Q4 2022 Liberty Latin America Ltd Earnings Call
Yes.
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Good morning, ladies and gentlemen, and thank you for standing by.
Today's call is being recorded.
And I'll now turn the call I've achieved.
Chief Technology, and product Officer, Liberty Latin America.
Good morning, and welcome to Liberty Latin America's full year 2022 investor call.
At this time, all participants are in listen only mode.
Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at Www Dot L. L. A dot com.
Following today's formal presentation instructions will be given for a question and answer session.
As a reminder, this call is being recorded.
Today's remarks May include forward looking statements, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts.
Actual results may differ materially from those expressed or implied by these statements.
For more information please refer to the risk factors discussed in Liberty Latin America's Most recently filed annual report on Form 10-K, along with the associated press release.
Liberty Latin America disclaims any obligation to update any forward looking statements or information to reflect any change in its expectations on and conditions on which such statement information is based in.
In addition on this call we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendices to this presentation, which is accessible under the investors section of our website.
I would now like to turn the call over to our CEO Mr. Bolland there.
Thank you Amir and welcome everybody to Liberty Latin America's full year results presentation.
I'll begin with our group highlights and an overview of our operating results by reporting segment.
Chris Noyes, our CFO will then follow with a review of the company's financial performance.
After that we will get straight to your questions.
As always I'm joined by my executive team from across the region and I will invite them to contribute as needed during the Q&A following our prepared remarks.
A point of housekeeping.
We'll both be working from slides, which you can find on our website at www Dot LLE Dot com.
Starting on slide four.
Highlights for the year.
The group reported revenues of $4 8 billion in 2022.
Without GTR.
Which was still consolidated until the end of Q3, our revenue would have been $4 4 billion and up by 3% on a rebased basis, driven by top line growth across all reporting segments, particularly our Liberty Costa Rica, <unk> networks in Latam NFC NW Caribbean.
Businesses.
We continued our operating momentum, adding 445000 broadband and mobile postpaid subscribers in the year.
We delivered into net <unk> growth across our segments with the largest contributions from Puerto Rico, where we added 36000 subscribers. Despite some sales disruption from hurricanes.
In mobile postpaid, we had a record year, adding 344000 subscribers.
Was more than double of 2021 results.
Ken with growth across all of our operations.
Our principal financial guidance metrics for 2022, with adjusted free cash flow and we broadly met our target of approximately $200 million as we delivered 189 million in the year.
Notably we had a record Q4 generating $210 million in that quarter.
We made significant progress with our inorganic strategy in the USB quiet cloud of Panama and finalize our 50 50 joint venture in Chile with American mobile.
We are focused on completing our integration of acquisitions, we have made over the past years and this will drive significant value for stakeholders.
Finally, we accelerated our buyback activity in the year repurchasing $170 million of stock.
Since we began the program in 2020, our buyback has exceeded $240 million.
And we continue to hold the view that the most compelling capital returns.
Our own company.
Turning to slide five.
I'll start our operating review with CFW Caribbean.
On the left with this slide we present, our internet and mobile postpaid additions should at the year.
Internet ads had a slow start in the first quarter, but momentum has been building.
Particularly in Jamaica, which is our largest market in this segment.
Growth has been driven by continued network investments and in 2020 to be upgraded or added 100000 homes in cable and wireless Caribbean markets.
In mobile we delivered record postpaid additions of 74000 subscribers in 2022.
84% higher than in the prior year.
We continue to be focused on growing our postpaid base with a key driver being increased penetration of FMC products in.
In Jamaica, we more than doubled FMC penetration in our fixed customer base during the year.
Moving to the center of the slide and our revenue by product.
The Pie chart depicts the well diversified nature of <unk> Caribbean revenue with <unk> and consumer fixed being the largest elements followed by consumer mobile.
Importantly, we saw healthy growth across each of these products in the year contributing to CSW Caribbean, 4% overall revenue growth on a rebased basis.
