Liberty Latin America Reports Q3 2018 Results

Delivered Rebased Revenue Growth of 3% Led by Chile & Puerto Rico

Added 42,000 RGUs, Fueled by Robust Broadband Gains

Expanded Footprint with > 260,000 New / Upgraded Homes YTD

Completed Acquisitions of Cabletica and LCPR Minority in October

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 (“Q3”) and nine months (“YTD”)
ended September 30, 2018.

CEO Balan Nair commented, “In Q3, we returned to rebased revenue growth
driven by our high-speed broadband strategy across LLA and strong growth
in Puerto Rico.”

“Our fixed performance was led by 25,000 customer additions during the
quarter as we strive to satisfy the significant demand in our markets
for high-speed connectivity while typically bundling this lead product
with our attractive video offering. We continue to invest in upgrading
and expanding our networks with approximately 100,000 premises added in
the quarter and we see potential to further upgrade and grow our
footprint, generating healthy returns.”

“In mobile, we are focused on driving LTE penetration across the group
with growth of over 50% year-over-year; however, this still only
represents a third of our total subscriber base. At C&W, we recently
launched our exciting new ‘Moments that Matter’ advertising campaign in
Panama with refreshed offers that are generating positive early results.”

“In addition to organic growth, expansion and consolidation in the
region remain key elements of the value creation opportunity we see for
our stakeholders. In that regard, I’m pleased that we have completed the
acquisition of Cabletica, a leading Costa Rican cable operator, as well
as the free cash flow accretive purchase of the remaining 40% stake in
Liberty Puerto Rico from Searchlight Capital Partners. Expanding our
operations through strategic acquisitions provides greater opportunities
to leverage digital transformation, delivering improved customer
experiences, and achieving cost benefits through additional scale.”

“As we grow our business, ensuring that we have ample liquidity and a
well hedged capital structure with long-dated maturities is one of our
core focus areas. Approximately 90% of our debt is due in 2022 or later
and our average tenor is over 5 years.”

“In conclusion, we are starting to build operating momentum across LLA
and remain convinced of the opportunities to create sustainable growth
and drive meaningful free cash flow generation in the years ahead. For
2018, we remain on-track with our guidance1 targets and
expect to report a strong fourth quarter in terms of rebased growth, as
we will compare favorably against our Q4 2017 hurricane impacted
financial results.”

Business Highlights

  • C&W focused on improving customer value propositions and driving fixed
    penetrations:

    • Recently launched “Moments that Matter” campaign and new value
      propositions in Panama
    • Gained 17,000 fixed RGUs during Q3 led by strong showing in Jamaica
    • Expanded footprint through upgrade and new build of approximately
      50,000 premises during Q3
  • VTR delivered another consistent growth quarter:

    • Reported rebased revenue growth of 5% and OCF growth of 6%
    • Added 22,000 broadband and video RGUs, leveraging superior digital
      network
    • Launched “VTR Play” in July with over 1 million views
  • Liberty Puerto Rico recovering strongly and building momentum a year
    after Hurricanes Maria and Irma:

    • Returned to rebased revenue and OCF growth, driven by FCC funding
      in Q3
    • Doubled Q2 2018 RGU performance, with 22,000 net organic additions
      in the third quarter
    • Completed network restoration with all reported customers now
      online and billable

Financial Highlights

Liberty Latin America     Q3 2018    

YoY
Growth/(Decline)*

    YTD 2018    

YoY
Growth/(Decline)*

 
(in USD millions)
Revenue $ 925 3 % $ 2,757 (1 %)
OCF2 $ 364 4 % $ 1,058 (2 %)
Property & equipment additions $ 170 (12 %) $ 581 15 %
As a percentage of revenue 18 % 21 %
 
Operating income $ 139 167 % $ 361 325 %
 
Adjusted FCF3 $ 34 $ (26 )
Cash provided by operating activities $ 211 $ 609
Cash used by investing activities $ (167 ) $ (592 )
Cash provided (used) by financing activities $ (6 ) $ 217
 

* Revenue and OCF YoY growth rates are on a rebased basis4.

