Liberty Latin America Reports Q2 and H1 2019 Results

Q2 Rebased¹ Revenue Growth of 3% to $983 million

Solid Q2 Subscriber Growth with 67,000 Fixed and 44,000 Mobile Additions

Operating Income of $144 million in Q2, 16% Higher Year-over-Year

Delivered Q2 Rebased OCF² Growth of 8% to $387 million

Raising 2019 Financial Guidance for Adjusted FCF³

DENVER, Colorado–(BUSINESS WIRE)–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 (“Q2”) and six months (“YTD” or “H1”) ended June 30, 2019.

CEO Balan Nair commented, “Our second quarter performance showed further evidence of our developing operational momentum. We continued to leverage our investments in network, product and customer experience to add over 110,000 subscribers across our fixed and mobile services in Q2. In fixed services, we added 67,000 RGUs, including 44,000 new broadband subscribers underpinned by continued strong demand for our market-leading speeds. On the mobile front, we reported our second consecutive quarter of growth, adding 44,000 new subscribers. This performance was led by Jamaica, where our focus on simplicity in the “Paint Jamaica Blue” campaign showed early success.”

“We are focused on enhancing broadband connectivity across our markets, and in Q2 we added or upgraded 160,000 homes, bringing the total so far this year to approximately 240,000. Product innovation is also an important element of our strategy and we successfully launched Replay TV in Puerto Rico and increased our top-speed to 600 Mbps in Chile.”

“Financially, we reported rebased revenue growth of 3%, showing steady development in our fixed residential and B2B businesses, and importantly, mobile revenue stabilized on a sequential basis at Cable & Wireless. On an OCF basis, we delivered 8% rebased growth with each of our segments driving year-over-year growth. The increase in OCF, combined with reduced year-over-year capital intensity, propelled adjusted free cash flow to $68 million in Q2, or $116 million for the first half of 2019. Given our performance in H1 2019, we are raising our adjusted free cash flow target in 2019 from $125 million to $150 million.”

“Capitalizing on attractive financial markets over the last four months, we pro-actively refinanced debt in our C&W credit pool, further improving our maturity profile. We also issued 2% convertible senior notes at Liberty Latin America in June, generating approximately $350 million of net proceeds. As a result, we ended Q2 with over $900 million of cash and over $1 billion of untapped revolving credit facilities.”

“For the second half of 2019, we are building on our operational momentum, including further expanding our leading networks and launching innovative products for our customers. Combined with our ongoing focus on efficiency opportunities across LLA, we are confident in achieving our targets for the year.”

Business Highlights

• C&W’s revitalized propositions resonating well with customers:
  • Record Q2 RGU additions of 30,000 with growth across all three fixed products
  • Delivered 34,000 mobile subscriber additions, powered by Jamaica
  • Successful start to UTS integration; expected to deliver material synergies over time

• VTR/Cabletica focused on further enhancing customer experience:
  • Added 31,000 RGUs, driven by broadband gains
  • Cabletica continued strong financial and operational performance in Q2
  • New build initiatives delivered over 55,000 new homes across Chile and Costa Rica

• Liberty Puerto Rico delivered another strong quarter:
  • Added 5,000 RGUs and achieved a record NPS score in June
  • Leading video proposition enhanced with launch of Replay TV
  • Expanded footprint with 5,000 new homes passed

Liberty Latin America 2019 Financial Guidance – Update

• Reconfirming our OCF guidance of >$1.525 billion
  • Based on USDCLP of 670 and USDJMD of 130 (as provided on February 20, 2019)

• Reconfirming P&E additions as a percentage of revenue at ~19%

• Increasing our Adjusted FCF guidance to ~$150 million from ~$125 million

Financial Highlights

Subscriber Growth⁴

• Fixed-line customer additions: Reported organic additions of 30,000 in Q2 2019, with gains across all of our three segments led by VTR/Cabletica with 21,000.

• Product additions: Delivered organic fixed RGU additions of 67,000, supported by our new build/upgrade program, and organic mobile subscriber additions of 44,000 in Q2 2019.

• C&W added 30,000 fixed RGUs during Q2; our best Q2 result since 2016.
  • Broadband RGU additions of 15,000 were up 4,000 year-over-year; mainly driven by success in our largest markets of Panama and Jamaica, where each added 5,000 RGUs. Key drivers across C&W were (1) the success of our revitalized customer propositions centered around our leading broadband speeds and (2) the penetration of our expanding network.
  • Video RGU additions of 8,000 were flat year-over-year. Panama and Barbados both saw year-over-year improvements with additions of 4,000 and 3,000 RGUs, respectively, driven by the aforementioned new propositions, offset by lower growth in Jamaica.
  • Fixed-line telephony RGU additions of 8,000 were slightly down by 2,000 year-over-year. Additions in Q2 were mainly driven by Trinidad and Panama.
  • Mobile subscribers increased by 34,000 in Q2, our second consecutive quarter of growth and a material year-over-year improvement.
    • Jamaica anchored this strong growth with 76,000 mobile additions, our best quarterly result in any market since Q2 2016. This success was driven by our new customer value propositions launched in April.
    • In Panama, we recorded net subscriber losses of 26,000, as compared to the prior quarter, mainly as a result of heightened competition, especially in the low-end prepaid segment.

