GCI Liberty, Inc.

GCI Liberty, Inc. (the "Company") operates as a holding company, primarily consisting of 100% of the outstanding equity interests in GCI, LLC, GCI Holdings, LLC, and their subsidiaries (collectively, the "GCI Business"). The GCI Business provides a comprehensive suite of data, wireless, voice, and managed services to residential, business, governmental, educational, and medical institutions, predominantly within Alaska under the GCI brand. The Company's operations are geographically concentrated in Alaska, making its growth and financial performance highly dependent on the economic conditions within the state, which has been negatively impacted by a recession in recent years. The Alaska economy itself is influenced by oil prices, state and federal spending, investment earnings, and tourism. GCI Holdings has a history of expanding its product portfolio and facilities, leveraging its integrated approach to customer service and network utilization to drive efficiencies and maximize returns on invested capital.

GCI Holdings operates in an intensely competitive telecommunications industry, facing competition from existing providers and new entrants driven by rapid technological advancements. Key competitors for mobile services include national mobile network operators such as AT&T Inc. and Verizon Communications Inc., as well as regional operators and Mobile Virtual Network Operators (MVNOs). In the internet sector, GCI Holdings competes with fiber-to-the-home, fixed wireless broadband, Internet delivered via low earth orbit (LEO) or geostationary satellite, and digital subscriber line (DSL) services. The Company also faces competition from "over-the-top" phone providers, companies selling phone cards, and various alternative communication options for voice services. GCI Holdings' competitive advantages stem from its extensive and diverse communications network, which includes redundant undersea fiber optic cable systems, a statewide wireless network, and its ability to serve remote Alaskan communities through a combination of fiber, microwave, and satellite technologies. Its integrated approach to customer service and bundled service offerings also contribute to customer loyalty and efficient network leverage.

The core business model of GCI Liberty revolves around GCI Holdings, which generates revenue from monthly fees for data, wireless, voice, and managed services, complemented by universal service subsidies from federal and state agencies. The revenue mix is primarily recurring, with monthly service fees for data network access, high-speed internet, and wireless access billed in advance. Transactional income is generated from product sales, such as wireless equipment, recognized when control transfers to the customer. The primary customer segments include residential customers, businesses, governmental entities, and educational and medical institutions. GCI Holdings actively participates in federally and locally subsidized programs, such as the Universal Service Fund (USF) and government grants, which are crucial for expanding its network into high-cost, rural areas of Alaska where it would otherwise be uneconomical to build infrastructure.

Data services constitute the largest portion of GCI Holdings' revenue, accounting for 71% ⁴² of total revenue in 2025, up from 70% ⁴³ in 2024. These services include data network access, high-speed internet, and product sales, with monthly service revenue recognized as services are provided. Business data revenue increased by $43 million ⁶⁰ in 2025 compared to 2024, primarily due to service upgrades for existing healthcare and education customers. Consumer data revenue, however, decreased by $8 million ⁵⁸ in 2025, mainly due to a decline in subscribers and the discontinuation of the Affordable Connectivity Program in 2024, further impacted by a fiber break on a third-party network.

Wireless services represent the second largest revenue component, contributing 24% ⁴⁴ of total revenue in 2025, up from 23% ⁴⁵ in 2024. This segment generates revenue from network access and usage by consumer, business, and wholesale carrier customers, as well as sales of wireless equipment. Consumer wireless revenue increased by $16 million ⁵⁹ in 2025, driven by increased wireless USF support for high-cost areas. Conversely, business wireless revenue decreased by $6 million ⁶¹ in 2025, primarily due to contractual changes in roaming revenue, partially offset by increased wireless USF support. Other services, which include voice and formerly video, accounted for 5% ⁴⁶ of revenue in 2025, down from 7% ⁴⁷ in 2024. Consumer other revenue decreased by $17 million ⁶² in 2025, primarily due to the discontinuation of video services, which GCI Holdings fully exited as of December 31, 2025, after receiving regulatory approval on May 5, 2025. Business other revenue increased by $2 million ⁶³ in 2025, attributed to the recognition of grant money.

