Liberty Latin America Reports Q3 2023 Results

Added 44,000 net organic internet and postpaid mobile subscribers

Delivered operating income of $163 million, up 7% YoY

Expanded Adjusted OIBDA to $428 million, rebased growth of 10%

Repurchased $112 million in equity and convertible notes

Announced acquisition of spectrum and subscriber assets in PR & USVI for $256 million

Liberty Latin America Ltd. (“Liberty Latin America” or “LLA”) (NASDAQ: LILA and LILAK, OTC Link: LILAB) today announced its financial and operating results for the three months (“Q3”) and nine months (“YTD”) ended September 30, 2023.

CEO Balan Nair commented, “We drove subscriber growth in the third quarter as we continued to execute our commercial strategies. All of our reporting segments delivered higher broadband subscribers, and we added or upgraded over 100,000 homes passed in Q3. Postpaid mobile adds were again driven by our market leading operation in Costa Rica, as well as continued growth across C&W Caribbean markets.”

“LLA reported $1.1 billion in revenue, $163 million of operating income, and $428 million in Adjusted OIBDA in the third quarter. Together with modest top-line growth and the benefits of synergy realization and efficiency initiatives, four of our five operating segments delivered double-digit rebased Adjusted OIBDA growth in the quarter, which propelled us to achieve accelerated 10% rebased Adjusted OIBDA growth. This is LLA’s best quarterly result in 2 years.”

“Importantly, we continue to make progress on our integration and with the migration of mobile subscribers in Puerto Rico and the USVI. To date, we have migrated approximately 225,000 subscribers and just launched sales efforts for prepaid products on our new platform. Our latest postpaid offerings are also gaining traction with iPhone 15 sales and shipments exceeding the iPhone 14 launch by more than 50%. And our fixed services year-to-date revenue growth is at 5%, which bodes well for when we are able to sell a bundled offering in 2024.”

“We are also partnering with AT&T to extend our migration window by four months through the end of April 2024. By extending the window, we expect to enhance the migration of incompatible handsets, integrate all iPhone and Samsung software upgrades, complete all B2B account migrations and importantly, minimize changes and disruptions during the holiday season.”

“Our commitment to Puerto Rico and the USVI is bolstered by our announcement to acquire a combination of over 100 MHz of spectrum and approximately 120,000 Boost subscribers from DISH Network. Upon completion, this transaction provides us with valuable spectrum that will allow us to add more capacity, increase speeds, and further strengthen our leading 5G mobile network, as well as increase our scale in the prepaid market.”

“During Q3 we purchased $112 million of our equity and convertible notes, bringing our year-to-date spend to nearly $300 million. Overall, we continued to drive operational and financial progress in the quarter and have taken important steps to create value through our inorganic strategy. We are on-track to build on this outstanding growth for a robust fourth quarter performance and continued growth in future years.”

Q3 Business Highlights

• C&W Caribbean: sustained subscriber momentum and double-digit Adj. OIBDA growth
  • 20,000 internet and mobile postpaid organic adds
  • Reported and rebased Adj. OIBDA growth of 13% and 14%, respectively
• C&W Panama: Claro Panamá acquisition synergies drive strong growth
  • Reported and rebased revenue growth of 10%
  • Reported and rebased Adj. OIBDA growth of 25%
• Liberty Networks: strong financial performance
  • Reported and rebased revenue growth of 9% and 10%, respectively
  • Reported and rebased Adj. OIBDA growth of 9% and 11%, respectively
• Liberty Puerto Rico: focus on integration
  • Robust internet subscriber growth, 29,000 net adds over last twelve months
  • ~225,000 customers migrated to LPR IT platform
• Liberty Costa Rica: postpaid momentum and strong currency drive Adj. OIBDA growth
  • Strongest postpaid quarter of the year, adds over 40% higher sequentially
  • Adj. OIBDA up 52% and 21% on a reported and rebased basis, respectively

Announced transaction

Acquisition of spectrum and subscriber assets in Puerto Rico & USVI from DISH Network

• >100MHz of low, mid and high band spectrum and ~120,000 prepaid subscribers
• Aggregate asset purchase price of $256 million to be paid in four annual installments
• Funding through local liquidity sources, including cash on hand, cash generated from operations, cash generated from asset sales, and/or revolving credit facilities

