Liberty Latin America Ltd. (LILAK) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture. While there are positive aspects such as strong OIBDA growth in Panama and C&W Caribbean, and future revenue growth expectations, there are concerns about declining revenue in Puerto Rico, high leverage, and negative cash flow. The Q&A session provides some optimism for future growth but lacks clarity on several issues. The impact of Hurricane Beryl and bad debt further complicates the outlook. Considering these factors and the market cap, a neutral stock price movement is expected over the next two weeks.
Key Financial Performance
Adjusted OIBDA $763 million in the first half, with double-digit rebased growth in Panama and Costa Rica, and high single-digit growth in Cable & Wireless Caribbean.
Revenue $1.1 billion in Q2, reflecting a 2% sequential growth but a 1% year-over-year decline on a rebased basis.
Adjusted OIBDA $389 million in Q2, a 4% increase sequentially but a 12% decline year-over-year.
Revenue (C&W Caribbean) $368 million in Q2, reflecting 4% rebased growth driven by higher ARPUs and year-over-year subscriber growth.
Adjusted OIBDA (C&W Caribbean) $157 million in Q2, representing 8% rebased growth due to revenue growth and cost discipline.
Revenue (C&W Panama) $197 million in Q2, reflecting 9% rebased revenue growth across all business lines.
Adjusted OIBDA (C&W Panama) $65 million in Q2, representing 10% rebased year-on-year growth driven by revenue growth.
Revenue (Liberty Puerto Rico) $309 million in Q2, reflecting a 12% rebased decline year-over-year due to mobile subscriber losses and ECF funding removal.
Adjusted OIBDA (Liberty Puerto Rico) $71 million in Q2, reflecting a rebased decline of 48% year-over-year due to lower revenues and higher OpEx related to migration.
Revenue (Liberty Networks) $119 million in Q2, resulting in rebased declines of 1% year-over-year.
Adjusted OIBDA (Liberty Networks) $63 million in Q2, reflecting a rebased decline of 13% year-over-year due to lower IRU revenue and a bad debt adjustment.
P&E Additions $180 million in Q2, or 16% of revenue, compared to $192 million or 17% of revenue last year.
Adjusted Free Cash Flow Negative $18 million for Q2, compared to adjusted FCF of $31 million for Q2 2023, primarily driven by lower adjusted OIBDA.
Total Debt $8.1 billion at the end of Q2, with gross leverage of 5.3 times and net leverage of 4.9 times.
Cash and Availability $600 million in cash and $800 million available under revolving credit lines.
Stock Repurchase $22 million of stock repurchased in Q2, increasing year-to-date total to $83 million.
Hurricane Beryl Impact Expected revenue and adjusted OIBDA impact of $10 million to $20 million in H2, with additional P&E additions of $10 million to $20 million for repairs.
Bad Debt $12 million of bad debt in Q2 due to billing and collection issues.
Parametric Weather Derivative Program Triggered twice by Hurricane Beryl, expecting to receive $44 million of net proceeds in Q3.
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Operating Highlights
Subscriber Growth: Added 62,000 subscribers in total across the group in the first half, with close to 200,000 additions excluding Puerto Rico.
5G Launch: Launched initial 5G service in Costa Rica and conducted successful trials during the May elections.
Acquisition of DISH's Boost Subscribers: Expected to close in Q3, acquiring over 110,000 Boost subscribers and valuable spectrum.
Combination with Millicom: Announced combination with Millicom in Costa Rica to improve market structure and drive synergies.
Market Share in Puerto Rico: Currently holds around 20% market share in mobile, with significant room for growth.
Operational Recovery Post-Hurricane Beryl: Over 90% of fixed and mobile network coverage restored in impacted markets.
Cost Efficiency Initiatives: Expect to generate significant additional OpEx savings in H2 from initiatives started in Q2.
Equity Repurchase: Repurchased over $300 million of equity and convertible notes, with $22 million in Q2.
Focus on Inorganic Growth: Looking at inorganic ways to drive stakeholder value, including M&A activities.
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Risk or Challenges
Subscriber Migration Challenges: The company faced specific challenges related to the completion of mobile subscriber migration in Puerto Rico, leading to increased churn and subscriber losses.
Hurricane Impact: Hurricane Beryl caused infrastructure damage in Jamaica, Grenada, and St. Vincent, with expected operational and financial impacts ranging from $10 million to $20 million in H2.
Regulatory Issues: The sunset of the ECF program in Puerto Rico resulted in a significant loss of subscribers, impacting revenue and operational performance.
Bad Debt Write-off: A decision to write off $12 million of bad debt due to migration-related billing and collection issues negatively impacted financial performance.
Competitive Pressures: The competitive backdrop in Costa Rica's fixed market remains challenging, prompting the company to pursue a transaction with Millicom to enhance market structure and synergies.
Operational Disruptions: The migration from AT&T in Puerto Rico led to operational disruptions, affecting subscriber retention and overall performance.
Debt Levels: The company reported total debt of $8.1 billion with a gross leverage of 5.3 times, indicating potential financial risk.
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Guidance & Outlook
Subscriber Growth: Added 62,000 subscribers in total across the group in the first half, with close to 200,000 additions excluding Puerto Rico.
Buyback Activity: Repurchased over $300 million of equity and convertible notes, equivalent to total capital allocated during 2023.
Combination with Millicom: Announced combination with Millicom in Costa Rica to improve market structure, drive synergies, and invest in fiber and 5G.
5G Trials: Successful 5G trials during May elections in Panama, showcasing technology leadership.
