Liberty Latin America Ltd. (LILA) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue $1.1 billion, 2% lower year-over-year, primarily due to a decline in Liberty Puerto Rico, offset by growth in C&W Panama, Liberty Costa Rica, and Liberty Networks.
Adjusted OIBDA $407 million, 8% increase year-over-year, driven by operating leverage and cost management efforts across operations.
Adjusted OIBDA less P&E additions $286 million, 26% of revenue, up from 22% year-over-year, reflecting higher adjusted OIBDA margin and lower P&E additions.
Adjusted Free Cash Flow (FCF) Negative $133 million, $46 million better year-over-year, impacted by seasonal working capital movements.
C&W Caribbean Revenue $364 million, flat rebased growth year-over-year, with 5% growth in mobile offset by a 3% decline in B2B revenue.
C&W Panama Revenue $177 million, 5% rebased growth year-over-year, driven by 16% growth in mobile and 3% in residential fixed.
Liberty Networks Revenue $110 million, 3% rebased growth year-over-year, driven by higher revenue in wholesale and enterprise business lines.
Liberty Puerto Rico Revenue $298 million, 11% rebased decline year-over-year, due to lower residential fixed and mobile revenue.
Liberty Costa Rica Revenue $158 million, 2% rebased growth year-over-year, with mobile residential revenue increasing by 6%.
Total Debt $8.2 billion, with a net leverage of 4.6x.
Cash on Balance Sheet $600 million, with $800 million availability under revolving credit line.
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Operating Highlights
Subscriber Additions: In Q1, Liberty Latin America added 44,000 broadband and postpaid mobile subscribers, with notable growth in Costa Rica and Caribbean operations.
FMC Penetration: FMC penetration in successful markets exceeded 30%, contributing to lower churn and a more predictable revenue profile.
Loyalty Programs: The company is launching loyalty programs across the region to reduce churn by rewarding long-term customers.
MANTA Subsea Cable System: A contract was announced for the design, manufacture, and installation of the MANTA subsea cable system, expected to drive future revenue growth.
Market Positioning in Costa Rica: Liberty Latin America is taking steps to consolidate the fixed market through a joint venture with Tigo, expected to close in the second half of the year.
Competitive Landscape in Puerto Rico: In Puerto Rico, the company is focusing on new distribution channels and enhancing its customer value proposition to improve postpaid growth.
Cost Management: The company has implemented cost management initiatives that have positively impacted adjusted OIBDA margins, increasing by over 300 basis points year-over-year.
P&E Additions: Lower P&E additions in Q1 compared to the previous year have contributed to adjusted OIBDA growth.
Strategic Shift in Puerto Rico: Liberty Latin America has withdrawn its 3-year guidance due to challenges in Puerto Rico, focusing on cost reduction and improved performance in the second half of 2025.
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Risk or Challenges
Competitive Pressures: Liberty Costa Rica is facing intense competition in its fixed market with five nationwide players, which has led to ARPU pressures despite subscriber growth.
Regulatory Issues: The discontinuation of the ACP program in Puerto Rico has negatively impacted residential fixed revenue, contributing to an overall decline in revenue.
Supply Chain Challenges: The company is experiencing challenges related to network maintenance expenses, particularly due to costs associated with cable cuts and higher interconnect costs.
Economic Factors: The overall economic environment has led to a decline in revenue in Puerto Rico, with a significant year-over-year rebased decline of 11% in Q1.
Debt Management: Liberty Puerto Rico has debt due in 2027 to 2029, which poses a refinancing risk as the company targets improvements in financial results before refinancing.
Cost Management: The company is undergoing a cost-cutting exercise to address margin compression in Puerto Rico, focusing on reducing headquarter staff and frontline team impacts.
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Guidance & Outlook
Subscriber Growth: In Q1, Liberty Latin America added 44,000 broadband and postpaid mobile subscribers, with notable progress in Costa Rica and Caribbean operations.
Fixed Mobile Convergence (FMC) Strategy: FMC penetration exceeded 30% in successful markets, driving lower churn and a more predictable revenue profile.