FY 2023 LLA Financial Guidance

• Adjusted OIBDA mid-to-high single digit rebased growth
• P&E additions as a percentage of revenue at ~16%
• Adjusted FCF of ~$300 million, before distributions to noncontrolling interests
  • Our target remains as previously provided, however several factors have materialized recently which add variability this year including the Puerto Rico migration and dependency on large payments (particularly in Panama) due from B2G and B2B customers that could fall into next year. The delay in finalizing the Puerto Rico migration until next year will result in additional costs and adverse impacts on our working capital in 2023, in large part due to the need to carry significantly higher mobile handset inventory in order to drive sales across both the AT&T systems and our new systems.

Financial and Operating Highlights

Revenue Highlights

The following table presents (i) revenue of each of our segments and corporate operations for the periods indicated and (ii) the percentage change from period-to-period on both a reported and rebased basis:

• Reported revenue declined by 8% for each of the three and nine months ended September 30, 2023.
  • Reported revenue declined in Q3 as (1) net organic growth driven by C&W Panama and Liberty Networks and (2) net foreign exchange benefits of $24 million, were more than offset by the negative year-over-year impact of $130 million related to VTR's deconsolidation following the formation of the Chile JV in October 2022 and organic decline in Liberty Puerto Rico.
  • Reported revenue declined in YTD 2023 as (1) the addition of $70 million from the acquisition of América Móvil's Panama operations (Claro Panamá) on July 1, 2022, (2) net foreign exchange benefits of $63 million and (3) net organic growth driven by C&W Panama and Liberty Networks, were more than offset by the negative year-over-year impact of $451 million related to VTR's deconsolidation and organic decline in Liberty Puerto Rico.

Q3 2023 Revenue Growth – Segment Highlights

• C&W Caribbean: revenue was flat on a reported basis and grew by 1% on a rebased basis, year-over-year.
  • Fixed residential revenue decreased by 1% on a reported basis and was flat on a rebased basis. Subscription revenue grew year-over-year, driven by higher internet broadband subscribers, primarily in Jamaica where we added 21,000 RGUs over the last twelve months. This was partly offset by lower ARPU from telephony services due to fixed-mobile convergence incentives.
  • Mobile revenue was up 6% on a reported basis and 7% higher on a rebased basis. The increase followed our focus on fixed-mobile convergence propositions which drove 75,000 postpaid mobile additions in the last twelve months, and higher prepaid ARPU resulting from price increases during Q1 2023. We have also continued to see an increase in inbound roaming revenue as tourism has recovered in the region.
  • B2B revenue was 3% lower on both a reported and rebased basis. The discontinuation of a non-core transit services agreement at the beginning of 2023 at C&W Jamaica had a $10 million negative impact on revenue as compared to the prior year quarter. This translates to a 270 basis point and 740 basis point impact on C&W Caribbean's total revenue and B2B revenue growth rates, respectively and more than offset underlying B2B growth in the period.
• C&W Panama: revenue grew by 10% on a reported and rebased basis.
  • Fixed residential revenue was up 7% on a reported and rebased basis. Growth was driven by RGU additions of 59,000 over the past twelve months, following investments in our networks, products and commercial activities.
  • Mobile revenue was 1% lower on a reported and rebased basis. Subscription revenue was stable, however a reduction in handset equipment revenue drove the year-over-year rebased decline.
  • B2B revenue grew by 26% on a reported and rebased basis. The year-over-year performance was driven by increased revenue from government related projects and data services.
• Liberty Networks: revenue grew by 9% and 10% on a reported and rebased basis, respectively. Growth on a rebased basis was driven by higher wholesale network revenue primarily associated with a significant customer that is recognized on a cash basis, and higher affiliate revenue due to increased capacity usage. Enterprise revenue was also higher year-over-year due to continued growth in B2B connectivity and managed services.
• Liberty Puerto Rico: revenue was 4% lower on a reported and rebased basis.
  • Residential fixed revenue growth of 10% was due to higher ARPU following rate increases and the negative prior-year impact of credits issued to customers as a result of power outages related to Hurricane Fiona. The increase was also driven by net broadband subscriber additions totaling 29,000 over the past twelve months.
  • Residential mobile revenue was 10% lower compared to the prior-year period. This was driven by: (1) lower ARPU from mobile services, due to a higher number of low cost and discounted plans and the impact of higher contract asset amortization, (2) lower roaming revenue, and (3) a decline in the average number of prepaid mobile subscribers.
    • Sequentially, revenue grew by 2% primarily due to increased handset sales following new product initiatives.
  • Other revenue declined by $13 million as compared to the prior-year quarter due to a reduction in revenue recognized on funds received from the FCC, primarily due to increased recognition in Q3 2022 related to broadband expansion phasing.
• Liberty Costa Rica: revenue grew by 23% on a reported basis and was flat on a rebased basis. Reported performance benefited from a $24 million positive foreign exchange impact year-over-year, as the Costa Rican colon appreciated against the U.S. dollar. The overall year-over-year rebased performance was a result of mobile postpaid subscriber growth offset by lower video RGUs and ARPU due to increased retention discounts and declines in higher ARPU plans.

