Liberty Latin America Ltd. Q2 FY2024 earnings call

Group Highlights

• Continued to grow high-speed broadband and postpaid mobile bases in first half, adding 62,000 subscribers total (excluding Puerto Rico challenges).
• Adjusted OIBDA of $763 million in first half, with double-digit rebased growth in Panama and Costa Rica, and high single-digit growth in Cable & Wireless Caribbean.
• Aggressive buyback activity, repurchased over $300 million of equity and converts.
• Announced combination with Millicom in Costa Rica to improve market structure, drive synergies, and invest in fiber and 5G.

Cable & Wireless Caribbean

• Added 80,000 subscribers in past 12 months, Q2 flat broadband subscriber performance due to price increases causing higher churn, but continued year-over-year revenue growth. Postpaid mobile adds robust. Impacted by Hurricane Beryl, with teams working to restore services and expected operational and financial impacts manageable.

Cable & Wireless Panama

• Delivered solid Internet subscriber additions and robust revenue growth, added over 50,000 postpaid subscribers in mobile, and had successful 5G trials, driving 6% top line growth in first half.

Liberty Puerto Rico

• Stable quarter of Internet subscriber adds, fixed revenue flat year-over-year due to RGU base growth offset by reduced ARPU. Mobile postpaid subscriber performance impacted by migration disruption and ECF program sunset, but prepaid segment saw some greenshoots. Expected operating performance to improve in second half with commercial initiatives and cost efficiencies.

Liberty Networks

• Enterprise continued as fastest growth area, rising 11% on rebased basis year-over-year driven by connectivity growth and higher value-added services penetration. Wholesale business demonstrated resilience despite year-over-year decline in IRU non-cash revenues.

Inorganic Moves

• Announced agreement to combine operations with Tigo in Costa Rica to create value through market structure improvement, cost synergies, cross sell opportunities, and network synergies. Anticipated acquisition of spectrum and subscribers from DISH to close in Q3, providing valuable spectrum and strengthening 5G mobile network and prepaid market scale.

Cable & Wireless Caribbean

• Q2 revenue: $368 million, adjusted OIBDA: $157 million, adjusted OIBDA margin 43% (8% rebased growth). Revenue contribution from various business categories including fixed, mobile, and B2B.

Cable & Wireless Panama

• Q2 revenue: $197 million, adjusted OIBDA: $65 million, 10% rebased year-on-year growth across all business lines.

Liberty Networks

• Q2 revenue: $119 million, adjusted OIBDA: $63 million, rebased declines of 1% and 13% respectively due to lower IRU revenue and bad debt adjustment.

Liberty Puerto Rico

• Q2 revenue: $309 million, sequential decline from Q1, adjusted OIBDA: $71 million, significant rebased decline year-over-year due to mobile subscriber losses and ECF sunset.

Costa Rica

• Q2 revenue: $147 million, adjusted OIBDA: $53 million, 4% rebased revenue growth and 1% rebased adjusted OIBDA growth, driven by mobile revenue but impacted by fixed ARPU pressure and mobile equipment sales.

Forward-looking Statements

• Expect adjusted OIBDA to more than $45 million per month in the second half for Puerto Rico, now towards end of year, still setting up significant expansion in 2025.
• Anticipate Hurricane Beryl's parametric program to cover cash flow impact, with expected $44 million of net proceeds into LLA during Q3.
• Target to reach $45 million of monthly adjusted OIBDA in back half of 2024 for Puerto Rico.
• The acquisition of spectrum and subscribers from DISH is expected to provide valuable spectrum for adding capacity, increasing speeds, and strengthening 5G mobile network and prepaid market scale upon completion.

Risks

• Operational challenges in Puerto Rico due to delays and issues in operational systems hindering progress, leading to being three months behind initial expectations.
• Impact of Hurricane Beryl on operations in Jamaica, Grenada, and St. Vincent, including infrastructure damage, power outages, and expected revenue and adjusted OIBDA impacts of $10 million to $20 million in H2 along with additional P&E additions of $10 million to $20 million.
• Migration-related costs and bad debt adjustments affecting financial performance in certain segments.

Q: Could you give some more color on the retention discounts applied to ACP subscribers and risk of potential churn or bad debt issues going into Q3, particularly on non-discounted subscribers?

A: We were able to retain over 92% of the ACP base. The impact on ARPU is about 4%. There are some discounts on retention for certain customers, but overall, most customers have been retained. Bad debt is expected to return to normalized level by end of year.

Q: If you take the expectation to get to a monthly run rate of $45 million for Puerto Rico, does that put the 2025 EBITDA contribution for Puerto Rico at roughly $540 million?

A: Wouldn't straight line the number. Goal is to get to $45 million by end of 2024, and 2025 will have growth from opening balances and net adds, with revenue growth positive in 2025.

Q: Is there a tailwind for your network business off level 4 data center activity in the Caribbean? And any positive opportunities in Venezuela?

A: Data center business has opportunities in Panama, Costa Rica, and Mexico due to growth in hyperscale data centers. No current plans to go into Venezuela, but will be opportunistic when political turmoil changes.

Q: Any color on regions impacted by the hurricane season and impacts on businesses in Jamaica and other regions?

A: Hurricane Beryl impacted Jamaica, Grenada, and St. Vincent. Tower damage was minimal, but fixed network had damage. Parametric insurance triggered, expecting $44 million net proceeds in Q3, and team resilient with minimal financial impact from this hurricane.