to deliver service and then what's the business model. And we're actually playing in multiple business models now and taking advantage of becoming an accessibility platform, making services available to customers, but also taking what were traditional cable services and packaging them in ways that distribute them on apps and distribute them not just to people who get over-the-air television, which are our traditional cable customers, but distributing the live content to Internet-only customers. So the whole notion of streaming is that it's a technology and the question is what's the business opportunity for a platform like us to sell television? And the answer is, we can sell it in traditional ways and in new ways. And -- but there are more people getting streamed applications from Charter than any other provider of live TV in the United States today.

Great.

I think you -- if I could add on to what Tom said, I -- and we talked about this a little bit yesterday in the question. So I think you really need to differentiate, as Chase said, and John said, between scripted programming and live programming. And I think in the live space, there's a lot of opportunity still. In the scripted space, there are scale players sort of referencing back to the prior question, which make it very difficult to see how the platforms, which have already got to lead. Unclear what their opportunity is to make money given the nature of the competition, but also unclear how somebody who doesn't have some enormous advantage could enter and be competitive.

The other thing I'd say is we're distributing our apps on lots of platforms. We're on Apple, we're on Roku, we're on all the phones. And so we haven't built our own distinct platform because there's a competitive market out there for platforms to distribute video on. It may -- we have that opportunity if we want to build one, and we may. But so far, so good in terms of us being able to distribute widely on other people's platforms.

Yes. If I can speak, right now, in my home up here in Maine, that's how I receive television is on an app. I provide my own IP devices and I'm a Charter customer. And I think the reality of that is that Tom has fairly dramatically reduced the CapEx and R&D budget to try and support a video platform that's unique when he doesn't have the scale to do it. So it's been a prudent decision to allow consumers to use other people's IP devices. And then for time to provide the stream and the app to make them operational and work within the charter system.

Okay. Great. Mike, back to you and Qurate. I'd like to hear how you all think about reinvesting capital within the business. How do you think investing more deeply in shipping and handling versus performance marketing? It's pretty clear COVID provided a short-term bump to the business, but what are we doing to reinvest some of these proceeds to make sure we make her happy? What are those internal capital allocation decisions like?

So we're certainly committed to reinvesting at a healthy rate in the business, given the strong bit of margins we generate, so that we can sustain long-term growth. And there are really multiple considerations that go into those investment choices. We start at a high level with 2 overarching goals, which is, what do we need to do to get more people into our ecosystem, and what do we need to do to make that ecosystem that much more attractive, compelling, sticky to keep those customers. And then we're always thinking about that through a short-term lens, what can we do immediately to impact the near-term results and the long-term lens as to how we build a healthy business that will sustain itself over time. So as we go through all the things we can invest in through those -- through that lens, we look at areas like performance marketing as highly attractive because we've learned how to target performance marketing in ways that bring in amazingly high-quality customers with strong lifetime values and a pretty attractive kind of less than 1 year payback. So we like that. We've been increasing performance marketing spend on a pretty consistent basis. And as we build our capabilities, we're not averse to even further increasing the rate of growth of performance marketing if we're getting the necessary returns. But if I take -- as the example you used at SNH, I put that on the low end of the spectrum of attractive investment choices as we look at it. We just see it as a relatively low-returning investment because giving away SNH attracts a transient transactional customer, it doesn't do anything to reinforce the core of our value proposition. If we need to do it to be competitive, we'll do it. But one of the reasons we went to that as a place to pull back on investment in the last couple of quarters is that we just don't know that it's super healthy long-term strength of the business. So beyond performance marketing, what else do we look at? I'd really think about it in the context of that digital ecosystem framework I shared with you today because our investment runs across our P&L, all focused on enhancing that ecosystem to both short- and long-term benefit. Starts with -- we're going to make sure every product we offer comes at a compelling value, even at full price, it still has to be less than the prevailing price in the marketplace, at full price and with SNH covered. We then, as you heard me mention, are investing heavily in original contact -- content to bring more people into the ecosystem, to get people to spend more time with us. We're investing in fundamental innovation at the level of the streaming service. So this is that we're creating this frictionless, interactive, digital service that pulls people in. We're investing in distributing that service offer more and more platforms, both traditional pay-TV platforms, but all manner of other social media and streaming services. And then we're leaning into tools like community building tools that I mentioned today and personalization tools. So it's all about add value across the ecosystem to bring more people in and to make it more sticky once they get there. Giving away a lot of SNH doesn't really reinforce any of that. So we'll do it to the extent it's a competitive requirement. But otherwise, we like to put the dollars in those areas.