Operating Income (Loss)

• Operating income (loss) was $163 million and $152 million for the three months ended September 30, 2023 and 2022, respectively, and $405 million and ($20 million) for the nine months ended September 30, 2023 and 2022, respectively.
  • The increase for the three-month comparison is primarily due to higher Adjusted OIBDA. The improvement from operating loss to operating income for the nine-month comparison is primarily due to the net impact of (i) lower impairment, restructuring and other operating items, net, mostly due to goodwill impairments recorded during the second quarter of 2022, (ii) higher depreciation and amortization and (iii) lower Adjusted OIBDA.

Adjusted OIBDA Highlights

The following table presents (i) Adjusted OIBDA of each of our reportable segments and our corporate category for the periods indicated and (ii) the percentage change from period-to-period on both a reported and rebased basis:

• Our reported Adjusted OIBDA for the three and nine months ended September 30, 2023 increased by 4% and declined by 3%, respectively, as compared to the corresponding prior-year periods.
  • Reported Adjusted OIBDA was higher in Q3 as (1) organic growth in C&W Caribbean, C&W Panama, and Liberty Costa Rica, and (2) the appreciation of the Costa Rican colon, were partly offset by the deconsolidation of VTR and organic decline in Liberty Puerto Rico.
  • Reported Adjusted OIBDA was lower YTD as (1) organic growth in C&W Caribbean, C&W Panama, and Liberty Costa Rica, and (2) the appreciation of the Costa Rican colon, were more than offset by the deconsolidation of VTR and organic decline in Liberty Puerto Rico.

Q3 2023 Adjusted OIBDA Growth – Segment Highlights

• C&W Caribbean: Adjusted OIBDA increased by 13% and 14% on a reported and rebased basis, respectively. Performance was driven by the aforementioned mobile revenue growth and lower direct costs, including declines in programming expenses. Our Adjusted OIBDA margin improved by over 400 basis points year-over-year to 42%.
• C&W Panama: Adjusted OIBDA increased by 25% on a reported and rebased basis. The performance was driven by value capture activities related to the Claro Panamá acquisition.
• Liberty Networks: Adjusted OIBDA increased by 9% and 11% on a reported and rebased basis, respectively. Our rebased performance was driven by the aforementioned revenue growth in the quarter.
• Liberty Puerto Rico: Adjusted OIBDA declined by 11% on a reported and rebased basis. The performance was driven by the net impact of our aforementioned revenue decline, lower direct costs, primarily due to lower gross sales, and higher other operating costs year-over-year.
• Liberty Costa Rica: Adjusted OIBDA grew by 52% and 21% on a reported and rebased basis, respectively. Rebased performance was driven by favorable foreign exchange movements on non-CRC denominated costs and execution of our integration plan.
• Corporate: Adjusted OIBDA was 41% and 43% higher on a reported and rebased basis, respectively. Growth as compared to the prior-year period was driven by lower bonus costs and the timing of professional services.

Net Earnings (Loss) Attributable to Shareholders

• Net earnings (loss) attributable to shareholders was $60 million and $76 million for the three months ended September 30, 2023 and 2022, respectively, and $29 million and ($309 million) for the nine months ended September 30, 2023 and 2022, respectively.