Acquisition of DISH's Boost Subscribers: Expected closing in Q3, acquiring over 100 megahertz of spectrum and over 110,000 Boost subscribers.
Adjusted OIBDA Expectations: Expect adjusted OIBDA to exceed $45 million per month in the second half, with significant expansion anticipated for 2025.
Revenue Growth in Puerto Rico: Expect to stabilize mobile subscriber base and drive top line growth through new commercial initiatives.
Hurricane Beryl Impact: Anticipate $10 million to $20 million impact on revenue and adjusted OIBDA in H2 due to Hurricane Beryl.
Debt Management: Gross leverage at 5.3 times, expected to trend down towards year-end as adjusted OIBDA expands.
Operational Improvements: Expect significant additional OpEx savings in H2 from initiatives started in Q2.
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Shareholder Return Plan
Share Repurchase Program: Liberty Latin America has been aggressive with its buyback activity this year, having repurchased over $300 million of its equity and convertible notes, which is equivalent to the total capital allocated during 2023. Additionally, in Q2, the company repurchased $22 million of stock, increasing the year-to-date total to $83 million.
Convertible Notes Redemption: The company redeemed the remaining $140 million of outstanding convertible notes due July 2024, resulting in substantially all of its debt being due in 2027 and beyond.
Derivative Cap Call Arrangement: Liberty Latin America entered into a derivative cap call arrangement that allows for the repurchase of upwards of 6 million shares or 3% of LLA in H2 2025 at attractive prices.
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Key Q&A
Q:Can you provide more details on the retention discounts applied to ACP subscribers?
A:We have roughly about 85,000 subscribers in fixed and about 3,000 mobile. The effective discount was about $14, with a subsidy of about $30. We've retained over 90% of our customers on ACP.
Q:What are the drivers for further EBITDA improvement in Puerto Rico in the second half of the year?
A:We're guiding to $45 million towards the end of the year for EBITDA, driven by TSA dropouts, one-off costs, cost takeout (300 headcounts), and new campaigns that will drive additional gross adds.
Q:Does the expectation of reaching a monthly run rate of $45 million imply a 2025 EBITDA contribution of roughly $540 million?
A:I wouldn't straight line the number. The opening balance in December going into January will be crucial, and we expect growth throughout 2025.
Q:Will 2025 mark the year for positive rebased revenue growth for the entire portfolio?
A:Yes, there will be positive revenue growth in 2025 due to improvements in various segments, including Cable & Wireless Caribbean, Panama, and Costa Rica.
Q:What impact do you expect from the hurricane season on your operations?
A:Hurricane Beryl impacted Grenada, St. Vincent, and Jamaica, primarily due to power outages. We are rebuilding our backbone and have insurance coverage for damages.
Q:Is there a tailwind for your network business from data center activity in the Caribbean?
A:Yes, we see opportunities in Panama, Costa Rica, and Mexico, especially with the CHIPS Act funding and the growth of hyperscale data centers.
Q:Are there any opportunities in Venezuela or Argentina due to political changes?
A:We have no current plans to enter Venezuela or Argentina but will monitor political changes for future opportunities.
Q:Review of Unclear Management Responses
A:Management's response lacked clarity on the specific variances that could affect the 2025 EBITDA contribution, as well as the exact impact of the hurricane season on operations beyond general statements.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACP
Beryl Jamaica
Boost
Corporate
Danilo
ECF
Grenada St
Hurricane Beryl
Mexico
Noyes
Rico Liberty
Senior
St Vincent
Tigo
Venezuela
amount
backbone
business
challenge
completion
connectivity
deal
discount
fiber
group
hurricane
hyperscalers
impact
infrastructure
insurance
manager
market center
market structure
model
number market
opening balance
power
retention
spectrum
subscriber loss
subsea
sunset
today line
LILAK Transcript
Liberty Latin America Ltd. (LILA) Q1 2025 Earnings Call Transcript
Unknown5-11
The earnings call presents a mixed picture with some positive aspects like revenue growth in certain regions and improved OIBDA. However, significant challenges in Puerto Rico, including revenue decline, regulatory issues, and supply chain challenges, weigh heavily. The Q&A reveals competitive pressures and management's vague responses, further indicating uncertainty. Despite some positive financial metrics, the lack of active share buybacks and refinancing risks contribute to a negative outlook, especially for a small-cap stock.
Liberty Latin America Ltd. (LILAK) Q2 2024 Earnings Call Transcript
Unknown8-11
The earnings call summary presents a mixed picture. While there are positive aspects such as strong OIBDA growth in Panama and C&W Caribbean, and future revenue growth expectations, there are concerns about declining revenue in Puerto Rico, high leverage, and negative cash flow. The Q&A session provides some optimism for future growth but lacks clarity on several issues. The impact of Hurricane Beryl and bad debt further complicates the outlook. Considering these factors and the market cap, a neutral stock price movement is expected over the next two weeks.
Liberty Latin America Ltd. (LILA) Q1 2024 Earnings Call Transcript
Neutral5-8
Liberty Latin America Ltd. (LILA) Q4 2023 Earnings Call Transcript
Positive2-23
The earnings call highlights positive developments such as subscriber growth, strategic capital allocation for buybacks, and strong revenue growth in key regions like Costa Rica. Despite challenges in Puerto Rico and some cautious guidance, the overall sentiment is positive, driven by optimistic growth in broadband and B2B segments. The market cap indicates a moderate reaction, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
LILAK Report
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