Liberty Global Ltd (LBTYA) Q2 2024 Earnings Call Transcript

Liberty Global Ltd. Class C Common Shares

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary suggests a positive outlook with stable financial performance, a strong cash position, and an aggressive share buyback program. Despite some execution risks in restructuring and competitive pressures, the strategic initiatives, including the Sunrise spin-off and asset sales, are expected to enhance shareholder value. The Q&A section reveals management's cautious optimism and strategic focus, although some specifics were withheld. Overall, the sentiment leans positive due to the share buyback program and anticipated shareholder returns from the Sunrise spin-off.

Key Financial Performance

Revenue Sunrise delivered stable revenue in Q2, supported by the July 2023 price rise and continued growth in mobile subscriptions and B2B. Telenet posted stable revenue in Q2 despite slightly weaker mobile performance. Virgin Media O2 reported broadly stable revenue but excluding the impact of the nexfibre construction, saw a revenue decline of around 4% due to lower year-on-year hardware sales.

Adjusted EBITDA Sunrise posted stable adjusted EBITDA growth, including cost capture driven by the revenue increase in the quarter and lower OpEx, particularly in labor costs and marketing spend. Telenet's EBITDA was down around 9% year-over-year, reflecting a tough comparison base against Q2 of last year, including a EUR 10.5 million one-time benefit last year, and higher staff-related expenses. Virgin Media O2's adjusted EBITDA decreased 1%, including nexfibre construction, due to a reduced contribution from B2B fixed. VodafoneZiggo delivered around 8% EBITDA growth driven primarily by the reversal of energy cost headwinds and lower consultancy service costs.

Free Cash Flow Consolidated cash balance was $3.5 billion at the end of Q2 2024, with cash inflow related to operations of $0.3 billion. Net cash from Ventures was $300 million, and share buybacks were around $170 million during the quarter.

Cash Position Consolidated cash balance was $3.5 billion at the end of Q2 2024, reflecting a strong cash position.

Debt Profile Maintaining long-term fixed debt profile of around 5 years with no material maturities until 2028. Proactively deleveraging ahead of the spin to ensure an initial leverage range of 3.5x to 4.5x.

Market Cap Sitting on a cash balance equal to roughly half our market cap, with an aggressive buyback program that saw us repurchase 5% of our shares year-to-date.

Share Price Valuation Current share price of $18 to $19 per share does not reflect the inherent value of the business, with an implied value of a Liberty Global share around $26 per share when combining cash, listed stakes, unlisted Ventures, and Sunrise valuation.

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Operating Highlights

New Product Launch: Announced plans to create a U.K. NetCo on track in the first half of 2025.

Investment in Ventures: Increased stake in Formula E from 38% to 65%.

Market Expansion: Reached 5 million fiber homes across VMO2 in the U.K. Preliminary agreement with Proximus in Belgium to avoid overbuilding fiber in 2 million homes. Acquired 100 megahertz of 3.5 gig spectrum in the Netherlands.

Operational Efficiency: Achieved $650 million in asset sales in the last 6 months. Continued to shrink market cap through a buyback program, repurchasing 5% of shares year-to-date.

Strategic Shift: Focus on maximizing intrinsic value of FMC operations and using Ventures portfolio for liquidity. Plans to deleverage Sunrise pre-spin with CHF1.5 billion ($1.7 billion) funding.

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Risk or Challenges

Competitive Pressures: The company is facing an increasingly competitive marketplace, particularly in the mobile sector, where promotions and flanker brands are putting pressure on mobile ARPUs. This competitive environment is leading to challenges in maintaining market share and profitability.

Regulatory Issues: Concerns raised by the Competition and Markets Authority (CMA) regarding the merger with 3 in the U.K. are being addressed through a strengthened mobile network sharing agreement with Vodafone.

Supply Chain Challenges: The company is experiencing pressure in the mobile sector due to slower hardware sales, which are low-margin revenue streams. This decline in hardware sales is impacting overall revenue growth.

Economic Factors: Consumers are feeling the stress of inflation and macroeconomic challenges, which is affecting spending behavior and overall market dynamics.

Execution Risks: The transformation of operations into NetCos and ServCos carries high execution risks, as these are complex restructurings that require careful management to achieve the desired value creation.

Debt Management: While the company maintains a strong debt profile, proactive deleveraging is necessary ahead of the Sunrise spin to ensure a manageable leverage range.

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Guidance & Outlook

Strategic Plan: Liberty Global's strategic plan includes maximizing the intrinsic value of FMC operations, utilizing the Ventures portfolio for liquidity, and delivering value to shareholders.