Finally to the right of the slide as we look ahead to 2023.
Our focus on continuing our operating momentum through network upgrades and expansion investments, hi, FMC penetration and opportunities in segments, such as small medium businesses.
Moving to slide six and I'll <unk>, Panama segment, starting on the left of the slide we added our highest ever number of Internet Archie used in Panama during the year as we drove penetration across our footprint. We have made significant investments in our network.
And this should provide a platform for continued growth.
At the end of 2022, 96% of our footprint was high speed.
EBIT HFC or fiber to the home compared to 76% at the end of 2020.
Our overall footprint has grown by 20% over the last two years.
And mobile.
We recorded record postpaid additions of 70000 in 2022, driven by a strong first half performance.
In line with our group strategy, we continue to be focused on growing our postpaid base with a driver again being increased penetration of FMC products, which was four percentage points higher year over year.
Moving to the center of the slide and our revenue by product in Panama, our largest product by revenue on mobile <unk>.
Schumer fixed it's the smallest of the three but our fastest growing area with 8% revenue expansion in 2022.
Finally to our 2023 priorities and integration updates underwrite of the slide.
In addition to continuing our organic consumer momentum we are focused on integrating the collateral Panama operations.
Total run rate synergies from the acquisition, including Capex benefits of approximately $15 million.
Approximately $70 million.
As of last month, we are now able to combine our sales channels stores and brand.
We are finalizing our organizational and commercial structure.
And we are consolidating infrastructure and benefiting from associated savings.
Next to slide seven and Liberty, Puerto Rico, our largest single market.
Starting on the left of the slide.
Our Internet base grew steadily through the year delivering 36000, <unk> ads, we've continued to invest to expand our network with fiber to the home utilizing FCC allocated funds to make our infrastructure more resilient.
And mobile Puerto Rico was another market, where we recorded record postpaid adds in the year, adding 85000 subscribers.
We continued to maintain very low levels of churn at around 1% a month postpaid base helped by the quality of our network and FMC offerings.
Moving to the center of the slide consumer mobile, it's our largest product in Puerto Rico with just under 50% share.
This is followed by our fixed business, representing a third of the total and <unk> at 15%.
Internet <unk> ads drove fixed revenue growth. However, mobile was slightly lower year over year postpaid subscriber growth was offset by our <unk> and prepaid subscriber declines as well as the impact of increased subsidies in 2022.
Finally to our 2023 priorities and integration updates underwrite of this slide.
In addition to stabilizing our mobile performance and continuing to grow our consumer fixed business.
2023 focuses on completing the integration of At&t's operations in Puerto Rico.
Total run rate synergies from the combination I expect it to be approximately $70 million by 2024.
Re competed a key milestone by setting up an engaging our mobile core at the end of last year.
Our focus is to our deployment of the it stack and migrating customers into our platforms, thereby replacing services currently provided by AT&T and T SEC.
Consistent with our acquisition plan, we aim to complete the integration by the end of this year.
Turning to slide eight and Liberty Costa Rica.
Starting on the left of the slide our.
Our Internet base grew to the year delivering 25000 data <unk> ads.
Continue to invest in our net but adding or upgrading 50000 homes in 2022, a 15% increase year over year.
Liberty Costa Rica generated the highest postpaid mobile adds across <unk> 115000, net new subscribers.
Moving to the incentive to slide consumer mobile is our largest product with close to 60% share of revenue.
This is followed by a consumer fixed business, representing just under a third and then a small but fast growing <unk> operation.
We generated growth across all segments, with particularly strong performance in <unk> and mobile.
Finally to our 2023 priorities and the integration updates under right of the slide.
In addition to our strong operating and financial performance in 2022, we also successfully completed the rebranding of our operations.
Panama and Puerto Rico. In addition to executing against ongoing commercial objectives. We are focused on integration activities in Costa Rica.
Total run rate synergies from the acquisition of approximately $15 million.