• VTR/Cabletica added 31,000 fixed RGUs during Q2, with additions across both markets. VTR added 22,000 RGUs driven by 18,000 broadband and 9,000 video RGU additions, partially offset by fixed-line telephony RGU losses. We continue to leverage our superior network in Chile and increased our top broadband speed to 600 Mbps across our full network of 3.2 million two-way homes in July. Cabletica added 9,000 RGUs, driven by broadband gains.
  • VTR delivered a consistent mobile performance, adding another 10,000 subscribers in Q2. At June 30, 2019, our mobile subscriber base totaled 276,000, of which 97% were on postpaid plans.

• Liberty Puerto Rico added 5,000 fixed RGUs in Q2, returning to more normalized RGU growth levels as compared to prior quarters following the completion of our network restoration in 2018. This result was fueled by broadband additions as our market-leading speeds continue to resonate well with our customers.

   

Revenue Highlights

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

• Our reported revenue for the three and six months ended June 30, 2019 increased by 7% and 5%, respectively.
  • Reported revenue growth in Q2 2019 was largely driven by (1) an increase of $24 million at Liberty Puerto Rico, primarily attributable to a strong recovery from the 2017 hurricanes, and (2) increases of $33 million for each segment of C&W and VTR/Cabletica related to the acquisitions of UTS and Cabletica, respectively. These increases were partially offset by a negative foreign exchange (“FX”) impact of $31 million, primarily related to a depreciation of the Chilean peso in relation to the US dollar.
  • Reported revenue growth in H1 2019 was primarily driven by (1) an increase of $65 million related to the acquisition of Cabletica and $33 million related to the acquisition of UTS and (2) an increase of $60 million at Liberty Puerto Rico, mainly driven by the recovery mentioned above. These increases were partially offset by a negative FX impact of $63 million, primarily related to the Chilean peso.

Q2 2019 Rebased Revenue Growth – Segment Highlights

• C&W: Rebased revenue decline of less than 1% year-over-year, which reflects an improvement from Q1 2019 performance.
  • Mobile revenue attrition of 9% on a rebased basis was partly offset by rebased revenue growth of 4% in B2B and 1% in residential fixed. The reduction in mobile revenue year-over-year was primarily attributable to lower service revenue in Panama and the Bahamas where continued competition drove decreases in ARPU and the average number of subscribers. Growth in B2B was supported by increased managed services revenue in Jamaica and LatAm, while growth in residential fixed revenue was largely fueled by broadband, as C&W added over 50,000 subscribers over the last twelve months.

• VTR/Cabletica: Rebased revenue growth of 3% was largely driven by subscriber growth across our three business lines; residential fixed, B2B and mobile.

• Liberty Puerto Rico: Rebased revenue performance was supported by strong subscriber growth over the last twelve months. In fact, Q2 revenue of $104 million compares well to the revenue that was generated in the last full quarter preceding the hurricanes ($108 million in Q2 2017).

Operating Income

• Operating income was $144 million and $124 million for the three months ended June 30, 2019 and 2018, respectively, and $257 million and $223 million for the six months ended June 30, 2019 and 2018, respectively.
  • Operating income increased during the three and six months ended June 30, 2019, as compared with the corresponding periods during 2018, primarily due to the net effect of (i) higher OCF, as further described below, and (ii) an increase in depreciation and amortization expense.

Operating Cash Flow Highlights

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

• Our reported OCF for the three and six months ended June 30, 2019 increased by 10% and 8.5%, respectively.
  • Reported OCF growth in Q2 2019 was primarily driven by (1) an increase of $16 million at Liberty Puerto Rico, primarily related to our strong recovery from the 2017 hurricanes, (2) organic growth at C&W and VTR/Cabletica, (3) an increase of $12 million from the inclusion of Cabletica and (4) an increase of $9 million from the inclusion of UTS. These items were partially offset by a negative FX impact of $12 million, primarily related to the Chilean peso.
  • Reported OCF growth in H1 2019 was primarily driven by (1) an increase of $46 million at Liberty Puerto Rico, primarily related to the aforementioned recovery, (2) an increase of $24 million from the inclusion of Cabletica, (3) organic growth at VTR/Cabletica, (4) an increase of $9 million from the inclusion of UTS. These items were partially offset by a negative FX impact of $25 million, primarily related to the Chilean peso.

