Liberty Latin America Ltd.

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 Ray Collins, Chief Strategy Officer of Liberty Latin America.

Good morning and welcome to Liberty Latin America's full year 2020 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.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 and statements that are not historical fact. Actual results may differ materially from those expressed or implied by these statements. Additional information on factors and risks that could cause results to differ is available in Liberty Latin America's most recently filed Form 10-K. Liberty Latin America disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement 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 and on our investor relations website. I would now like to turn the call over to our CEO, Mr. Balan Nair. Thank you, Ray, and welcome everybody to our full year results presentation. I'll begin by taking you through our group highlights and operating results for each of our reporting segments. a review of the company's financial performance and our outlook. After that, we will get straight to your questions. As always, I'm joined by my executive team from across the region, and I'll get them involved as needed during the Q&A, following up prepared remarks. As a point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.gov. Well, let's start on slide four and our highlights for the year. Operationally, we added 170,000 RGUs driven by strong performance in cable and wireless and a record result in Puerto Rico where broadband demand drove subscriber growth of more than double our 2019 additions. Our key financial objective is to deliver positive free cash flow in 2020, and I am pleased to say that we generated very challenging year. In terms of momentum, even excluding AT&T's contribution, our results continued to improve in quarter four as we reported revenue at a similar level to the pre-COVID quarter one and adjusted OEBIDA, which was in fact higher than in the first quarter of the year. We also made significant progress with our inorganic strategy. as we completed the acquisition of AT&T's Puerto Rico and U.S. Virgin Island operations, adding over 1 million, mainly post-paid, mobile subscribers to the group. The operations are off to a good start, and I'll cover our integration plans in more detail later in the presentation. Finally, we continued to lean into our investment thesis despite COVID. with the addition of approximately 400,000 new or upgraded homes in 2020. Over 80% of these homes will pass using fiber-to-the-home technology, and we have exciting plans to increase our bill by 50% in 2021. Moving to slide five, and a summary of our quarterly fixed and mobile subscriber ads. Starting with our fixed RGU evolution on the left of the slide. Here you can see that we grew our RGU base in each quarter through the year with a dip in the second quarter as our markets adjusted to the impact of the pandemic. One of these impacts was reduced mobility, which drove higher demand for residential data connectivity as customers increasingly worked and learned from home. As a result, our broadband ads contributed over 90% of our net subscriber additions in the year. We believe there is a significant opportunity to bring high-speed connectivity to more households in the region, and this underpins our organic growth strategy in the coming years. On the right of the slide, we show our mobile subscriber evolution. Subscriber losses in the first half were primarily the result of mobility restrictions, which limited the ability for customers to access services and reduced demand for top-ups generally. as customers spend an increasing amount of time in their homes. In the second half, restrictions were eased across most markets, and we saw a recovery in subscriber numbers. However, this did not offset our first half subscriber losses. I'll cover the specific trends in more detail over the coming slides. Turning to slide six in our cable and wireless Caribbean and network reporting segments. Note that this represents the cable and wireless segment as reported in prior quarters. However, excluding cable and wireless Panama, which we now disclose separately due to a change in our internal organizational structure. This change has no impact on our borrowing groups or legal structure. Starting with the RGU trends on the left and a similar evolution to the previous slide, we had a good year in fixed. adding over 100,000 subscribers, led by 92,000 ads in Jamaica, which was close to three times that market's 2019 performance. Broadband was once again the main driver contributing over half of Jamaica's ads. During 2020, over 80% of our new build and upgrade volume in cable and wireless Caribbean networks was in Jamaica, which is the segment's largest market. Mobile steadily recovered in the second half, once again led by Jamaica. However, we recorded losses for the