Similar to Puerto Rico, we are now deploying systems. So that we can migrate fully to our old platforms and exit our TSA.
Next to slide nine MLC NW networks in Latam segment.
Starting with Netflix on the left hand side.
We've consistently grown this business since inception over 20 years ago.
Driven by significant increases in capacity demanded by customers.
The chart highlights for the last couple of years.
Set against this the pricing of capacity typically drops each year driven by the declining cost of delivering increased bandwidth.
The dynamic of increased demand quantity offset by declining prices is consistently yielded a net growth in the low single digits year over year with the 6% revenue increase in 2022.
A combination of our available capacity unique network topology, low latency and mesh architecture, which enables rather resilient.
And the ability to provide end to end solution differentiates our proposition in this area.
Looking to 2023 continued growth should be supported by increasing broadband penetration across our markets.
In the center of the slide you can see that subsidy accounts for the majority of revenue with a 75% share.
This drives a strong U S dollar weighting into networks, and Latam segments with over 80% of our revenue generated in U S dollars.
Although a smaller slice of Latam <unk> business is one of our fastest growing areas across the group with revenue 9% higher in 2022.
On the right side of the slide we provide some more color on this area.
The chart here shows two different major product groups within our <unk> business.
The largest element remains connectivity.
However, the highest growth area is value added and managed services, which include cloud based solutions disaster recovery as a service software as a service and others.
We expect the value added services area to continue its strong growth trajectory, representing a larger share of <unk> revenue over time.
We anticipate customers will look to increase the sophistication of the IP platforms and products and this will drive penetration of our offerings.
Moving to slide 10, and an overview of our infrastructure assets.
On the left of the slide you can see that across our consumer markets, 93% of our networks are capable of supporting very high speed through either hybrid fiber coax or fiber to the home.
We have continued to build fiber and migrate our customers from copper to fiber technology.
Over the past four years, our FTE th proportion has increased by 22 percentage points SPF expanded our footprint and upgraded our copper plant.
Upgrading on Netflix, it's a key focus for us as you can see in the center of the slide.
We are committed to getting all our networks to gigabit readiness capable of delivering speeds of one gig and above.
Having begun our journey with 7% of our network at this standard in 2018, we made great strides to reach over two thirds of our network readiness at the end of 2022 and.
And by the end of 2024, we anticipate a nearly 30 percentage points further improvement were approximately 95% of our footprint. We will have achieved gig readiness through either fiber to the home all DOCSIS three one technology.
We are also making our network much more resilient through investments in power resiliency, which is a key challenge in our markets.
Finally on the right of the slide we have LTE in all our markets and <unk> in Puerto Rico, and the U S Virgin Islands.
Have already enabled <unk> core in all markets.
<unk> build will follow over time as <unk> handset penetration improves.
Finally to slide 11, and our strategic focus areas as we look to 2023 and longer shareholder value creation.
Priority is split across three pillars, consistent with the priorities, we identified a year ago.
Netflix in it.
As mentioned this will include expanding and upgrading our fixed networks through our <unk> initiative.
In 2023.
Focus on wireless core transformation.
Integration activity as well as establishing new IP stacks to consolidate platforms and support our business operations.
Second our commercial approach.
We are focused on reducing churn.
This is a material value driver for us commercially and the Kpis for our management team.
Development includes delivering a great in home Wi Fi experience E Sim <unk> Fintech and <unk> products.
It will improve service and reduce costs.
Our greater use of digital channels, we seek to improve our customer journey, reducing friction and buying our products increasing efficiency of our search engine optimization search engine marketing and social networks marketing into future.
This should increase sales and reduce channel costs for the future.
Additionally, following good initial success noted earlier, we are pushing FMC hard in a market <unk>.
Leveraging our key competitive edge that rehash.
That full service capabilities should also enable us to expand our <unk> penetration.
Third and finally capital allocation integration progress and completion is a key focus this year.
