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spk04: ladies and gentlemen the trilogy international partners q4 2021 earnings call will begin in approximately two minutes please do not disconnect once again the trilogy international partners q4 2021 earnings call will begin in approximately two minutes we thank you for your continued patience Thank you. Thank you. Thank you. Thank you. Good day, ladies and gentlemen, and welcome to the Trilogy International Partners Q4 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Anne Saxton, Vice President of Investor Relations and Corporate Development. Ma'am, the floor is yours.
spk05: Thank you, Kate. Hello, everyone, and welcome to our conference call to discuss our results for the fourth quarter of 2021. This call is also being broadcast live over the web and can be accessed in the investor section of the Trilogy International Partners website. Joining me today are Trilogy's President and CEO, Brad Horwitz, and Trilogy's Senior Vice President and CFO, Eric Nichols. This column includes forward-looking information from which our actual results may differ materially. For further information regarding the various factors, assumptions, and risks that could cause our actual results to differ, please review the cautionary language in the About Forward-Looking Information section of yesterday's press release, as well as the cautionary note regarding forward-looking statements and the risk factors in our 2021 Annual Report on Form 20F available on both CDAR and EDGAR. This forward-looking information represents our expectations as of today and, accordingly, is subject to change. We disclaim any obligation to update forward-looking information except as required by law. Please also refer to yesterday's press release for definitions and reconciliations of any non-fungal measures that we used during today's call. The press release is posted on our website at Trilogy-International.com under the Investors tab. I will now turn the call over to Brad Horwitz, President and CEO of Trilogy International Partners.
spk03: Thanks, Anne, and hello, everyone. Thank you for joining us for our call. Today I'll provide you with an update on our businesses, starting with an update on the status of our strategic transactions in New Zealand and Bolivia, and then Eric will take you through our fourth quarter performance and provide some additional color on the transactions. On New Year's Eve, we announced our sale of our New Zealand business to Voyage Digital, We are very pleased with the price, which implies an enterprise value of two degrees of 1.7 billion New Zealand dollars, including lease liabilities, or 1.3 billion New Zealand dollars on a cash and debt-free basis. This month, we received more than 99% shareholder approval for the transaction, as well as two of the three government approvals that are required from the New Zealand Commerce Commission, which serves as the telecommunications regulator, and the New Zealand Government Communications Security Bureau within the timeframes that we originally expected. This leaves one remaining government approval from the Overseas Investment Office, which is expected in the second quarter, likely between mid-May and June. We do not anticipate any issues, particularly because the entities involved already have this authorization, which is required to operate in New Zealand. We anticipate the transaction will close shortly after this final approval. As the purchase price for the sale of the New Zealand business has been set and is not subject to change based on subsequent financial performance, our operating results are perfunctory. That being said, we're pleased with another quarter of strong execution by our local team led by Mark Aue in New Zealand. Despite COVID-related mobility restrictions, which were significantly longer than those in 2020, we achieved our 2021 service revenue guidance and beat our adjusted EBITDA guidance. We made good traction in our long-term goal of shifting our customer mix to postpaid, increasing that base by 8% year over year. This increase was buoyed by our continued momentum in B2B, which contributed more than half of our postpaid gross ads for both the fourth quarter and the year. Our customer growth and retention, marked by postpaid churn under 1% for the fourth quarter and the full year of 2021, was underpinned by our ongoing service excellence, which has won several awards throughout the year. plus solid growth in fixed broadband customers, coupled with increased ARPU and prepaid, drove our organic adjusted EBITDA growth of 12% for the quarter and 9% for 2021. Regarding our Bolivian operation, earlier this week, we announced our agreement to transition our 71.5% equity in Nueva Tel to a third party. OUR BOLIVIAN ASSETS AND LIABILITIES WILL BE TRANSFERRED TO BELIZIA TECHNOLOGIES, WHICH IS A MEMBER OF THE BELIZIA GROUP OF COMPANIES. COLLECTIVELY, THEY DEVELOP, OWN AND OPERATE WIRELESS NETWORKS, IOT EDGE AND MULTI-EDGE COMPUTING TECHNOLOGIES AND SUPPORTING INFRASTRUCTURE ACROSS LATIN AMERICA. THE TRANSACTION IS SUBJECT TO CUSTOMARY CLOSING CONDITIONS AND WE ANTICIPATE THAT THE CLOSING WILL TAKE PLACE IN THE SECOND QUARTER OF 2022. In New Zealand, we continue to deliver solid results while