 
 

Subscriber Growth5

    Three months ended     Nine months ended
September 30, September 30,
2018     2017 2018     2017
Organic RGU net additions (losses) by product
Video 12,600 (3,900 ) 29,700 7,600
Data 36,800 34,700 118,700 96,500
Voice (7,800 ) 8,700   (12,400 ) (7,000 )
Total 41,600   39,500   136,000   97,100  
 
Organic RGU net additions by segment
C&W 16,600 20,200 70,300 14,500
VTR 3,200 19,000 48,400 78,200
Liberty Puerto Rico 21,800   300   17,300   4,400  
Total 41,600   39,500   136,000   97,100  
 
Organic Mobile SIM additions (losses) by product
Postpaid 3,600 6,300 17,000 28,800
Prepaid (40,900 ) (36,000 ) (141,200 ) (53,300 )
Total (37,300 ) (29,700 ) (124,200 ) (24,500 )
 
Organic Mobile SIM additions (losses) by segment
C&W (46,800 ) (42,900 ) (155,100 ) (64,500 )
VTR 9,500   13,200   30,900   40,000  
Total (37,300 ) (29,700 ) (124,200 ) (24,500 )
 
  • Product additions (losses): Organic fixed
    RGU additions of 42,000 and organic mobile subscriber losses of 37,000
    in Q3 2018.
  • C&W added 17,000 RGUs during Q3,
    driven by product and service enhancements and continued network
    upgrade and expansion.

    • Broadband additions of 6,000 were driven by success in Jamaica,
      where we added 4,000 RGUs as we continued to penetrate our
      expanding high-speed network, and in Panama where our Mast3r
      packages supported 2,000 additions. Our WiFi “Connect Box” is
      delivering enhanced in-home connectivity and, as of September 30,
      is installed across nearly 30% of C&W’s overall broadband
      subscriber base and approximately 50% of broadband subscribers in
      Panama.
    • Video RGU additions of 6,000 represented a good third quarter
      performance and a reversal of Q3 2017 subscriber losses. Jamaica,
      once again, had a positive quarter, adding 5,000 video RGUs, while
      Panama gained 2,000 new subscribers through successful promotion
      of broadband and video double-play packages, marking their best
      quarterly video RGU growth since Q2 2017.
    • Fixed-line telephony RGU additions of 4,000 were driven by our
      successful bundling strategy.
    • Mobile subscribers declined by 47,000 in Q3. Panama losses of
      26,000 subscribers drove the overall decline as the market remains
      highly competitive. We recently launched our “Moments that Matter”
      campaign to support our new “Siempre” value proposition in Panama.
      In the Bahamas, competition continued to impact our operation
      driving subscribers 12,000 lower; however, this was an improvement
      compared to the prior-year period loss of 19,000. Of note, LTE
      subscribers grew by more than 50% over the past twelve months.
  • VTR added 3,000 RGUs in Q3, driven by
    strong broadband and video gains, partially offset by fixed-line voice
    attrition. Our superior broadband speeds of up to 400 Mbps in
    combination with the WiFi “Connect Box”, which is deployed to over 60%
    of VTR’s broadband subscribers, continue to drive results. To further
    enhance the video experience, VTR launched “VTR Play” in July,
    offering up to 80 channels on-the-go, and has had over 1 million views
    so far.

    • Mobile: We added 10,000 subscribers in Q3, bringing our total
      mobile subscriber base to 246,000. Importantly, over 65% of
      additions were on a SIM-only basis and over 97% of our base is on
      postpaid plans.
  • Liberty Puerto Rico added 22,000 RGUs on
    an organic basis in Q3, doubling the additions reported in Q2 of this
    year. This growth was driven by our compelling product propositions
    including our superior high speed broadband offering, as well as the
    restoration of our network. Of note, we removed 34,000
    subscribers from our reported figures in September that were located
    in areas where we have not restored our network.