We've closed some very accretive transactions and need to complete the integration. So that we can deliver significant synergies and optimize topline performance intend driving adjusted OIBDA and adjusted free cash flow growth in the future we.
We accelerated our share buyback in 2022 and continue to see this as a core part of capital allocation going forward.
As at the end of the year, we had $57 million remaining per our last authorization through the end of <unk>.
We will obviously need to get re authorization sometime this year.
We will continue to consider inorganic opportunities. However, our focus this year is completing the integration projects as mentioned.
Overall, we expect our strategy to drive mid to high single digit adjusted OIBDA growth in 2023, which intern supports our free cash flow guidance.
With that I'll pass you over to Chris Noyes, Our Chief Financial Officer, who will talk you through our financial performance before we take your questions.
Chris.
Thanks, Alan I will focus on Q4 performance on this slide two items to note first we consolidated our Chilean business at the start of Q4 second our Q4 results in Puerto Rico continued to be impacted by Hurricane Fiona Q.
Q4 revenue totaled 1.1 dollars 6 billion.
Representing a reported decline of 9% from Q4, 2021, which included $175 million of revenue associated with Ctr <unk>.
Excluding BTR, our revenue increase year over year by $55 million helped in part by the contribution from our Q3 acquisition of Claro, Panama and modest Rebased growth of 1% on a full year basis, excluding BTR revenue was up 8% on a reported basis and 3% on a rebased basis.
$4 4 billion.
As each of our five operating segments grew year over year, especially our Costa Rica, and CW networks in Latam businesses.
In terms of adjusted OIBDA, we delivered $405 million in Q4, which reflects a 13% reported decline excluding BTR, we experienced a modest decline of 1% on adjusted OIBDA on both a reported and Rebased basis.
Our Q4 Rebased performance was adversely impacted by hurricane Fiona by roughly $7 million.
On a us dollar basis, our adjusted OIBDA sequentially expanded in Q4 by over $20 million from Q3 levels. Excluding <unk> results for the full year, excluding BTR adjusted OIBDA was flat on a rebased basis to $1 6 billion.
With BMW Caribbean, and Costa Rica, performing exceptionally well our growth was adversely impacted by $26 million of integration expenses in 2022, reflecting a $10 million increase year over year, and roughly $19 million of adverse impacts from hurricane Fiona.
For 2023, we expect to incur over $30 million of integration costs and more importantly, our targeting mid to high single digit Rebased adjusted OIBDA growth for Allo law, which growth will be significantly weighted to <unk>.
Slide 14, recaps, our revenue and adjusted OIBDA results by current segment for Q4 and the full year.
Beginning on the left with CFW Caribbean, we reported $367 million of revenue in Q4, reflecting 3% rebased growth and $138 million of adjusted OIBDA or 10% Rebased growth in the quarter, our residential mobile and <unk> businesses delivered mid single digit rebased growth on the back of volume increase.
<unk>.
Our double digit Rebased adjusted OIBDA growth in Q4 was led by the Bahamas came in in the Dutch Caribbean.
The prior quarters the business experienced a 250 basis point increase in suggests the OIBDA margin as the higher year over year revenue was matched with holding both direct and indirect costs relatively flat, which we feel is a very good result, given inflationary pressures.
Moving to cable <unk> wireless Panama, Q4 revenue and adjusted OIBDA were the highest totals of the year with $201 million and $57 million respectively. Rev.
Revenue declined 3% on a rebased basis year over year, principally as a result of a 7% Rebase decrease in <unk> as the prior year period included a large amount of project related revenue.
Adjusted OIBDA declined 10% in the quarter largely as a result of the drop in revenue combined with higher bad debt expense, including the cost of factoring certain receivables.
Fortunately, our adjusted OIBDA stepped up by $11 million in Q4 from Q3 entering 2023, we can now legally integrate the CW P and collateral Panama customer facing operations.