Great. Thank you. Moving back into cable. In the past, Liberty has expressed skepticism around 5G technology. Have our views on this changed? More specifically, T-Mobile's 5G mid-band spectrum fixed wireless. Our cable assets have been speed advantaged, historically, and continue to be with a move to 1 gigabit symmetrical capacity. However, mid-band spectrum, specifically rolled out by T-Mo, seems to be a sweet spot for fixed wireless as it can easily penetrate line-of-sight obstructions, unlike millimeter wave from Verizon, yet it still offers 200 to 300 megabit speeds. Is T-Mobile's mid-band 5G fixed wireless product a legitimate threat to our broadband business?

Tom, you want to start on that, and we might hear from John and myself?

Sure. Loo, yes, mid-band spectrum is better for penetration of fixed objects than millimeter wave. And therefore, you can get farther from the customer with your investment in a radio to connect a customer than you can with millimeter wave. But if you look at the throughputs of our broadband product now, our average broadband-only customers using over 600 gigs of content a month, and the average wireless customers today using about 10. And so if you look at that ratio, it's enormous. And yes, you can replicate it by making investments in bringing radios closer to customers. Even mid-band spectrum doesn't penetrate through walls that well and requires another radio inside the house to distribute the content. So it's not that inexpensive. And I think that there are wireless technologies and there are overbuilt technologies that can replicate what our capabilities are. And I think they're generally more expensive than our ability to upgrade. So I still think that we have the best network in terms of future capability and future investment, in terms of the kinds of investments that we need to make to continue to take speeds up and take capacity up on a relative basis to alternatives. And so any network, including millimeter wave, can work with enough capital behind it and enough backbone behind it. So they're all competitive threats, but I think that our position, from an investment perspective and a future-proofing perspective, is better because we can build more capacity at lower costs and maintain the capacities we have at lower cost than alternatives.

Well, I might add the -- I agree with Tom's comments, I think much of what -- why we have been skeptical of 5G was the idea that it was a turnkey operation, particularly at the millimeter wave level that was going to have a massive replacement of cable. And that was some degree, I think, hype from some competition who were overly optimistic and nonspecific about their actual ability to roll it out. Millimeter wave and T-Mo is clearly a stronger competitor on -- in total than what is offered at -- the mid-band is more attractive than the millimeter wave alternative. But that having been said, as Tom noted, the history, and John can talk about this better than almost anybody in the world, the history of overbuilders is not great. And the opportunity that they really have to follow behind and offer a somewhat of a me-too product, which is actually probably more capital-intensive, certainly more capital-intensive than Charter's ability to upgrade, seems like it's an unlikely capital asset allocation [Audio Gap] opportunity for them. John?

Yes. I mean, technology rolls on, and you never know when somebody is going to invent something that truly is competitive from a cost basis and attractiveness to the consumer. There are some real issues in terms of reliability of service with a wireless connectivity as well as the capacity issues that Tom referred to. So I think we'll wait and see. I know a lot of the early experiments with fixed wireless really didn't have enough capacity at the end of the day to be seriously deployed. And we -- going back to Intel's invention that was going to put us all out of business and took 3 multiples of the stock valuation in the industry to the overbuild by Google, to the -- we've seen a lot of competitive efforts. It's pretty hard to impact somebody who's already got a facility in place that is so easily expanded in its capacity at low incremental cost. I think that's been the big surprise for the cable industry is the ability of the industry to adapt and regenerate itself at higher and higher speeds and higher and higher reliability, better quality. So you never say never. But it's not an easy task to take on what is already bought and paid for entrenched business that continues to innovate.

Okay. Greg, this one is for you. Given your experience with Liberty SiriusXM Group and some of your other holdcos over the years, how do we ensure the Liberty Broadband holdco discount doesn't blow out? Alternatively, as long term holders, do you care about the short-term holdco discount or even embrace it as a means to create value if the endgame is a 0% NAV discount through a combination with Charter or some other structure?

Well, I -- sorry, that was for me, but do you want to -- do you start, John?

Well, I was just going to say, assuming that Charter continues the robust behavior it's had recently in terms of generating lots of levered free cash flow and shrinking its equity, it will drive -- and given the fact that Liberty Broadband is capped at 25%, we'll be in a position where we start to participate in that cash flow stream that Charter is using to shrink its equity. So that's quite formidable. And if we receive that with relatively little tax leakage, we will be able to essentially address the discount that we have. So to me, Liberty Broadband is a modestly levered discounted play on Charter stock.