year due to the second quarter's adverse performance. In the center of the slide, we present an overview of our revenue mix and the sequential growth rates we saw in the fourth quarter. Our fixed operations remained robust and mobile revenue grew as prepaid recharges continued to recover. Subsea benefited from increased demand for international bandwidth and delivered healthy sequential growth of 5%. Finally, B2B service revenues was 2% lower sequential overall. However, this is a tale of two different businesses with our LATAM operations growing whilst our incumbent Caribbean market was slightly down in the quarter. Taking sub-C, including in-company revenue, which is eliminated in our consolidated reporting, and B2B LATAM in the aggregate, This represents a business with approximately $400 million of mainly U.S. dollar revenue and an OEBIDA margin above 50%. Finally, I want to highlight that this segment actually grew adjusted OEBIDA on a rebase basis in 2020, despite the impact of COVID-19. This was a great achievement by the team in a very tough year. Next, to slide seven, in cable and wireless Panama. where we experienced the most severe COVID-19 restrictions across our operations. This created a challenging operating backdrop leading to fixed and mobile subscriber losses in the second quarter, as shown on the left of the slide, which we recovered to an extent in the second half of the year as restrictions were eased. In our residential fixed business, we delivered 35,000 net RGU ads for the year, with second half additions more than offsetting second quarter's losses. competitive intensity and did not recover losses from earlier in the year. In the center of the slide, you can see that revenue from each of our products grew sequentially in the fourth quarter. Note that B2B growth of 20% was driven by some significant contract wins. As we look to continue growing our fixed operations, we are focused on expanding our product and network offerings. In combination with our Newville activity, where we added nearly 100,000 five-visitor home passings in 2020, we have also launched our Hub TV platform, bringing greater differentiation to our product bundle. Overall, we believe that this business has a lot of potential, given the fixed market structure and relatively strong economic environment. more senior management focus and should provide a catalyst to try to improve performance. Turning to slide eight in our BTR-Cavletica segment. Starting with RGU evolution on the left of the slide, we've previously in Q4 compared to Q3 and really getting to flat result in January. We see the recovery. I'll cover our approach here in more detail on the next slide. Our Costa Rican business, Cavalitica, continues to perform well during adding RGUs in each quarter and 18,000 in aggregate during the year. The mobile chart in the lower left represents our business in Chile, where we finished the year with 280,000 predominantly post-paid subscribers. Store closures due to COVID-19 and a highly competitive market environment drove the software performance here in second half. Moving to the center of the slide and revenue by product, in contrast with the cable and wireless business, fixed residential contributing 90% of revenue and up 3% sequentially in Q4. Finally, a key segment of our group strategy in 2021 is to accelerate our fiber to the home new build program. Across Chile and Costa Rica, we are planning to build more than 400,000 new homes, which is a significant uplift on the 2020 activity. On slide nine, We wanted to highlight some of the metrics that we as a management team are focused on as we look to improve operational and financial trends at BTR. In the upper left, we show significant reductions in both the daily number of technical calls to our representatives and our track roll rate of 73% and 49% respectively. These improvements follow previously discussed targeted network and customer service investments. The points below the chart summarizes key pillars of the framework we are using to approach network and customer experience. Additional measures of our operational improvements are presented in the central charts with a reduction in the intent to disconnect and increase in retention rates over the past months. Finally, on the upper right of the slide, we show how our new build ambitions in 2021 compares to prior years. A significant and exciting step up, which we believe will reinforce our platform for sustained growth. From a return on investment perspective, we have been successful in driving down the cost to pass homes with fiber, making these projects very attractive. Turning to slide 10 and our best performing business in 2020, Liberty Puerto Rico. Starting with our RGU trends on the left of the slide, as I mentioned earlier, 2020 was a record year for the business with 121,000 net RGU additions. Broadband net ads contributed two-thirds of total RGU growth, and as shown in