As a result, we expect to significantly expand adjusted OIBDA, even with integration costs expected to run in excess of $10 million.
Turning to the Middle column CW networks in Latin America, which is the third operating segment of our cable and wireless credit pool had a strong Q4 with $124 million revenue and $80 million and adjusted OIBDA our.
Our rebased revenue growth rate of 14% was due to higher revenue associated with a significant subsea network customer that is recognized on a cash basis increased affiliate revenue and growth in <unk> service related connectivity and managed services. This revenue growth contributed to our 13% rebased growth in adjusted OIBDA.
Second from the right Liberty, Puerto Rico, our revenue in Q4 was $374 million, reflecting flat year over year, Rebased growth and a modest increase from Q3 of $7 million.
Our rebased basis residential fixed revenue growth was driven by approximately 40000 RG <unk> additions during the year, partly offset by the negative impact of Hurricane Fiona residential mobile revenue was broadly flat compared to the prior year period as higher handset sales were offset by lower <unk> and a decline in prepaid mobile subscribers.
Adjusted OIBDA was $120 million in Q4, resulting in a rebased decline of 11%.
Several factors contributed to this year over year decline, including $7 million in revenue credits and costs associated with Hurricane Fiona increased facility and maintenance costs and the adverse gross margin impact of robust handset sales in the quarter as compared to last year.
Wrapping up with Costa Rica on the far right, we generated Q4 revenue of $117 million and $36 million of adjusted EBITDA, reflecting strong rebased revenue growth of 3% and an alloy segment, leading to 17% Rebased adjusted OIBDA growth.
Revenue was driven to a large extent by increases in residential mobile and broadband subscribers.
OIBDA Rebased growth was not only helped by the revenue contribution by tight cost management and a favorable FX in the second half of the year with our 2022 subscriber additions and a combination of lower integration expenses and higher synergies. We are poised for strong growth in 2023.
Turning to slide 15, I will discuss 2020, <unk> additions and adjusted Scf and our 2023 outlook.
First we incurred $225 million of <unk> additions in Q4 and $816 million for the full year with the latter representing 17% of revenue a little better than our 2022 guidance without ctr. Our total full year spend will have dropped to $709 million or 16% of revenue.
Same basis.
We foresee having very attractive capital deployment opportunities in 2023, including with respect to our own equity, hence will look to more aggressively upstream cash out of non wholly owned entities this year and going forward.
We estimate that third party distributions could total up to $100 million this year.
Moving to slide 16 at December 31, 2022, and adjusting for the 2023 January Costa Rica financing, we had $8 billion, a total debt approximately $800 million of cash and $1 billion of availability under our revolving credit lines at La gross leverage was $5 one times in net law.
<unk> was four six times.
Post quarter and in January of 2023, we refinanced our 2024 bank debt maturities in Costa Rica, with New 450 million dollar eight year that from both the inner American development Bank and institutional investors via a sustainability link bond, which is the largest.
Of it's kind in Central America. It was the first single berated issuance from Atlanta corporate to come to market since March 2022, and a milestone transaction for the poster Rican corporate market.
As a result of this transaction we have further improved our maturity schedule with only about 5% of our debt do before 2027.
Our key next maturity over the coming four years is our $400 million convertible bond, which is due in July 2024, and we currently have ample liquidity to address this data maturity overall.
Overall with minimal near term maturities, we can look to be opportunistic and wait for improving market conditions before addressing that due in 2027 and beyond.
Further the long data maturity wall provides us with significant financial flexibility in the meantime to allocate capital to higher yielding activities.
In terms of our stock repurchase activity, we bought nearly $170 million in 2022, bringing our total up to $243 million since the program's inception are.
R 2022 amount was about 90% of our consolidated 2022 adjusted free cash flow.
Under our current authorization, we have $57 million remaining through December 31, 2024 is Ballon mentioned, we would expect to use this amount in 2023 and will look to our board for additional authorization during the year.
