Liberty Latin America Ltd. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Growth: Consistently grew high-speed internet and postpaid mobile bases, adding 186,000 subscribers (5% overall increase) in 2023. Adjusted OIBDA reached $1.7 billion, a 6% year-over-year growth.
• Capital Allocation: Allocated $300 million to buyback programs in 2023, with convertible bonds expected to be the majority of buybacks this year ($220 million outstanding and due in July).
• Integration Progress: Made progress in Puerto Rico integration, with over 80% of customers moved to a new mobile core and IT platform. In C&W Panama, achieved $70 million of total run rate synergies by end of 2023.
• Segment-Specific Highlights: C&W Caribbean added nearly 100,000 subscribers, FMC strategy driving performance. C&W Panama added 29,000 broadband subscribers. Liberty Puerto Rico focused on migration, expecting inflection in second half 2024. Liberty Networks announced collaboration with Gold Data for subsea route expansion.

Segment Performance

• C&W Caribbean: Q4 2023 revenue was $366 million, with flat year-over-year rebased growth. Adjusted OIBDA expanded significantly to $116 million in Q4, representing 16% rebased growth. Revenue mix includes B2B and consumer fixed as the largest elements, followed by consumer mobile.
• C&W Panama: Q4 2023 revenue was $206 million, with 2% growth year-over-year. Adjusted OIBDA was $67 million, a 17% year-over-year increase. Growth was driven by B2B (8% growth) and residential fixed (6% increase) due to RGU base expansion.
• Liberty Puerto Rico: Q4 2023 revenue was $354 million, with a 5% rebased decline. Adjusted OIBDA was $104 million, a 12% rebased decline. Impacted by ECF funding withdrawal and migration-related costs.
• Liberty Costa Rica: Saw stable broadband subscriber base, with over 40,000 fiber to the home homes added. Mobile net adds were strong, and 5G trials were launched. Consumer mobile represents nearly 60% of revenue, followed by consumer fixed (~30%).
• Liberty Networks: Q4 2023 revenue was $114 million, with a 9% rebased decline. Adjusted OIBDA was $62 million, a 22% rebased decline. Driven by non-recurring factors, but long-term third-party monthly recurring revenue grew at a 8% CAGR over three years.

Guidance

• Target mid to high-single-digit rebased compound annual growth rate (CAGR) in adjusted OIBDA over the next three years (through 2026).
• Aim for 16% of revenue to be allocated to property, plant, and equipment (P&E) additions annually.
• Target over $1 billion of aggregate adjusted free cash flow before distributions over the next three years.
• Plan to redeem the remaining $220 million of outstanding convertible bonds this year.

Risks

• Migration Challenges: Puerto Rico migration activities impacting Q1 2024 results, with elevated integration costs and duplicative expenses.
• Competitive Pressure: Aggressive subsidies from competitors like T-Mobile in Puerto Rico affecting market dynamics.
• Economic Sensitivity: Potential impact of economic softness on enterprise business, particularly government segments.
• Volatility in Networks: Liberty Networks' revenue and adjusted OIBDA affected by non-recurring, non-cash revenues, leading to quarter-to-quarter volatility.

Question and Answer

• Q: Soomit Datta asked about Puerto Rico cadence, integration costs, and free cash flow.

A: Christopher Noyes discussed migration costs, TSA expense reduction, and transaction taxes affecting free cash flow, noting Q1 2024 would be toughest with costs tailing off later.

• Q: Vitor Tomita inquired about Puerto Rico competitive situation.

A: Balan Nair mentioned T-Mobile's aggressive subsidies, migration focus, and post-migration plans for aggressive gross adds starting in May.

• Q: Matthew Harrigan asked about pricing and enterprise economic softness.

A: Balan Nair discussed opportunistic pricing, situational approach, and enterprise market nuances, noting government segments less likely for price increases.

• Q: Gabriel Vaz de Lima asked about Q1 2024 trends.

A: Balan Nair noted January sales were better than budget but cautioned one month doesn't make a trend, with focus on migration completion.

• Q: Michael Rollins asked about Liberty Networks and asset optimization.

A: Balan Nair and Ray Collins discussed non-recurring revenues in Liberty Networks, MRR growth potential, and plans to expand subsea routes and enterprise footprint in Central America countries.