Liberty Latin America Ltd. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Highlights: Added over 225,000 high-speed broadband and postpaid mobile subscribers year-to-date (excluding Puerto Rico). Successfully refinanced $1 billion of Cable & Wireless credit silo senior notes. Explored inorganic growth in Peru and added Sparkle to a pan-regional subsea system.
• C&W Caribbean: Negatively affected by Hurricane Beryl, but adjusted OIBDA grew sequentially and year-over-year, with management focusing on reducing operating costs.
• C&W Panama: Drove fixed footprint penetration, launched 5G, and saw adjusted OIBDA growth from Claro acquisition synergies.
• Liberty Costa Rica: Achieved solid broadband subscriber adds, moved above 1 million mobile subs, and had healthy rebased revenue growth led by mobile.
• Liberty Networks: Enterprise continued as the fastest growth area, with a resilient wholesale business despite noncash IRU declines, and a new pan-regional subsea cable system with Sparkle.
• Liberty Puerto Rico: Stable Internet subscriber adds adjusting for ACP churn, launched converged proposition LOOP, and saw prepaid net adds. Early signs of mobile operations turning around with improved NPS and customer sentiment.
• Peru: Invested in a greenfield fiber-to-the-home business, passed ~3 million homes, and awarded LatAm Fiber Operator of the Year.

Segment Performance

• C&W Caribbean: Q3 2023 revenue was $360 million, flat year-over-year on a rebased basis. Mobile performance saw an organic increase of over 50,000 postpaid subscribers year-over-year, but fixed and B2B revenues declined. Adjusted OIBDA was $158 million, representing 5% rebased growth, with an adjusted OIBDA margin improving by over 200 basis points year-over-year to 44%.
• Cable & Wireless Panama (CWP): Generated $188 million in revenue, declining 1% year-over-year. Topline growth in mobile (9%) and fixed (5%) was offset by a 13% decline in B2B revenue. Adjusted OIBDA was $69 million, representing 17% year-on-year growth, driven by project-related cost phasing and Claro Panama acquisition synergies.
• Liberty Networks: Generated $110 million in revenue and $59 million in adjusted OIBDA, with rebased declines of 2% and 8%, respectively. Driven by a reduction in noncash REU revenue and higher bad debt expense.
• Liberty Puerto Rico: Q3 revenue was $308 million, reflecting a 13% rebased decline year-over-year. Residential fixed and mobile revenues declined, and B2B revenue was impacted by FCC fund cancellation. Adjusted OIBDA was $88 million, a rebased decline of 24% year-over-year, but improved sequentially by 24% due to lower indirect costs.
• Liberty Costa Rica: Delivered Q3 revenue of $146 million and adjusted OIBDA of $51 million, reflecting 5% rebased revenue growth and a 1% rebased decline in adjusted OIBDA. Positive performance across business lines, though adjusted OIBDA decreased slightly due to higher bad debt expense.

Guidance

• Adjusted OIBDA performance is expected to accelerate in Q4 driven by B2B and improved Puerto Rican operations.
• Anticipate the strongest cash flow performance of the year in Q4 due to improved adjusted OIBDA and seasonally positive working capital.
• Plan to refinance remaining 2027 Cable & Wireless bonds within 12 months to improve capital structure.
• Focus on regaining commercial momentum in Puerto Rico and expect improved adjusted OIBDA performance in Q4.

Risks

• Impact of Hurricane Beryl on C&W Caribbean fixed revenue and B2B.
• Complexity of Puerto Rico migration leading to larger-than-expected churn and delayed recovery to pre-migration EBITDA.
• Competitive market conditions in Puerto Rico affecting top-line growth.
• Currency fluctuations and potential impact on capital structures and operating costs.

Question and Answer

Q: Related to capital allocation for Puerto Rico and Peru strategy A: Balan Nair and Chris Noyes discussed intent to operate Puerto Rico on cash side, implementing cost cuts and targeted commercial acquisitions; Peru investment ~$100M with ~3M homes passed and awarded LatAm Fiber Operator of the Year.

Q: Converged bundles and 5G upgrades A: Balan Nair and Inge Smidts discussed success of converged bundles in various markets, and progress in 5G launches in multiple regions, focusing on market readiness and digital channel sales.

Q: Puerto Rico EBITDA recovery and top-line acceleration A: Balan Nair discussed cost cutting, sales growth, B2B opportunities, and converged offerings to drive EBITDA recovery, noting lessons learned from AT&T migration and progress in green shoots.

Q: Currency implications and capital structures A: Balan Nair and Chris Noyes discussed currency hedging, exposure to U.S. dollar, and monitoring currency market changes, with most operations hedged and stable currency in key markets.