In summary, we made steady progress with respect to our longer term strategy in 2022 and completed the inorganic transactions in Panama Chile.
Looking forward 2023 is geared towards the operational execution as we begin to see the benefits from our network digital platform and product investments as well as centralization efforts. Additionally, a big part of our story in 2023 will involve the integrations in Puerto Rico, Costa Rica, and Panama successful implementation will set the stage.
For significant cash flow acceleration into 2024.
We remain disciplined around our capex spend even as we invest in our fixed network. Both in terms of fiber to the home expansion and shutting down our residual copper plan expanding mobile capacity throughout our markets and advancing our integration efforts.
Capital allocation will remain a key focus as we seek to drive shareholder return and given global market conditions likely to see his dedicate more spent internal investments, including our stock.
And finally, we have set the bar high for ourselves in 2023, we are pursuing mid to high single digit Rebase adjusted OIBDA growth peony additions at approximately 16% of revenue and adjusted free cash flow before distributions to partners of approximately $300 million.
With that operator, please open the line for questions.
Thank you.
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The first question, we have from the phone lines have used them.
Administrate research.
Oh that goes.
Thanks for the call a couple of questions. Please one.
Just on the free cash flow.
Four.
2023.
A little bit around with energy has occurred and I just wanted to do you have a number four.
Twenty-three as to what about synergy capture will be.
Within the within the 300 million.
And then secondly, please just only on the minority of dividends.
Which is of interest you hold on to sleep very limited.
Last year.
Like a bit of a catch up payment. This year, what is the best way to think about that number.
Going forward. Please thank you.
No lettuce limit.
Okay, Let me think.
I'll start with the dividends person will get back to the free cash flow.
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Last year, we did the acquisition in Panama.
Not.
We spend most of the cash transaction Mcmorrow acquisition, and then sending the Bahamas, what we did was sometimes equal.
In the business, especially when you think.
Natural disasters Hurricanes et cetera, we have issued dividend in the Bahamas, Brian .
And.
And I think what Christmas, indicating and his comment was that we are working with our partners.
Dominion.
We need to issue dividend.
This year and I suspect, we will and from where we stand of course bring me up stream all that cash.
Capital allocation needs in our business.
Significant so.
We feel really good about the cash during good.
<unk> as an example.
On the free cash flow side, maybe we are not breaking out the synergies, but I can tell you. This multiply synergies are going to get in and 24.
So you'll see this year's FTF of course have synergies in there, but the bulk of <unk> drop in 21 beyond so clearly you can see even further expansion in next year.
I would I would add to assume.
Assume that your question around maybe is more of a <unk>.
Normalized bad I think there is we are sitting on some cash balances about Panama Bahamas. So I think it's rightfully good to assume that there is a little bit of a catch up I think if you look out until 2004 and beyond really be a factor of the free cash flow generation of each of those businesses.
Both of which we we think we can continue to grow the cash flow, particularly in Panama with the synergies kicking in in 2003 going into 2004.
That's right.
Thanks. Thanks.
Okay got it perfect.
Thank you as a reminder, if you would like to ask any more questions. Please press stop on one and your telephone keypad.
Mmm.
Operator, if we don't have any further questions you know I think a presentation.
Morning was self evident so, but maybe 20 seconds and then we'll.
We'll call it a rat.
As a reminder.
Questions.
Okay, well operator, thank you and everybody in the call I want to thank you all your support clearly reacquaint excited about three D printing.
Three with the guidance that credit just gave I. Thank God the management team feels really good about a region feels really good about the businesses that we operate in.
Feel really good as well on the ability to execute this year. So reduced thank you for your support and we look forward to talking to you again in the next quarter.
Everybody.
Thank you though.
Gentlemen.
This completes Liberty Latin America is full year 2022 investigator.
As a reminder.
Every play of the call will be available to the Investor Relations section.
<unk> website at W. W Dot L L dotcom.
You can also find a copy of today's presentation cameos.
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