For the fiscal year ended December 31, 2025, GCI Liberty reported total revenue of $1,046 million ⁴⁸, an increase from $1,016 million ⁴⁹ in 2024. The Company experienced an operating loss of $347 million ⁵⁰ in 2025, a significant decline from an operating income of $140 million ⁵¹ in 2024. This was primarily due to an impairment of goodwill and intangible assets totaling $525 million ⁵² in 2025, which included a goodwill impairment of $108 million ⁵³ and an intangible asset impairment of $417 million ⁵⁴. Net loss for 2025 was $309 million ⁵⁵, compared to net earnings of $70 million ⁵⁶ in 2024. Basic and diluted EPS were both $(9.97) ⁵⁷ in 2025, versus $2.26 ⁵⁷ in 2024. Adjusted OIBDA, a non-GAAP measure, increased to $403 million ⁶⁴ in 2025 from $360 million ⁶⁵ in 2024. Cash and cash equivalents stood at $416 million ⁶⁶ as of December 31, 2025, up from $74 million ⁶⁷ in 2024. Total debt outstanding was $971 million ⁶⁸ as of December 31, 2025, consisting of $600 million ⁶⁹ in 4.75% senior notes due 2028, $367 million ⁷⁰ under the Senior Credit Facility, and a $4 million ⁷¹ Wells Fargo Note Payable.

Year-over-year comparisons show a revenue increase of $30 million ⁴⁸ in 2025, primarily driven by a $43 million ⁶⁰ increase in business data revenue and a $16 million ⁵⁹ increase in consumer wireless revenue, largely due to USF support. This growth was partially offset by a $17 million ⁶² decrease in consumer other revenue due to the discontinuation of video services, an $8 million ⁵⁸ decrease in consumer data revenue, and a $6 million ⁶¹ decrease in business wireless revenue. Operating expenses (exclusive of depreciation and amortization) decreased by $16 million ⁷² to $523 million ⁷³ in 2025, primarily due to decreases in video programming and network distribution costs related to a fiber break on a third-party network, which was restored in Q3 2025. However, technology expense increased by $10 million ⁷⁴ due to higher maintenance, software, and external labor costs. Selling, general and administrative expenses increased by $3 million ⁷⁵ due to public company costs and personnel expenses. The most significant shift in business mix was the complete exit from the video business in 2025.

During the reported fiscal period, GCI Liberty completed its Separation from Liberty Broadband Corporation on July 14, 2025, which involved an internal reorganization, the sale of 10,000 shares of GCI Liberty non-voting preferred stock ⁷⁶ to third parties, and a reclassification of common stock to facilitate the distribution of GCI Group common stock to Liberty Broadband shareholders. In connection with the Separation, GCI Liberty entered into various agreements, including a Services Agreement with Liberty Media for public company support services, with fees not expected to exceed approximately $5 million ⁷⁷ for the first year. The Company also conducted a rights offering that commenced on November 26, 2025, distributing 0.3838 ⁷⁸ of a Series C GCI Group Right for each share held, allowing holders to purchase GLIBK at a subscription price of $27.20 ⁷⁹, an approximate 20% ⁸⁰ discount. This offering was fully subscribed, issuing 11,059,127 ⁸¹ shares of GLIBK and generating approximately $300 million ⁸² in proceeds for general corporate purposes. GCI Holdings also resolved a regulatory matter with the FCC's Enforcement Bureau on August 8, 2025, entering into a $10,000 ⁸³ settlement and a three-year consent decree related to an expired submarine cable landing license.