Cost Management Initiatives: The company is focused on cost management, which has led to margin expansion and improved operating leverage.
Joint Venture with Tigo: Liberty Costa Rica is consolidating the fixed market through a joint venture with Tigo, expected to close in the second half of 2025.
MANTA Subsea Cable System: A contract was announced for the design and installation of the MANTA subsea cable system, which is expected to provide strong future revenue growth.
Revenue Expectations: Q1 revenue was $1.1 billion, reflecting a 2% decline on a rebased basis, primarily due to Liberty Puerto Rico's performance.
Adjusted OIBDA Growth: Adjusted OIBDA increased by 8% year-over-year to $407 million, with expectations for significant year-over-year growth in adjusted OIBDA and adjusted FCF in 2025.
Capital Expenditure (CapEx) Outlook: The company anticipates lower capital intensity in 2025 and 2026, with P&E additions down 20% year-over-year in Q1.
Puerto Rico Performance: The company withdrew its 3-year guidance due to slower recovery in Puerto Rico, but expects improvements in churn and postpaid mobile KPIs in H2 2025.
Cost Reduction Initiatives: An aggressive cost reduction strategy is being pursued, expected to positively impact performance in the second half of 2025.
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Shareholder Return Plan
Share Buyback Program: The company has not been active in its stock buyback program for the last 3 quarters and has roughly $240 million available under its authorization. They may look to be opportunistic as they return to their cash flow build cycle, which is always weighted to the second half of the year.
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Key Q&A
Q:Can you provide more color on the competitive environment in Puerto Rico, particularly regarding promotions and handset discounts?
A:In Puerto Rico, we compete with Claro on the fixed side and with Claro and T-Mobile on the mobile side. T-Mobile is the most aggressive in terms of handset subsidies, but we haven't seen them become more aggressive recently. Our focus is on improving customer service and cost structure.
Q:Do you still expect 14% CapEx to sales in 2025 and 2026, and how will it be distributed across regions?
A:Yes, we expect to hit 14% CapEx in 2025 and 2026, and it will be quite equally distributed across the business.
Q:Is the 30% year-over-year decline in CapEx in Puerto Rico sustainable, or will it trend back towards the group average of 14%?
A:Puerto Rico's CapEx is trending closer to the mid to high-15% range, and we are not under-spending there.
Q:Will Liberty Latin America fund Puerto Rico from the parent balance sheet if additional funding is needed?
A:We treat Puerto Rico as a separate credit silo, and funding decisions will be based on capital allocation methodology.
Q:What is the macro outlook for Puerto Rico and how does it affect your business?
A:Puerto Rico has a good market with a stable population and rational competitors. We are not too dependent on government subsidies, and we have a strong network.
Q:What are your internal targets for monthly EBITDA in Puerto Rico?
A:We have internal guidelines for monthly EBITDA, and we are focused on getting it to the right place.
Q:What is the estimate for cash interest expenses this year?
A:The average borrowing costs have increased to 6.5% from 6.2%, indicating higher cash interest expenses year-over-year.
Q:Review of Unclear Management Responses
A:Management avoided providing specific percentages for growth from Puerto Rico relative to the rest of the asset portfolio, stating that they are not breaking down the percentages for each segment. Additionally, they were vague about the potential impact of the Trump administration on Puerto Rico's economy, indicating uncertainty without providing concrete information.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BB element
BB operation
Benchmark ET
Beryl quarter
CW credit
CW silo
Caribbean CW
Caribbean consumer
Caribbean market
Caribbean point
Caribbean record
Connectivity Colombia
ET lady
Enterprise basis
FMC penetration
MANTA
OIBDA PE
Slide CW
Slide credit
Tigo
consumer BB
consumer mobile
credit silo
effort
focus
goal
group
investment
market FMC
market structure
mobile base
network FTTH
operator
penetration percentage
percentage point
player
point center
pricing
progress
proposition
silo CW
silo Liberty
slide addition
trend
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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