Q2 2019 Rebased OCF Growth – Segment Highlights

• C&W: Despite a slight rebased revenue decline, C&W delivered rebased OCF growth of 3% driven by a net decrease in operating costs (other operating costs and SG&A), consistent with our cost efficiency strategy. Lower bad debt from improved collections and lower staffing levels positively contributed to our rebased OCF growth during Q2, as C&W delivered $235 million of OCF at a 38.8% OCF margin.

• VTR/Cabletica: Rebased OCF growth of 6% was due in part to the operating segment’s 3% rebased revenue growth and reductions in interconnect and mobile access costs. Specifically, VTR returned to rebased OCF growth in the quarter, as compared to Q1 results. VTR/Cabletica posted an OCF margin of 40.9% in Q2 2019.

• Liberty Puerto Rico: Rebased OCF growth was mainly driven by revenue performance with the business delivering $52 million of OCF and an OCF margin of 49.7% during Q2 2019.

• Corporate: The modest increase in corporate costs was primarily due to higher personnel costs.

Net Loss Attributable to Shareholders

• Net loss attributable to shareholders was $116 million and $42 million for the three months ended June 30, 2019 and 2018, respectively, and $158 million and $87 million for the six months ended June 30, 2019 and 2018, respectively.

Property and Equipment Additions and Capital Expenditures

The table below highlights the categories of the property and equipment additions for the indicated periods and reconciles those additions to the capital expenditures that are presented in the condensed consolidated statements of cash flows included in our Form 10-Q.

1. The capital expenditures that we report in our condensed consolidated statements of cash flows do not include amounts that are financed under capital-related vendor financing or finance lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal is repaid.

Segment Highlights

• C&W: Property and equipment additions of $82 million represented 14% of revenue in Q2 2019, a reduction compared to the 17% of revenue in the corresponding prior-year period, and 12% of revenue in YTD 2019 compared to 14% in YTD 2018. The reduction is related mainly to lower Customer Premises Equipment and Capacity spend in Q2 2019 compared to Q2 2018. In Q2 2019, new build and upgrade initiatives delivered over 95,000 new or upgraded homes.

• VTR/Cabletica: Property and equipment additions of $63 million represented 23% of revenue in Q2 2019, in-line with the prior-year period and 21% of revenue in YTD 2019 compared to 22% in YTD 2018. The reduction in the YTD period was driven by the inclusion of Cabletica. In Q2 2019, new build and upgrade initiatives delivered over 55,000 new homes passed, the vast majority of which were added in Chile.

• Liberty Puerto Rico: Property and equipment additions of $19 million represented 19% of revenue in Q2 2019, a significant reduction compared to the prior-year period, primarily due to a decline in property and equipment additions together with an increase in revenue following the recovery from the 2017 hurricanes. In Q2 2019, new build and upgrade initiatives delivered 5,000 new homes passed.

Leverage and Liquidity (at June 30, 2019)

• Total principal amount of debt and finance leases: $7,174 million.

• Leverage ratios: Consolidated gross and net leverage ratios of 4.8x and 4.1x, respectively, as calculated on a latest two quarters annualized (“L2QA”) basis.
  • These ratios include the recent issuance of $403 million of Convertible Notes by Liberty Latin America.

• Average debt tenor⁵: 5.6 years, with approximately 96% not due until 2022 or beyond.

• Borrowing costs: Blended, fully-swapped borrowing cost of our debt was approximately 6.4%.

• Cash and borrowing availability: $957 million of cash and $1,056 million of aggregate unused borrowing capacity⁶ under our revolving credit facilities.

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 with respect to our strategies, priorities, financial performance and guidance, operational and financial momentum, and future growth prospects and opportunities, including B2B opportunities and inorganic growth opportunities (like our acquisitions of Cabletica and UTS) and the potential benefits from such opportunities; our expectations with respect to subscribers, customer data usage, revenue, OCF and Adjusted FCF; statements regarding the development, enhancement, and expansion of, our superior networks (including our plans to deliver new or upgraded homes in 2019 and our plans to expand LTE coverage and usage), our customer value propositions and the anticipated impacts of such activity including increased subscribers and revenue; our estimates of future P&E additions and operating expenditures, each as a percentage of revenue; the strength of our balance sheet and tenor of our debt; 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, the ability and cost to restore networks in the markets impacted by hurricanes; 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 obtain regulatory approval and satisfy conditions associated with acquisitions and dispositions; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from acquired businesses; 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 (including our third-party wireless network provider under our MVNO arrangement) 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 telecommunications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil, BTC, UTS and Cabletica. 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 over 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.

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Contacts

Investor Relations

Kunal Patel +1 786 274 7552

Corporate Communications

Claudia Restrepo +1 786 218 0407

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