managing obstacles created by COVID, which remains a challenge. In December, the government moved away from their COVID elimination strategy to an outbreak management strategy that eliminates hard lockdowns and emphasizes vaccine passes for increased mobility. The New Zealand government achieved their aggressive goal of reaching a 90% vaccination rate by the end of the year, And now about 94% of New Zealanders age 12 and up are fully vaccinated. After a short period of relative freedom, the Omicron variant was confirmed a few months ago. Resulting consumer behavior has been cautious, thereby impeding normal retail traffic. While this may affect acquisition momentum in our consumer and B2B products, we are pleased with our churn management and resulting stability in the customer base. This is supported by our continued strong mobile brand scores, positive net promoter scores across our portfolio of products, and the highest mobile number portability rates across all New Zealand network operators. Further, they're a valuable framework for achieving the growth opportunity ahead. We're pleased with the continued expansion of our postpaid base and our accelerating momentum in B2B. We are adding to our B2B product offerings this year and have a solid pipeline of potential new customers. Revenue generation by our prepaid business remains robust as our customer base is more active, resulting in higher ARPU. With the reopening of New Zealand's borders, which began in March and will be expanded to a fully vaccinated travelers, beginning May 1st, we anticipate some recovery in prepaid customer levels and roaming over time. In broadband, competition has increased, with some operators providing four to six months of free service at sign-up. We've taken a more even handed approach and are focused on retention and ARPU, which increased year over year on an organic basis. As a result of COVID mobility restrictions, our 5G build out was slightly delayed, pushing our commercial launch into this year. We officially launched 5G for mobile at the end of February in the central business districts of Auckland and Wellington, as well as limited areas of Christchurch. As we are enhancing our 4G network in lockstep with our 5G deployment, the customer experience in these areas is also improving. We expect to launch 5G over wireless broadband in the near future. Regarding long-term 3.5 gig spectrum rights, while we do not have a firm date for launch of the allocation process, we expect it will occur in the first half of this year. Usage of the long-term spectrum is scheduled to begin in November. And with that, I'll turn it to Eric to take you through the numbers. Eric?
spk00: Thanks, Brad, and hello, everyone. Before getting to the numbers, I would like to highlight and reiterate a couple key points on the strategic front. First, as Brad has mentioned, over the past several months, we have been focused on strategic initiatives to appropriately manage risk and maximize value for our shareholders. We announced the sale of Two Degrees on December 31st, and on February 11th, the company filed a management information circular, which provides additional background and disclosure around the Two Degrees sales transaction, including use of proceeds and the company's plans going forward. We will come back to this in a bit. Second, given the Two Degrees sale proceeds will be paid in New Zealand dollars, we have been closely watching the geopolitical flashpoints and overall market volatility. As such, promptly following the favorable TRL shareholder vote, we have the opportunity to hedge a significant portion of the sale proceeds in order to further crystallize value for our stakeholders. The net impact of the hedge is to fix the New Zealand dollar-US dollar exchange rate at roughly 0.67 for approximately 70% of the transaction proceeds. On our last call, we discussed that we are pursuing an orderly transition of the Bolivian business. The sale which we announced this week accomplishes this with the assets and liabilities of NuevaTel transferred to the buyer. While the sale proceeds are only nominal, there are also no material closing costs or leakage or significant indemnification responsibilities on the part of Trilogy. Given the well-documented challenges of the business over the last few years, We believe this is an acceptable outcome and simplifies the corporate structure going forward. With that, while the strategic items clearly take center stage, for completeness, we will also take a few minutes to run through the financial results for the fourth quarter of 2021. As always, note that our reported results may be impacted by changes in U.S. GAAP as well as foreign exchange fluctuations. Specifically, we implemented the new lease accounting standard in the first quarter of 2020 and the new revenue standard or NRS in the first quarter of 2019. Please note that prior periods were not recast for the new standards. For context, the impact of NRS in the consolidated adjusted EBITDA was a headwind of approximately $1.8 million in the fourth quarter of 2021 as compared to the same quarter of last year. Further, the strength of the New Zealand dollar relative to the U.S. dollar also impacted our reported results in the fourth quarter, providing a 1% year-over-year benefit on New Zealand results. As such, where noted, we refer to results on an organic like-for-like basis, which is excluding the impact of accounting changes as well as foreign currency. We believe an organic perspective enhances comparability between periods. Our consolidated business ended the fourth quarter with approximately 3 million wireless subscribers. Our postpaid wireless customer base as a percent of total wireless subscribers was 26% compared to 23.8% a year ago. Our consolidated service revenues in the fourth quarter of 133.8 million declined 2% year over year on an organic basis as the growth in our New Zealand subscriber revenues was offset by reduced service revenues in Bolivia. For the year, our service revenues were $540.7 million, up 1%, as our growth in New Zealand was partially offset by declines in Bolivia. Our fourth quarter consolidated adjusted EBITDA was $28.3 million, a 4% increase on an organic basis versus last year. As again, growth in our New Zealand business offset declines in our Bolivia operation. For the year, our consolidated adjusted EBITDA was 115.1 million flat with FY20. Our consolidated capital expenditures for Q4 were 27.4 million versus 30.8 million a year ago, with the decrease due to timing of spend in both markets. At the end of December, we had a total of 2,688 sites on air. This is a 4% increase compared to Q4 2020. Our 2021 consolidated capital expenditures for the full year were 92.8 million, an increase of 12% on an organic basis. Capital intensity for the year was 17.2% versus 15.3% a year ago. Turning now to our results by market. In New Zealand, our post-paid mobile base grew 8% versus prior year and now makes up 38.3% of our wireless customer base compared to 34.5% a year ago. At the end of Q4, we had 552.5 thousand post-paid mobile customers, more than 131,000 of which were B2B customers. Our prepaid subscriber count at the end of the fourth quarter decreased 8% compared to prior year due to mobility restrictions and closed borders. Our fixed broadband base grew 13% year-over-year to 149,000 subscribers. Our service revenues in New Zealand were 104.5 million and 416.1 million, an organic increase of 5% for Q4 and 7% for the full year, driven primarily by our continued fixed broadband and postpaid customer growth, particularly in our B2B mobile products. This again excludes the impact of foreign exchange and new accounting standards. At the product level and considering results on an organic basis, our postpaid revenues were $50.5 million in the fourth quarter and $199.4 million for the year, an increase of 6% and 5% respectively versus the prior year. This was driven by growth in our B2B and consumer postpaid customer basis of 24% and 4% respectively. Postpaid ARPU decreased 2% year-over-year for both the quarter and the year. Our Q4 prepaid revenues of $25.6 million increased 1% versus Q4 2020 on an organic basis. This was driven by an 8% organic increase in prepaid ARPU mainly due to an increase in the rate at which our prepaid customers purchase prepaid plans, as opposed to top-up or add-on offers. This offset an 8% COVID-related decline in our prepaid base, resulting from mobility restrictions and Wi-Fi offload. For the year, our prepaid revenues of $102.5 million increased 3% compared to last year on an organic basis. On an organic basis, New Zealand fixed broadband revenues grew 26.4 million, or 9%, in the fourth quarter versus the same period last year due to our 13% larger base and partially offset by ARPU compression. For the full year, broadband revenues were $106.5 million, up 17% due to our larger base and 4% growth in residential fixed broadband ARPU. Equipment revenue in New Zealand of $35.3 million increased 4% on an organic basis in Q4 due to increased volume on higher priced handsets during the quarter. For the year, they were $112.6 million flat on an organic basis compared to FY20. Our segment adjusted EBITDA for Q4 in New Zealand was $32.4 million, which was a 12% year-over-year increase on an organic basis. Our reported segment adjusted EBITDA margin in the fourth quarter was 31% versus 30.2% in Q4 2020. Our cost of service increased by 3.9 million, or 11%. Excluding the impact of foreign currency exchange, cost of service increased 3.4 million, or 10%, primarily due to an increase in transmission expense associated with the growth in fixed broadband subscribers as well as an increase in network-related maintenance costs. Sales and marketing increased by 1.7 million, or 11% in the fourth quarter. Excluding the impact of foreign currency exchange, sales and marketing costs increased 1.5 million, or 9%, primarily due to an increase in commission expense as a result of higher amortization expense relating to incremental contract acquisition costs capitalized subsequent to December 31st, 2020. Our Q4 general and administration expense increased by 4.9 million or 29%. Excluding the impact of foreign exchange, the increase was 4.7 million or 27%, primarily due to higher legal and consulting costs related to two degrees preparation of a planned public listing and equity issuance which were deferred as of September 30, 2021, as well as transaction costs related to strategic activities. Upon the announcement of the two-degree sale, these costs were expensed in the fourth quarter of 2021. These costs of $6.0 million in total were removed from segment-adjusted EBITDA due to the non-recurring nature. For the full year, our segment adjusted EBITDA in New Zealand was 127.6 million, reflecting organic growth of 9%. Our adjusted EBITDA margin for FY21 was 30.7% compared to 31.2% a year ago. The increase in segment adjusted EBITDA was due to growth in our fixed broadband and postpaid wireless revenues, partially offset by increased transmission costs related to our larger fixed broadband customer base and the aforementioned increase in amortized commission expense I described a moment ago. Our Q4 capital expenditures in New Zealand were $26 million versus $24.2 million a year ago. Excluding the impact of FX, our capital expenditures increased by $1.4 million, or 6%, primarily attributable to 5G network-related investments. Our capital intensity for the fourth quarter was 25% flat with a year ago. Shifting to Bolivia, we ended Q4 with 1.5 million wireless subscribers. The ongoing COVID-related challenges in Bolivia resulted in a contraction of our postpaid customer base versus the fourth quarter of 2020. We ended the quarter with 220.1,000 postpaid mobile customers and 1.3 million prepaid customers. We continue to expand our fixed broadband customer base, ending 2021 with 28.5,000 fixed broadband customers. This is a 47% increase compared to the same period last year. Our Q4 service revenues in Bolivia of 29.2 million declined 20% on an organic basis versus the fourth quarter of 2020 due to decreased postpaid and prepaid service revenues. For the year, our service revenues of $124.3 million decreased 16% compared to 2020. Our fixed broadband service revenues, which increased by 43% to $1.4 million in the fourth quarter and grew 64% to $5.1 million for the year partially offset these declines. Our Q4 segment adjusted EBITDA loss of $1 million in Bolivia deteriorated significantly compared to last year as our reduced revenues were only partially offset by significant cost reduction measures. Our reported FY21 segment adjusted EBITDA was roughly break even for the full year. Capital expenditures in Bolivia decreased year over year from $6.5 million to $1.4 million in the fourth quarter due to timing. Our full year capital expenditures of $11.8 million reflects our ongoing focus on cash management. Moving to our consolidated cash and liquidity position, at the end of Q4, our consolidated cash balance was $55 million in cash and cash equivalents and restricted cash. $36.8 million of which was held by Two Degrees, $17.5 million was held by NuevaTel, and the remaining balance was held at corporate. With respect to our capital structure, consolidated debt at the end of Q4, including $419 million of Trilogy's holdco notes, plus local debt and other was $675.4 million. At the end of Q4, 285 million New Zealand dollars was outstanding on our senior finance facility in New Zealand. In Bolivia, our debt outstanding totaled 33.2 million. From a consolidated gearing standpoint, net debt to consolidated LTM adjusted EBITDA was 5.4 times at December 31 versus 5.5 times a year ago. Coming back to the two degrees sale and use of proceeds, As estimated and disclosed in the Management Information Circular and more firmly determined as a result of our recent hedge transaction, the aggregate proceeds are estimated to be approximately $625 million, inclusive of the escrowed portion of up to $15 million. Of the net proceeds expected to be received, the company intends to repay debt obligations and accrued interest of approximately $450 million, then make an initial return of capital to shareholders of approximately $125 million, and retain approximately $35 million to ensure an adequate and prudent buffer to meet anticipated costs for ongoing operations and the ultimate windup of the corporation and to pay any potential indemnification claims arising from the transaction. Currently quantifiable items, including HQ costs at a reduced run rate, separation costs, and other known wind down costs, suggest that approximately half of the retained proceeds are accounted for. We also recognize there are myriad unknown items as it relates to a wind down and dissolution process. That said, we believe that a meaningful portion of these retained proceeds will ultimately be returned to shareholders. Regarding the escrowed portion of $15 million, we also recognize the inherent uncertainty. While we believe exposure is low, there is the possibility that amounts are reduced based on claims, if any. The escrowed proceeds are expected to be received by the company 12 months after the closing of the transaction. At that time, the company then plans to return any remaining amounts to shareholders as quickly and efficiently as possible, subject to the retention of any amounts that the company deems may be needed to address possible indemnification claims that may arise in the future. Finally, a comment on our 2022 outlook. As the sales of Two Degrees and Nueva Tel are expected to close in the second quarter of 2022, we will not be issuing 2022 guidance for either of our operating segments. With that, let's go to questions. Kate?
spk04: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 at this time. We do ask that if you are listening via speakerphone to please pick up your handset for optimum sound quality. If you wish to leave the queue, you may press star 2. Once again, if you have any questions or comments, please press star 1 on your phone now. Our first question today is coming from Umesh Bhandari at Legal & General. Your line is live. You may begin.
spk02: Hi, guys. First, I guess this is probably going to be our last earnings call. So I wanted to say congratulations on the transactions and best of luck. And then second, I guess... I think there's just only one regulatory hurdle that is present. Just maybe just discuss about what that is, and then, you know, I guess, I know you said, you know, that should get cleared in the second quarter. Is that sort of a fairly normal procedure or anything sort of that the company needs to do to get over that hurdle?
spk00: Hi, Umesh. It's Eric, and thanks for the comments. Are you referring to the two degrees or Bolivia? Two degrees, sorry.
spk03: Yeah, no, two degrees, it's a standard process with this. For the OIO approval, they typically establish a timeline. Historically, it's been 70 business days for it. Given that OIO approval was originally granted to us and to our partners quite a long time ago, and that MIRA was previously granted OIO approval when they acquired VOCUS last year, both entities are known well within the OIO, and we believe that it's simply a matter of process and timing. So we don't anticipate any issues whatsoever.
spk02: And then I guess there is not sort of any kind of hurdle in terms of getting the capital out of New Zealand, I assume, right? After the proceeds that I've... No, not at all. Correct. Okay. Great. Thank you very much. That's all I got. Thank you, Mesh. Thank you, Mesh.
spk04: Thank you. Our next question today is coming from Jeff Fan at Scotiabank. Your line is live. You may begin.
spk01: Hi, good afternoon and congrats on getting both processes complete or at least agreed upon. Just wanted to clarify a couple of things with Eric. You said that 70% of the proceeds in New Zealand are hedged at 0.67. Did I get that right?
spk00: That's correct, Jeff. Of the 930 million New Zealand dollars that we estimate would be proceeds to the company, roughly 70% of those New Zealand dollar proceeds have been fixed at the 0.67. Okay.
spk01: And regarding the escrow, you said the 625 estimated amount includes the 15 million that's held in escrow, correct?
spk00: correct yeah and then you said about half of the escrow amount have uh you've identified costs for let me um jeff step through the high level waterfall again uh you know of the the 930 million new zealand dollars of of total proceeds you know, flowing through to 625 million U.S., inclusive of the 15 million of escrow. Set the escrow to the side, 125 million for the initial distribution, 450 million for debt repayments, which leaves 35 million, which the company will be retaining for general corporate purposes as part of the wind down process. Of the $35 million, roughly half of that would be accounted for.
spk01: Oh, I see. Okay. Got it. And with regards to the Bolivia process, there are no other obligations that retains. It's a clean deal, no other impact for TRL holders.
spk03: Yeah, Jeff, it's Brad. No. You know, upon the closing of this transaction, all assets and all liabilities transitioned over to Belizea. They, in effect, all stopped at an intervening entity that we had, which was Western Wireless International, Bolivia 1 and 2, whose only assets were the shares in the Nuevitel business. And so the transaction was done at that level. Everything goes along with it upon closing. Okay, great. Thank you very much. Thanks, Jeff. Great, Jeff. Thank you.
spk04: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone now. We have no further questions in queue. This does conclude today's event. We thank you for your participation. Have a wonderful day.
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