the lower chart, our broadband base grew by nearly a quarter in the year. To put this into perspective, Charter, Comcast, and Altice USA grew their broadband subscribers by around 8%, 9%, 7%, and 4% respectively in 2020. In the center of the slide, we wanted to provide a view of 2020 for Puerto Rico operations, including a full year for the AT&T business we acquired at the end of October. We really like this market, and as you can see, the acquisition provides a significant step up in scale, taking the combined business to $1.4 billion of revenue and over half a billion of adjusted OEB debt. One of the primary reasons we see a differentiated converge opportunity in Puerto Rico is that over 80% of our mobile service revenues come from post-paid customers. Finally, we continue to innovate and invest in our networks to maintain a leading position in Puerto Rico. We are rolling out our Hub TV platform and continuing to build out our footprint. We passed $1.1 million plan to continue to grow and this is further assisted by the union of funding we have one to improve broadband speeds and 43 municipalities out of 78 across the island including San Juan and other key metro areas on slide 11 we provide an update on our integration work in Puerto Rico our key focus areas are firstly progress establishing a common culture. Secondly, I've talked previously about leveraging our product suite and putting together great propositions for our customers. This is already happening with our welcome offer, which has 20% enrollment after a week and continues to grow. The offer involves free fixed broadband speed upgrades if a customer is fixed and mobile services with us. Thirdly, It is vital to ensure that service levels are not compromised as we move to a new mobile call and new operations and business support systems. We have a comprehensive TSA agreement with AT&T to help us here, and we're confident we can move to these new platforms with minimal friction. Fourth, and something that is particularly exciting, we are creating a converged play in the market which enables us to differentiate our product offerings networks we now have. And fifth, we have a unique opportunity to lead with digital channels and services as we create new IT platforms for the new business. Overall, I am very excited about the value we can generate for our customers and other stakeholders through this acquisition. Finally, to slide 12. as well as longer-term shareholder value creation. First, we expect to recover and grow across our markets as the economic backdrop improves. In Chile and Panama specifically, we anticipate better trends following the operational actions we have taken in 2020. Secondly, with respect to our commercial approach, we remain focused on product innovation and are distributing our Hub TV products as we roll out new fiber-to-the-home networks. We are also developing our self-install capabilities, which should both improve customer experience and drive cost efficiencies in the future. Thirdly, we will continue to lean into our broadband penetration thesis for the region and add or upgrade approximately 600,000 mainly fiber-to-the-home homes in 2021, a material ramp in activity from 2020. Fourth, our cost focus. And this remains an area where we see significant potential to improve and drive value. Finally, to M&A. Our near-term focus is on integrating the assets acquired from AT&T and closing the acquisition of Telefonica's Costa Rica business, which we anticipate will happen this summer sometime. We see inorganic opportunities as a core driver of value creation in our region. but only if done at the right value. We are very disciplined in our process to appraise assets and accretive levered free cash flow per share remains a key metric. With that, I'll pass you over to Chris Nice, our Chief Financial Officer, who will talk you through our financial performance before we take your questions. Chris?

Thanks, Val. I will start on slide 14 with our financial results, two quick housekeeping items. Our 2020 results include Liberty Mobile, formerly AT&T Puerto Rico, for the post-acquisition period, which is for the last two months of Q4. And as mentioned, we are now showing cable wireless Panama as a separate operating segment, reflecting the change in reporting lines. However, our cable wireless credit silo will still include CWP within its results. In the upper left, we reported Q4 revenue of $1.1 billion, including $174 million in revenue from Liberty Mobile. This compares to $975 million for Q4 2019. Our Q4 result reflects a modest 1% year-over-year rebase decline, much improved versus both Q2 and Q3 rebase levels, driven in large part by our strong quarterly performance in Puerto Rico. For the full year, we generated revenue of $3.8 billion for an annual rebase decline of 3%. Moving to adjusted OIBA debt, we posted $428 million, or a 4% rebate decline for Q4, and $1.5 billion, or a 2% rebate