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:

    Three months ended   Increase     Nine months ended   Increase/(decrease)
September 30, September 30,
2018   2017 %   Rebased % 2018   2017 %   Rebased %
in millions, except % amounts
 
C&W $ 581.1 $ 578.9 0.4 0.7 $ 1,750.3 $ 1,737.2 0.8 (0.1 )
VTR 245.9 242.2 1.5 4.9 769.9 702.6 9.6 5.4
Liberty Puerto Rico 99.6 88.6 12.4 12.4 241.7 303.6 (20.4 ) (20.4 )
Intersegment eliminations (1.4 ) (1.6 )

N.M.

N.M. (4.7 ) (3.5 ) N.M. N.M.
Total $ 925.2   $ 908.1   1.9   3.0   $ 2,757.2   $ 2,739.9   0.6   (0.9 )
 

N.M. – Not Meaningful.

 
  • Our reported revenue for the three and nine months ended September 30,
    2018 increased by 2% and 1%, respectively.

    • Revenue improved during the three-month period primarily due to
      increases in each of our reportable segments, including $11
      million received by Liberty Puerto Rico from the FCC, partially
      offset by a negative FX impact of $13 million.
    • The YTD period performance was driven by the net impact of $28
      million in FX gains, the FCC funding, an increase of $10 million
      attributable to the impact of the C&W Carve-out Acquisition, and a
      decrease as a result of Hurricanes Irma and Maria at Liberty
      Puerto Rico.
  • From a rebased perspective, revenue increased (decreased) by 3% and
    (1%) for the three and nine months ended September 30, 2018,
    respectively, as the impacts of Hurricanes Irma and Maria during the
    YTD period were partially offset by strong rebased growth at VTR and
    FCC funding, as described below.

Q3 2018 Rebased Revenue Growth – Segment Highlights

  • C&W: Revenue grew 1% on a rebased
    basis.

    • Growth in B2B and residential fixed subscription revenue was
      partially offset by lower mobile subscription revenue.
    • Residential fixed revenue growth was led by broadband performance
      where organic subscribers were up by 52,000 over the last twelve
      months. Combined with growth in video revenue, this more than
      offset declines in fixed voice revenue.
    • The decrease in mobile subscription revenue is primarily
      attributable to lower subscription revenue in the Bahamas and
      Panama where continued competition drove a decrease in the average
      number of subscribers and ARPU per subscriber.
    • B2B growth (excluding sub-sea) was driven by Jamaica and our LatAm
      markets, in particular Colombia, Dominican Republic and Puerto
      Rico. Our sub-sea operations were also up, driven by increasing
      demand for bandwidth.
  • VTR: Rebased revenue growth of 5% was
    driven by improvement in (i) residential fixed subscription revenue,
    from increases in ARPU per RGU and the average number of subscribers,
    (ii) B2B subscription revenue, driven by growth in SOHO RGUs, and
    (iii) mobile subscription revenue, mainly driven by subscriber growth.
  • Liberty Puerto Rico: Revenue increased by
    12% on a rebased basis in Q3 and was primarily driven by funding
    received from the FCC of $11 million, which was granted to help
    restore and improve coverage and service quality from damages caused
    by Hurricanes Irma and Maria. Sequentially to Q2 2018, our revenue has
    increased by $19 million, including the $11 million referenced above.

Operating Income

  • Operating income (loss) was $139 million and ($206 million) in three
    months ended September 30, 2018 and 2017, respectively, and $361
    million and $85 million for the nine months ended September 30, 2018
    and 2017, respectively. These improvements were primarily driven by
    lower impairment, restructuring and other operating items, net, mostly
    due to impairment charges recorded during Q3 2017 to reflect the
    impacts of Hurricanes Irma and Maria.