Sunrise Spin-off: The Sunrise spin-off is on track for Q4 2024, with an estimated value of $12 per Liberty Global share, supported by CHF1.5 billion of deleveraging and a commitment for an annual dividend of CHF240 million starting in 2025.

U.K. Network Sharing Agreement: A comprehensive agreement with Vodafone in the U.K. strengthens the mobile network sharing agreement and includes rights for VMO2 to purchase spectrum.

U.K. NetCo Creation: Plans to create a U.K. NetCo are on track for the first half of 2025, with financing discussions expected to commence in Q4 2024.

Fiber and 5G Investments: Continued investments in fiber and 5G are expected to drive revenue growth and improve ARPU.

Ventures Platform: Liberty Global achieved $650 million in asset sales in the last 6 months, targeting an additional $100 million to $150 million before year-end.

Formula E Stake Increase: Liberty Global plans to increase its stake in Formula E from 38% to 65%.

Revenue Growth Guidance: Revenue growth at VMO2 is lowered due to slower hardware sales, but EBITDA and free cash flow guidance remain intact.

2024 Guidance Confirmation: All guidance metrics for Telenet, Sunrise, and VodafoneZiggo are reconfirmed, with VMO2 expecting a low- to mid-single digit decline in revenue.

Debt and Cash Position: Liberty Global maintains a strong debt profile with no material maturities until 2028 and a cash balance of $3.5 billion.

Deleveraging Plan: CHF1.5 billion ($1.7 billion) deleveraging will be funded by corporate cash, 2024 free cash flow, and proceeds from All3Media.

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Shareholder Return Plan

Estimated Dividend per Share: $12 per Liberty Global share from the Sunrise spin-off, expected in Q4 2024.

Sunrise Annual Dividend Commitment: CHF240 million annual dividend starting in 2025.

Share Buyback Program: 5% of shares repurchased year-to-date, with a plan to repurchase 10% of shares by year-end.

Cash Balance: $3.5 billion at the end of Q2 2024.

Share Buyback Amount: $170 million in share buybacks during Q2 2024.

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Key Q&A

Q:How many premises are actually ready for sale in Virgin Media O2's fiber rollout?

A:We're not sure we're disclosing that much information, Carl. But the $5 million breaks out into both, nexfibre about $1.3 million, I believe and the balance on our VMO2 upgrade or fiber up as we call it. I'm not sure we disclosed our penetration rate.

Q:Are you seeing more impact from altnets in the broadband market?

A:Yes, altnets are increasing their activities, right? They're built less but they try to sell more and therefore, you see aggressive promotions. But we managed to keep our base stable in the price rise quarter.

Q:Can you confirm the Belgian memorandum of understanding is at the active for the passive level?

A:Yes, it's a passive reciprocal deal ultimately with Proximus, where Telenet will be building 60% and Proximus 40% in the collaboration zone.

Q:What is the competitive mix in the Swiss market?

A:Promotional intensity is high, but we are seeing a bit of a worrying off effect. Our inflow was benefiting from 2 additional features that we have launched.

Q:What is your pricing strategy in the Netherlands?

A:We're trying to remain competitive in a declining inflation market which doesn't call for the same sort of increases.

Q:Are you interested in acquiring TalkTalk?

A:I don't think we have anything to say about TalkTalk today. We watch as others do, with great interest of what's happening across the sector in the U.K.

Q:How do you see your position in fintech, entertainment, and healthcare?

A:The Netco ServCo model should create a more agile ServCo management team and product and brand, looking at accessing the NetCo as well as perhaps other networks.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the number of premises ready for sale in the fiber rollout and the penetration rate. They also did not provide specific details on the impact of altnets on their customer base.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

LBTYK Transcript

Liberty Global Ltd (LBTYA) Q2 2024 Earnings Call Transcript

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Liberty Global Ltd (LBTYA) Q1 2024 Earnings Call Transcript

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The earnings call reveals mixed sentiments: strong mobile service revenue growth, strategic investments, and a solid balance sheet are positive. However, stable to declining revenue guidance, subscriber losses in Telenet, and unclear management responses on key issues create uncertainty. The Q&A highlights strategic progress but also reveals concerns about fiber competition and unclear long-term strategies. Overall, these factors suggest a neutral stock price movement as positives are offset by uncertainties and stable to declining guidance.

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The earnings call summary reveals mixed signals: strong EBITDA growth and met guidance, but challenges from cost inflation and tax payments. Positive subscriber trends and free cash flow improvements are offset by concerns about competitive dynamics and lack of clear guidance on ARPU and expenses. Q&A highlights uncertainties in UK cable ARPU and B2B revenue. The market's reaction is likely neutral, as positive elements balance out the negatives.

LBTYK Report

Liberty Global Ltd. 10-Q

10-Q

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