decline for the full year. Liberty Mobile contributed $56 million of adjusted OIBA debt in the quarter. Rebate performance in the quarter included a $13 million net detrimental impact on certain non-return items, primarily related to content accrual and withholding tax adjustments, as disclosed in earnings release. Our P&E additions in the bottom left of the slide were $188 million in Q4, or 17% of revenue. This result brings our 2020 total to $631 million, or 17% of revenue, which is 100 basis points lower than our year-ago pre-COVID 2020 target. For 2021, we are targeting a modest increase to approximately 18% of revenue for P&E additions. As Dallin mentioned, we are planning to build approximately 600,000 homes in 2021. a substantial increase over 2020, and we'll have integration CapEx in Puerto Rico as we embark on our three-year plan to fully integrate the business. Moving to the bottom right, we generated $89 million of adjusted free cash flow in Q4, helped in part by a positive contribution from our newly acquired mobile operations in Puerto Rico. For the full year, we delivered $148 million in adjusted free cash flow, comfortably achieving our COVID-adjusted target of positive free cash flow for 2020. For 2021, we are targeting approximately $200 million of adjusted free cash flow, which is more than a 30% increase over our 2020 results. Slide 15 highlights our continued recovery from Q2. Excluding the impact of Liberty Mobile, our Q4 revenue of $923 million was nearly back to Q1 levels, and our Q4 adjusted OIDA DA of $317 million surpassed Q1 adjusted OIDA DA by 2%. As we look to 2021, we expect to build momentum as we go through the year, with Q1 being our toughest comp and as we begin to lap COVID impacts in Q2. Additionally, Q4 to Q1 on an apple-to-apples basis typically steps down due to general seasonal factors. On slide 16, we present our Q4 financial results and quarterly adjusted EBITDA evolution by segment, starting on the left with CNW, Caribbean, and Networks. We generated $428 million of revenue and $182 million of adjusted OIVA dot Q4. Year-over-year Q4 revenue was 4% lower on a rebase basis, as 2% growth in fixed residential revenue was more than offset by COVID impacts across our mobile and B2B businesses, which were 14% and 3% lower, respectfully. As highlighted earlier, our rebase adjusted EBITDA decline for the segment of 10% for Q4 was in due large part to roughly $13 million of net non-recurring items. Despite these headwinds and the impact of COVID, CNW Caribbean and Network School adjusted EBITDA by 1% for the full year on a rebase basis, and we obtained a 42% adjusted EBITDA margin. The bottom chart highlights our sequential improvement as our Q4 adjusted EBITDA result was $5 million higher then Q3, and nearly back to Q1 levels. Moving to our new segment, Cable & Wireless Panama. Across LLA, our Panama business has suffered from the most stringent COVID-related lockdowns. Q4 revenue of $131 million, and just at way below $51 million, were 19% and 13% lower on a rebase basis, respectively, as compared to the prior year period. Our year-over-year revenue result was driven primarily by double-digit declines in B2B and mobile. Sequentially to Q3, the business has continued to recover as quarterly adjusted OIPA DAO was $8 million or 19% higher. In fact, as the bottom chart highlights, we delivered our strongest adjusted OIPA DAO quarter of 2020 in Q4. Turning to VTR in Chile and Cabo de Tica in Costa Rica, we reported Q4 revenue of $244 million, reflecting a year-over-year rebate decline of 3%. The rebase year-over-year decline was driven in large part by volume losses and RP pressure in VTR, which more than offset continued rebase revenue growth in Copley Coupé. VTR Copley Coupé posted $89 million of adjusted OIBA down Q4, which was 15% lower than the prior year period on a rebase basis. The year-over-year decline was driven by increased operating expenses at VTR as we invested our networks in customer service initiatives, and to a lesser extent, a $3 million increase Adverse FX impact of non-functional currency exposure in Chile, relating to the depreciation of the Chilean peso to the U.S. dollar. Sequentially, the Q3 adjusted EBITDA was $4 million lower. However, it was above the $86 million posted in Q2. Finally, to our strongest performing segment, Liberty Puerto Rico. As Balan mentioned, our business Puerto Rico had both a strong Q4 and 2020. With two months of contribution from Liberty Mobile in the quarter, We delivered $296 million of revenue and $116 million of adjusted EBITDA, posting double-digit rebates growth rates. Our cable business continued to build momentum throughout 2020. In fact, our top-line growth in Q4, excluding the impact of Liberty Mobile, was our best of the year at roughly 15% rebates growth year-over-year. This result was due in large part to over 120,000 RGUs added over the last 12 months. The newly acquired business