Property & Equipment Additions and Capital Expenditures

The table below highlights the categories of the property and equipment additions (P&E Additions) for the indicated periods and reconciles to cash paid for capital expenditures, net.

1. Table excludes Liberty Networks as that segment only provides B2B-related services.

Summary of Debt, Finance Lease Obligations and Cash and Cash Equivalents

The following table details the U.S. dollar equivalent balances of the outstanding principal amounts of our debt and finance lease obligations, and cash and cash equivalents at September 30, 2023:

1. Represents the amount held by Liberty Latin America on a standalone basis plus the aggregate amount held by subsidiaries of Liberty Latin America that are outside our borrowing groups.
2. Represents the C&W borrowing group, including the C&W Caribbean, Liberty Networks and C&W Panama reportable segments.
3. Cash amount includes restricted cash that serves as collateral against certain lines of credit associated with the funding received from the FCC to continue to expand and improve our fixed network in Puerto Rico.
4. Consolidated leverage ratios are non-GAAP measures. For additional information, including definitions of our consolidated leverage ratios and required reconciliations, see Non-GAAP Reconciliations below.
5. For purposes of calculating our weighted average tenor, total debt excludes vendor financing and finance lease obligations.
6. At September 30, 2023, the full amount of unused borrowing capacity under our subsidiaries' revolving credit facilities was available to be borrowed, both before and after completion of the September 30, 2023 compliance reporting requirements.

Quarterly Subscriber Variance

1. Relates to homes passed adjustments through the network upgrade process.

ARPU per Customer Relationship

The following table provides ARPU per customer relationship for the indicated periods:

Mobile ARPU

The following table provides ARPU per mobile subscriber for the indicated periods:

1. The FX-Neutral change represents the percentage change on a sequential basis adjusted for FX impacts and is calculated by adjusting the current-period figures to reflect translation at the foreign currency rates used to translate the prior quarter amounts.
2. The ARPU per customer relationship amounts in Costa Rican colones for the three months ended September 30, 2023 and June 30, 2023 were CRC 24,760 and CRC 25,451, respectively.
3. The mobile ARPU amount in Costa Rican colones for the three months ended September 30, 2023 and June 30, 2023 were CRC 3,544 and CRC 3,579, respectively.

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategies, priorities and objectives, performance, guidance and growth expectations for 2023; our digital strategy, product innovation and commercial plans and projects; subscriber growth; expectations on demand for connectivity in the region; our anticipated integration plans, including timing for completion, synergies, opportunities and integration costs in Puerto Rico following the AT&T Acquisition, in Costa Rica following the acquisition of Telefónica's Costa Rica business and in Panama following the acquisition of América Móvil’s Panama operations; statements regarding the benefits and expected impact of the transaction with DISH Networks; the strength of our balance sheet and tenor of our debt; our share repurchase program; and other information and statements that are not historical fact. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include events that are outside of our control, such as hurricanes and other natural disasters, political or social events, and pandemics, such as COVID-19, the uncertainties surrounding such events, the ability and cost to restore networks in the markets impacted by hurricanes or generally to respond to any such events; the continued use by subscribers and potential subscribers of our services and their willingness to upgrade to our more advanced offerings; our ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the effects of changes in laws or regulation; general economic factors; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from acquired businesses; the ability to obtain regulatory approvals for the transaction with DISH Networks and satisfy the other conditions to closing; the availability of attractive programming for our video services and the costs associated with such programming; our ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies to access cash of their respective subsidiaries; the impact of our operating companies' future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors to timely deliver quality products, equipment, software, services and access; our ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including our most recently filed Form 10-K and Form 10-Q. These forward-looking statements speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

About Liberty Latin America

Liberty Latin America is a leading communications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands BTC, Flow, Liberty and Más Móvil, and through ClaroVTR, our joint venture in Chile. The communications and entertainment services that we offer to our residential and business customers in the region include digital video, broadband internet, telephony and mobile services. Our business products and services include enterprise-grade connectivity, data center, hosting and managed solutions, as well as information technology solutions with customers ranging from small and medium enterprises to international companies and governmental agencies. In addition, Liberty Latin America operates a subsea and terrestrial fiber optic cable network that connects approximately 40 markets in the region.