I would agree with everything John said. I'd note we have bought back -- we bought back in the last few months $500 million worth of that broadband stock. As the GCI Liberty Complex and Liberty Broadband come together, we're going to have quite a lot of free cash and free cash flow. In addition, if we participate with -- because of our 26% cap, in the buyback that Charter is doing, if we are returning capital that way, we're going to have an opportunity to buying stock back with something like 8% leakage in terms of the tax rate against the 20% discount. So you combine those 3 things: the ongoing cash flow of GCI Liberty; the cash we have sitting at GCI Liberty today post the sale of Tree; and the buybacks that we're going to receive, and I think we're going to be shrinking that discount. But you noted rightly, questioner, it's an opportunity. I think you're going to see the levered Liberty Broadband buyback be a very attractive play on the already repurchasing Charter stock.

Okay. Great. Mike, we've got a few minutes left, so I'd love to throw one more back to you. I know you already covered this in your presentation today, but I think it's worth reiterating. And the numerous -- because we got a lot of questions about it. For the numerous customers that we've acquired during COVID, why are we confident in their staying power?

We've been really pleased with the quality of customers we've seen during the pandemic. We have a long history of how to measure the quality of a new customer and I think models that have really proven the test of time. They're multifaceted, and we look at what categories the customer comes in on because what category by win is highly predictive of your behavior. We look at what channel you came in on. And most importantly, we look at your behavior in really short periods of time because those customers who become great customers do exhibit good behavior quickly. And so on all those metrics, the pandemic class of customers is performing exactly the same as prior classes. There are more of them, and they're more digitally driven in terms of their behavior, but in terms of their lifetime value, they're spot on prior classes. One of the things I've mentioned in the presentation today is perhaps the highest threshold is how many new customers become best customers, our very best customers, which is a threshold of making 20 purchases within a year. And so we've looked at how many of the pandemic class have made 20 purchases, not within a year, but within 60 days. And on that metric, they look very similar to other classes of new customers. So we can confidently state that we have brought in, in the last 6 months, meaning Q2 and Q3, more new best customers than at any point in the history of the company.

It's great to hear, Mike. Thank you. Okay. We have one last question. So let's take it up a level. So this will be for Greg and John. The market's been very keen to buy disruptor stocks and, in parallel, sell those that are viewed as disrupted. COVID has only reinforced that narrative, more e-commerce, more streaming, more digital ads. It seems like an opportune time to deploy capital embed against that widely held narrative? Or does Liberty think the market has it right, cheap stocks will only get cheaper?

John, do you want to take a cutter?

Well, I would just say that in this environment with lots of cheap capital floating around, growth is at a huge premium. So if you have a business with sustainable growth and you can leverage against that growth, you're going to get extraordinarily high valuation metrics. And those are justified as long as those interest rates stay at extremely low levels that they're at, it's just arithmetic. There are many opportunities, perhaps, in businesses that have been disrupted, but not killed. And usually, the public marketplace is not the right place for those businesses. Those normally end up in the hands of private equity that can do the arithmetic of a business that is flat or slow shrink business, but is predictable and the cash flow streams from that business and the optimization of that business can generate acceptable levered returns. So that is a game that can be played. Usually the public marketplace is not willing to give sufficient valuations to those kinds of business strategies to justify taking capital and going into them, unless you're private.

I agree with most of John's comments. I outlined some of this yesterday in the thought piece we had about there will clearly be changes in the market that are COVID and permanent. And then there are going to be things that are probably less prominent. And there are cases in our judgment where the market has probably underestimated the risk of the pandemic's impact on behavior in other cases where I may have overestimated it. And we're parsing through those. And we do plan to put our capital in. Effectively, we bought more stock in live or the way we orchestrated the reattribution and at the right time. We've looked to do other things as live events go, but I suspect there's still more pain as we cycle through it. We're not going to -- as I do this questioning, we've had the market had some big updates on announcements of 2 or 3 vaccines with efficacy rates of 90%, 92% and 95% or something along those lines, and that's great. I still think there's going to be a long cycle, and we will see opportunities as we roll into '21 in many of those live spaces, and we'll look at them closely and try and estimate, which of those are permanently impacted and which of those are only temporarily impacted.

All right. Great. That's it for Q&A today.

Great. Well, I want to thank all of our presenting companies. I want to thank all the Liberty team who put this together. I want to thank all of our investors for their interest in the Liberty companies, and hope you all stay safe and well through this time. Have a great Thanksgiving, a great holiday season, and we see you at next year's Investor Day in person. If not, we'll still try and persevere. Be well. [Presentation]