contributed $174 million of revenue, and $56 million of adjusted oil to die in the quarter, achieving double-digit rebase growth as well. Liberty Mobile's growth was primarily driven by a combination of revenue increases driven by strong postpaid ARPU, positive alcoholic roaming, as well as equipment sales. For 2021, it's important to note that we expect to incur significant integration costs in Puerto Rico as we begin to work off the three-year TSA with AT&T and operate on a standalone basis. During 2021, we estimate that we will incur integration operating costs of $35 to $40 million, and CapEx integration costs of $25 to $30 million. In terms of benefits, we anticipate generating $10 million of synergies in 2021 and to ramp towards our full run rate expectation of $70 million by the end of our integration. Moving to slide 17, we have managed our costs in CapEx space well throughout the pandemic. Our 2020 efforts allowed us to maintain our adjusted or the down margin in the 39 to 40% range, while absorbing revenue contraction across many of our markets. The inclusion of Liberty Mobile in Q4 compressed our full-year LRA margin by 40 basis points, as Liberty Mobile's margin was 32% for the two months. The middle chart highlights our nearly 200 basis point drop in P&E additions from 2019, even though we continue to invest in new build, capacity expansion, and subscriber growth. The net impact is outlined in the right-hand chart that we progressed our adjusted EBITDA less puny additions to 23% of revenue, a solid increase from 2019 levels. This metric is a key focus of ours as we look to further improve our future efficiency levels. Slide 18 summarizes our liquidity and credit profile. At year end, we reported $8.5 billion of total debt, $900 million of cash, and $1.1 billion of availability under our RCFs. During Q4, we funded the AT&T transaction and repaid our outstanding CNW RCF. As previously highlighted, our funding for the Telefonica Costa Rica acquisition is all set. We will use local borrowings of nearly $300 million and anticipate the remainder will come from cash on hand as well as a pro-rata contribution from our local partner in Costa Rica. We finished Q4 with growth in net leverage of 4.8 times and 4.3 times respectively. Our ratio is on an LTQA basis on adjusted OEBDA, and we give full effect to Liberty Mobile for the entire six-month period. Turning to our debt maturity schedule on the right of the slide, we made great progress during 2020 on turning out our debt at attractive rates. We do not have any significant maturities over the next five years, as about 85% of our debt is due in 2026 and beyond. Our fully swap borrowing cost is in the low 60s. and most of our debt is trading above par today, implying even lower market yields. In 2021, we'll be focused on refinancing VTR's local term loans that mature over the next two years. Turning to slide 19, I'll wrap up our prepared remarks today. Continuing the theme from Q3, we sequentially improved both our absolute dollar revenue and adjusted OIDA and maintained quarterly fixed and mobile subscriber additions. Definitely a solid improvement from our Q2 COVID-impacted lows. As both Ballin and I have highlighted today, our collective view is that it will continue to take time for our markets to fully recover from the impacts of COVID and for commerce to return more broadly. It is also safe to assume our region will reasonably lag the U.S. in terms of recovery and vaccination levels. We are managing our business for the next couple of years with that in mind. We as a management team are focused on what we can control, grow volume and market share, innovate for and service our customers, invest in new build and transformation, and continue to reset our cost base. So it's a benefit from incremental operational leverage as our markets recover. Importantly, with our ability to generate free cash flow across our operating businesses, we are committed to investing for future growth, and we are targeting approximately 18% of revenue in P&E additions in 2021. The key to our story, and one that will become apparent in the coming quarters, is the anticipated beneficial impact of Liberty Mobile, one that will underpin our free cash flow generation. There's a lot of integration, including systems work to be done, but the business came in stronger than expected, and things are progressing well. Separately, closing the Costa Rican transaction this summer will strengthen our market-leading cable business, and we remain very excited about fixed mobile convergence in that market. Finally, not only are we planning for growth in revenue and adjusted EBITDA in 2021, we will continue to drive towards higher adjusted free cash flow as our goal is to deliver approximately $200 million in 2021. We believe this is the right balance for LOA. Lean in further while our markets are recovering. With that operator, we are ready to take questions.