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:

    Three months ended   Increase     Nine months ended  

Increase/
(decrease)

September 30, September 30,
2018   2017 %   Rebased % 2018   2017 %   Rebased %
in millions, except % amounts
 
C&W $ 226.5 $ 219.7 3.1 2.7 $ 679.2 $ 650.4 4.4 3.0
VTR 100.1 98.0 2.1 5.7 310.2 281.9 10.0 5.9
Liberty Puerto Rico 50.0 39.6 26.3 26.3 103.7 144.7 (28.3 ) (28.2 )
Corporate (12.6 ) (5.1 ) 147.1   147.1   (34.9 ) (15.4 ) 126.6   126.6  
Total $ 364.0   $ 352.2   3.4   4.1   $ 1,058.2   $ 1,061.6   (0.3 ) (2.1 )
 
OCF Margin 39.3 % 38.8 % 38.4 % 38.7 %
 
  • Our reported OCF for the three and nine months ended September 30,
    2018 increased 3% and remained relatively flat, respectively.

    • The increase in the three-month period is primarily due to the net
      effect of organic growth, which includes the $11 million received
      from the FCC, and an FX driven reduction of $6 million.
    • The relatively flat YTD performance is mainly due to a decrease at
      Liberty Puerto Rico, primarily resulting from the hurricanes,
      offset by growth at C&W and VTR, the FCC funding and a FX gain of
      $11 million.

Q3 2018 Rebased OCF Growth – Segment Highlights

  • C&W: OCF was up 3% on a rebased
    basis. The year-over-year improvement was primarily driven by a $9
    million reduction in OCF in the third quarter of 2017 attributable to
    the impacts of Hurricanes Irma and Maria.
  • VTR: The 6% rebased OCF growth was mainly
    driven by the aforementioned revenue growth, partially offset by a net
    increase in costs, including higher content expenses.
  • Liberty Puerto Rico: OCF increased 26% on
    a rebased basis, driven by FCC funds. Sequentially to Q2 2018, our
    quarterly OCF in Puerto Rico increased by $14 million, including the
    aforementioned FCC funds.
  • Corporate: The increase in corporate
    costs was primarily attributable to incremental costs associated with
    being a separate public company, including increases in personnel
    costs and professional services.

Net Loss Attributable to Shareholders

  • Net loss attributable to shareholders was $26 million and $343 million
    for the three months ended September 30, 2018 and 2017, respectively,
    and $112 million and $377 million for the nine months ended September
    30, 2018 and 2017, respectively.

Leverage and Liquidity (at September 30, 2018)

  • Total principal amount of debt and capital leases:
    $6,663 million.
  • Leverage ratios: Consolidated gross and
    net leverage ratios of 4.6x and 4.1x, respectively. These ratios were
    calculated on a latest quarter annualized (“LQA”) basis.
  • Average debt tenor6: 5.5
    years, with approximately 90% not due until 2022 or beyond.
  • Borrowing costs: Blended, fully-swapped
    borrowing cost of our debt was approximately 6.3%.
  • Cash and borrowing availability: $525
    million of cash and $991 million of aggregate unused borrowing capacity7
    under our 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, financial
performance, future growth prospects and opportunities, including
strategic acquisition opportunities and the growth of our footprint and
the potential benefits from such activities; our expectations with
respect to subscribers, customer data usage, revenue, ARPU per RGU, OCF
and Adjusted FCF; statements regarding the impact of Hurricanes Irma and
Maria on our operations in the Caribbean and our continued recovery
efforts; our performance expectations in Puerto Rico; statements
regarding the development, enhancement and expansion of our superior
networks and innovative and advanced products and services; our plans
and expectations relating to new build and network extension
opportunities, including our plans to deliver new or upgraded homes in
2018, and other investments in our networks (including expanding LTE)
and the anticipated impacts of such activity; statements regarding
expansion and consolidation opportunities; our estimates of future P&E
additions 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
the networks in hurricane impacted markets, 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
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 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 sub-sea 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.

Footnotes

1.

 

OCF guidance is based on foreign currency translation (“FX”)
rates as of February 9, 2018. The most significant FX rates for
Liberty Latin America were USDCLP 604 and USDJMD 125 as of
February 9, 2018. Spot and average FX rates are presented in the
following table:

           

September 30,
2018

Spot rates:
Chilean peso 656.86
Jamaican dollar 136.27
 
       

Three months ended
March 31,

    Three months ended
June 30,
    Three months ended
September 30,
    Nine months ended
September 30,
2018 2018 2018 2018
Average rates:
Chilean peso 602.37 621.77 663.75 629.16
Jamaican dollar 125.80 127.25 134.89 129.29
 

2.

 

For the definition of Operating Cash Flow (“OCF”) and
required reconciliations, see OCF Definition and Reconciliation
below.

3.

For the definition of Adjusted Free Cash Flow (“Adjusted
FCF”) and required reconciliations, see Adjusted Free Cash Flow
Definition and Reconciliation
below. For more detailed
information concerning our operating, investing and financing cash
flows, see the condensed consolidated statements of cash flows
included in our Form 10-Q.

4.

The indicated growth rates are rebased for the estimated
impacts of adopting Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers
, an acquisition and FX. See Revenue
and Operating Cash Flow
for information on rebased growth.

5.

See Footnotes for Operating Data and Subscriber Variance
Tables
for the definition of RGUs. Organic figures exclude
RGUs of acquired entities at the date of acquisition and other
nonorganic adjustments, but include the impact of changes in RGUs
from the date of acquisition. All subscriber/RGU additions or
losses refer to net organic changes, unless otherwise noted.

6.

For purposes of calculating our average tenor, total debt
excludes vendor financing.

7.

At September 30, 2018, we had undrawn commitments of $991
million. At September 30, 2018, the full amount of unused
borrowing capacity under our subsidiary’s credit facilities was
available to be borrowed, both before and after completion of the
September 30, 2018 compliance reporting requirements. For
information regarding limitations on our ability to access this
cash, see the discussion under “Material Changes in
Financial Condition
” in our Form 10-Q.

 
 

Balance Sheets, Statements of Operations and Statements of Cash Flows

The condensed consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Latin America are included in our
Form 10-Q.

Rebase Information

For purposes of calculating rebased growth rates on a comparable basis
for all businesses that we owned during 2018, we have adjusted our
historical revenue and OCF for the three and nine months ended September
30, 2017 to (i) include the pre-acquisition revenue and OCF of certain
entities acquired on April 1, 2017 at C&W (the Carve-out Entities) in
our rebased amounts for the nine months ended September 30, 2017 to the
same extent that the revenue and OCF of the Carve-out Entities are
included in our results for the nine months ended September 30, 2018,
(ii) reflect the estimated impacts of adopting Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers, for
the three and nine months ended September 30, 2017 and (iii) reflect the
translation of our rebased amounts for the three and nine months ended
September 30, 2017 at the applicable average foreign currency exchange
rates that were used to translate our results for the three and nine
months ended September 30, 2018. We have reflected the revenue and OCF
of the Carve-out Entities in our 2017 rebased amounts based on what we
believe to be the most reliable information that is currently available
to us (generally pre-acquisition financial statements), as adjusted for
the estimated effects of (a) any significant differences between U.S.
GAAP and local generally accepted accounting principles, (b) any
significant effects of acquisition accounting adjustments, (c) any
significant differences between our accounting policies and those of the
Carve-out Entities and (d) other items we deem appropriate.

Contacts

Liberty Latin America Ltd.
Investor
Relations

Kunal Patel, +1 786 274 7552
or
Corporate
Communications

Claudia Restrepo, +1 786 218 0407

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