GCI Liberty anticipates continued challenges and opportunities in its operating environment. The Company expects GCI Holdings' "Other revenue," which includes long-distance and local access services, to continue to decline due to decreases in voice subscribers, consistent with industry trends. This decline may accelerate as competition from wireless carriers and GCI's own product offerings intensifies. The Company also expects to incur corporate overhead expenses of approximately $5 million ⁸⁴ annually as a standalone public company.

A major growth area for GCI Holdings is its active pursuit of government grants to fund rural broadband expansion. In current and prior years, GCI Holdings has been awarded federal government grants to construct broadband infrastructure in unserved and underserved communities in rural Alaska. While the Company was awarded zero ⁸⁵ in federal grants in 2025, it received $30 million ⁸⁶ in 2024. GCI Holdings supports such subsidies, provided they are not directed to already served areas, and plans to continue seeking subsidies for its broadband construction through programs like the Broadband Equity, Access, and Deployment (BEAD) program and the Infrastructure Investment and Jobs Act of 2021 (IIJA), if regulatory requirements are reasonable. These grants are crucial for expanding network coverage into areas that would otherwise be uneconomical to serve.

Another significant growth vector for GCI Holdings is its participation in various Universal Service Fund (USF) programs, which provide government subsidies for services to schools, libraries, healthcare providers, and low-income households, as well as support for networks in high-cost areas. In 2025, GCI Holdings received 6% ⁸⁷ of the approximately $8.5 billion ⁸⁸ USF program, supporting services for approximately 180 ⁸⁹ rural health care providers, 235 ⁹⁰ schools, and 139,000 ⁹¹ rural wireless residents. The support amount for fixed wireline telephone service in high-cost areas increased by 30% ⁹² starting January 2025, and this support is frozen at 2011 levels with certain adjustments through December 31, 2026. Similarly, remote high-cost support payments for mobile services also increased by 30% ⁹³ starting January 2025, for a ten-year term. The Alaska Connect Fund Order, which succeeds the Alaska High Cost Order, maintains existing funding and performance requirements for wireline providers through 2028.

Operationally, GCI Holdings expects to continue to experience upward pressure on the costs of materials, labor, and other inflation-sensitive items into 2026. The Company is closely monitoring these impacts and acknowledges that it may be unable to fully recoup losses or offset diminished margins by passing these costs through to customers or implementing offsetting cost reductions. The fair values of goodwill and other intangible assets do not significantly exceed their carrying values following the impairments recorded in the third quarter of 2025. Management will continue to monitor business performance versus current and updated long-term forecasts to determine if additional carrying value adjustments are required, which could be material.

Regarding supply chain and infrastructure, GCI Holdings depends on a limited number of third-party vendors for wireless, internet, and other telephony-related equipment. Supply chain disruptions have been limited to date, but the Company may experience more severe disruptions in the future, or supplier inability to manufacture or deliver equipment or parts. Changes in U.S. or foreign trade policies, including new or increased tariffs, export controls, or sanctions, could exacerbate these risks, potentially leading to higher equipment costs or new compliance requirements. The Company must continuously improve and upgrade its systems and infrastructure to keep pace with rapidly evolving technologies like 4G and 5G wireless broadband services, which will require new investment in technology and potentially significant capital expenditures.

Planned capital allocation for 2026 includes net capital expenditures of approximately $290 million ⁹⁴. The Company expects to use approximately $50 million ⁹⁵ for interest payments on outstanding debt, to reimburse Liberty Media for amounts due under various agreements, and to fund potential investment opportunities at GCI Liberty. The approximate $300 million ⁸² in proceeds from the recent rights offering will be used for general corporate purposes, which may include working capital, capital expenditures, and repayment or refinancing of outstanding indebtedness, as well as potential strategic acquisitions, investments, or partnerships.