Liberty Latin America has three separate classes of common shares, which are traded on the NASDAQ Global Select Market under the symbols “LILA” (Class A) and “LILAK” (Class C), and on the OTC link under the symbol “LILAB” (Class B).

For more information, please visit www.lla.com.

Footnotes

1. Rebased growth rates are a non-GAAP measure. The indicated growth rates are rebased for the estimated impacts of (i) for the nine-month comparison, an acquisition, (ii) a disposition, (iii) the acquisition by our Liberty Costa Rica segment of the B2B Costa Rican operations within our Liberty Networks segment and (iv) FX. See Non-GAAP Reconciliations below.
2. We provide rebased revenue and Adjusted OIBDA growth rates, each a non-GAAP measure, for Liberty Latin America excluding VTR in light of the October 2022 deconsolidation of VTR that occurred in connection with the closing of our joint venture in Chile with América Móvil. See the tables below for the required non-GAAP reconciliations.
3. Consolidated Adjusted OIBDA is a non-GAAP measure. For the definition of Adjusted OIBDA and required reconciliations, see Non-GAAP Reconciliations below.
4. Adjusted Free Cash Flow (“Adjusted FCF”) is a non-GAAP measure. For the definition of Adjusted FCF and required reconciliations, see Non-GAAP Reconciliations below.
5. See Glossary for the definition of RGUs and mobile subscribers. Organic figures exclude RGUs and mobile subscribers of acquired entities at the date of acquisition and other non-organic adjustments, but include the impact of changes in RGUs and mobile subscribers from the date of acquisition. All subscriber / RGU additions or losses refer to net organic changes, unless otherwise noted.

Additional Information | Cable & Wireless Borrowing Group

The following tables reflect preliminary unaudited selected financial results, on a consolidated C&W basis, for the periods indicated, in accordance with U.S. GAAP.

1. Indicated growth rates are rebased for the estimated impacts of an acquisition for the nine-month comparison, FX and the acquisition by the Liberty Costa Rica borrowing group of the B2B Costa Rican operations within our C&W borrowing group.

The following table details the U.S. dollar equivalent of the nominal amount outstanding of C&W's third-party debt and cash and cash equivalents:

1. During May 2023, the terms of the agreements underlying the C&W Credit Facilities were amended, which resulted in (i) the replacement of LIBOR-based benchmark rates with Adjusted Term SOFR for the C&W Term Loan B-5 Facility, the C&W Term Loan B-6 Facility and the C&W Revolving Credit Facility for interest periods commencing after June 30, 2023, (ii) the modification of the provisions for determining an alternative rate of interest upon the occurrence of certain events relating to the availability of interest rate benchmarks and (iii) certain conforming changes.
2. Amounts include $69 million of amortizing loans which are due in three annual installments beginning in May 2024.

• At September 30, 2023, our third-party total and proportionate net debt was $4.2 billion and $4.0 billion, respectively, our Fully-swapped Borrowing Cost was 5.4%, and the average tenor of our debt obligations (excluding vendor financing) was approximately 4.4 years.
• Our portion of Adjusted OIBDA, after deducting the noncontrolling interests' share, (“Proportionate Adjusted OIBDA”) was $231 million for Q3 2023.
• C&W's Covenant Proportionate Net Leverage Ratio was 4.1x, which is calculated by annualizing the last two quarters of Covenant EBITDA in accordance with C&W's Credit Agreement.
• At September 30, 2023, we had maximum undrawn commitments of $655 million, including $95 million under our regional facilities. At September 30, 2023, the full amount of unused borrowing capacity under our credit facilities (including regional facilities) was available to be borrowed, both before and after completion of the September 30, 2023 compliance reporting requirements.

Liberty Puerto Rico (LPR) Borrowing Group

The following tables reflect preliminary unaudited selected financial results, on a consolidated Liberty Puerto Rico basis, for the periods indicated, in accordance with U.S. GAAP:

The following table details the nominal amount outstanding of Liberty Puerto Rico's third-party debt, finance lease obligations and cash and cash equivalents: