Liberty Latin America Ltd. Q4 FY2021 Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by. Today's call is being recorded. I'll now turn the call over to Laura Pianalto, Treasury Manager of Liberty Latin America. Laura, please go ahead.

Good morning and welcome to Liberty Latin America's Full-Year 2021 Investor Call. At this time, all participants are in a listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at www.lla.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 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 or in the conditions on which any such statement or information is based. 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.

Thank you, Laura. And welcome everybody to Liberty Latin America's full-year results presentation. I'll begin with our group highlights and operating results before closing with an overview of our strategic focus areas in 2022. Chris Noyes, our CFO, will then follow with a review of the company's financial performance and our outlook. After that, we'll get straight to your questions. As always, I'm joined by my executive team from across the region and I will get them involved as needed during the Q&A following our prepared remarks. As a point of housekeeping, we will both be working from slides which you can find on our website at www.lla.com. Starting on Slide 4 and our highlights for the year. We grew our fixed base by 269,000 RGUs in 2021, led by cable and wireless where we added over 100,000 RGUs, with strong contributions also coming from Puerto Rico, Panama, and Costa Rica. In mobile, we had a record performance in both Q4 and the year, adding 493,000 subscribers in 2021 with a growing postpaid mix. Panama and Costa Rica reported the highest additions across both periods. High-speed connectivity is at the core of our customer offering and we invested to expand and improve our network during the year, adding or upgrading approximately 750,000 homes passed across our operations, almost exclusively using fiber to the home technology. We plan to continue this activity in 2022 with around 600,000 homes planned. Our principal financial guidance for 2021 was to deliver $200 million of adjusted free cash flow and we achieved this target. We also announced an additional $200 million buyback program yesterday, which Chris will provide more details on. Finally, we continued to make progress with our inorganic strategy in 2021, announcing the acquisition of America Movil's Panama Operations and a 50-50 joint venture with America Movil in Chile. We expect to close both transactions this year as well as make further progress integrating businesses previously acquired in Puerto Rico and Costa Rica.

Thanks, Balan. I will start by running through our key metrics, focusing on Q4 performance. For starters, Q4 revenue increased by about $180 million year-over-year to $1.3 billion fueled by our acquisitions in Puerto Rico and Costa Rica. Our rebased growth rate was 6%, which was our second-best quarter of the year. This growth was led by double-digit topline performances in Panama and Costa Rica, as well as a 7% rebased result from cable and wireless Caribbean & Networks. On a full-year basis, revenue was up 4% on a rebased basis to $4.8 billion. In the upper right, we generated adjusted OIBDA of $470 million in Q4, reflecting rebased growth of 3%, an improvement from flat rebased growth in Q3. Our adjusted OIBDA margin in Q4 of 37% was adversely impacted by lower margin B2B and mobile equipment sales during the quarter, as well as about $10 million of integration expenses. Moving to the full year and consistent with revenue, our rebased growth was 4% on adjusted OIBDA of $1.8 billion. Our P&E additions, in the bottom left, were $257 million in Q4 or 20% of revenue. This result brings our 2021 total to $856 million or 18% of revenue, and includes significant new build and upgrade activity, as Balan highlighted, and roughly $25 million of integration-related CapEx during the year. On the bottom right, we reported $51 million of adjusted free cash flow for Q4, bringing our full year to $200 million, a 35% increase over 2020.

Turning to Slide 15, at year-end including VTR which is held as an asset for sale on our balance sheet, we had $9.2 billion of total debt, $1.1 billion of cash and $1.2 billion of availability under our revolving credit lines. Consistent with Q3, we had gross leverage of 5 times and net leverage of 4.4 times. Since September 30, we have been active across 3 of our credit silos. As we highlighted on our Q3 call, in early October we issued $590 million of C&W term loans due 2029 at a fully swapped rate of 4.4% and repaid $500 million of 7.5% bonds and $55 million of 5.75% bonds. In December we raised an incremental $120 million term loan at LIBOR plus 375 basis points due 2028 and used the proceeds to redeem 10% of our outstanding 6.75% bonds at Liberty Puerto Rico. In closing, we are excited about our 2022 prospects. It will be a year of operational execution across our integrations and initiatives that Balan highlighted and to close both our Panamanian and Chilean transactions. We are focused on driving free cash flow growth this year, even with the headwind of significant integration spend. And with all the work we continue to do, we believe will position us for improved growth and free cash flow performance in 2023 and beyond.

Ladies and gentlemen, this concludes Liberty Latin America's Full Year 2021 Investor Call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Latin America's website at www.lla.com. There, you can also find a copy of today's presentation materials.