Structural headwinds and execution risks include the ongoing legal challenges to the constitutionality of the USF program. Although the Supreme Court reversed the Fifth Circuit's decision upholding the constitutionality of the USF contribution factor on June 27, 2025, continuing litigation in the Fifth Circuit challenges two statutory provisions and the legality of the Universal Service Administrative Company (USAC). A future judicial decision deeming a portion of the USF program unconstitutional could materially decrease GCI's revenue and accounts receivable, which were 46% ⁹⁶ and 42% ⁹⁷ of GCI's revenue for 2025 and 2024, respectively, and USF net receivables were $96 million ⁹⁸ at December 31, 2025. Such a reduction could force GCI to terminate high-cost or low-profit services, discontinue rural networks, or reduce its workforce.

Geographic, regulatory, and macro factors also pose constraints. The Alaska economy's dependence on the oil industry, state and federal spending, investment earnings, and tourism makes GCI vulnerable to volatility in oil prices and potential reductions in federal funding. The U.S. Federal Reserve's interest rate decreases in 2024 and the second half of 2025, coupled with inflationary cost pressures and recessionary fears, could negatively affect demand for GCI's services and increase its cost of doing business. Regulatory changes, such as the FCC's ongoing rulemaking proceeding addressing the Rural Health Care (RHC) Program rules, could impact how subsidies are determined and affect GCI's business. Furthermore, the Alaska Connect Fund Order may lead to less support for GCI Holdings' wireless operations in rural Alaska after 2026 and for fixed broadband support after 2028, depending on competitive conditions and FCC decisions on performance plans.

GCI Liberty faces several material risks, including intense competition in the telecommunications industry from national carriers, non-geostationary satellites, and other providers receiving federal grants for broadband deployment, which could reduce market share and harm financial performance. The Company's reliance on Universal Service Fund (USF) support, which constituted 46% ⁹⁶ and 42% ⁹⁷ of GCI's revenue in 2025 and 2024 respectively, is jeopardized by ongoing legal challenges to the program's constitutionality, with USF net receivables of $96 million ⁹⁸ at December 31, 2025. Failure to comply with USF program requirements or a disruption in payments could materially decrease revenue and accounts receivable. Geographically concentrated operations in Alaska expose the Company to the state's economic conditions, which are influenced by volatile oil prices and federal spending, and a limited customer base restricts market share growth. Natural disasters, such as Typhoon Halong in October 2025, or man-made events, can disrupt technical infrastructure and service provision, leading to significant restoration costs, which may not be fully covered by insurance, and potential customer loss. Cyberattacks and network disruptions, including those potentially amplified by AI and machine learning, pose risks of equipment failures, data breaches, and increased costs, despite preventive measures. The Company's significant indebtedness of approximately $971 million ⁶⁸ as of December 31, 2025, including variable rate debt, exposes it to interest rate risk and limits financial flexibility for capital expenditures and acquisitions. Furthermore, the Company's dependence on a limited number of third-party vendors for communications equipment creates supply chain risks, exacerbated by potential changes in trade policies and tariffs.

Management's overall tone emphasizes the Company's commitment to protecting the security and integrity of its systems and data, as evidenced by the implementation of processes designed to prevent, assess, identify, and manage cybersecurity threats based on recognized frameworks like the National Institute of Standards and Technology Cybersecurity Framework. They highlight the multidisciplinary team, including information security, legal, accounting, internal audit, risk management, and third-party consultants, involved in identifying and mitigating these risks. Management also stresses the importance of staying abreast of rapidly evolving technological developments to remain competitive and enhance product utility. A key strategic priority is the continued pursuit of government grants and participation in Universal Service Fund programs to fund broadband infrastructure expansion in rural and underserved areas of Alaska, acknowledging the critical role these subsidies play in the Company's ability to serve high-cost regions. Another priority is managing the impact of inflation-sensitive items, such as materials and labor costs, which are expected to continue into 2026, and exploring strategies to recoup losses or offset diminished margins. Management also noted the approximate $300 million ⁸² in proceeds from the recent rights offering will be used for general corporate purposes, including working capital, capital expenditures, debt management, and potential strategic acquisitions, investments, or partnerships.