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Liberty Latin America Reports Q2 and H1 2018 Results

August 8, 2018

DENVER, Colorado--(BUSINESS WIRE)--Aug 8, 2018--Liberty Latin America Ltd. (“Liberty Latin America”) (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, 2018.

CEO Balan Nair stated, “Building on a solid start to the year, we added over 60,000 RGUs in the second quarter, including a record number of quarterly broadband additions. This result shows the potential for our fixed businesses, operating in markets where we believe there is additional demand for high-speed services. In mobile, we are seeing a growing number of subscribers using our LTE networks and we have introduced combo plans (with voice, data and text messages) across our markets to address consumers’ changing needs while also aiming to maintain and grow our revenue. We continue to invest in product offerings our customers demand, leveraging the capabilities of our mobile and fixed networks. For example, in addition to Flow-to-go, which we already provide in C&W’s markets, we recently launched VTR Play in Chile, and Go in Puerto Rico, which enable our customers to stream their favorite TV programs at home or on-the-go.”

“Our Puerto Rican business delivered another solid quarter of sequential revenue and OCF 2 growth, as we focused on being fastest to market, both in reconnecting existing customers and reaching new customers. Over 90% of our subscribers are now billable, and in Q2 we saw the first quarter of organic net additions since last year’s hurricanes with quarterly sales ahead of Q2 2017.”

“We have been working for a number of years to design and implement a digital transformation strategy at VTR and I’m excited to announce that this is now being rolled-out. As a result, our customers will benefit from faster and more effective service delivery, which we expect will differentiate us from our competitors and also drive cost efficiencies in our business as we refine our processes. There is tremendous potential to leverage this platform and the learnings from our Chilean business across Liberty Latin America.”

“In-line with our expectations, we have continued to expand and improve our fixed networks in 2018, with over 160,000 homes upgraded or added in the first half of the year. We are also investing in high-speed LTE mobile networks, which we anticipate will drive usage and ultimately revenue.”

“In our first six months as a separately listed company, we have made significant strides towards creating the culture, structure and platforms required for sustainable future growth and we remain on-track with our 2018 guidance 1 targets.”

Q2 Business Highlights

C&W operating momentum building: 29,000 fixed organic RGU additions supported by product and service enhancementsContinued network upgrade and expansion added over 40,000 premises in Q2B2B revenue growth driven by sub-sea networks and managed services VTR continued to deliver solid growth: Reported rebased revenue growth of 5% and rebased OCF growth of 7%Broadband RGU additions of 27,000, best quarterly performance in two yearsLaunch of “VTR Play”, with up to 80 channels available to stream on-the-go Liberty Puerto Rico close to fully operational: Service available to over one million homesFirst quarter of net organic RGU additions since Hurricanes Irma and MariaLaunched “Go” video streaming application in early August

Financial Highlights

* Revenue and OCF YoY growth rates are on a rebased basis 4.

Subscriber Growth 5

Product Additions (Losses): Organic fixed RGU gains of 61,000 and organic mobile subscriber losses of 76,000 in Q2 2018. C&W added 29,000 RGUs during Q2, driven by product and service enhancements and continued network upgrade and expansion. Broadband RGU additions of 11,000 were significantly higher than the attrition of 3,000 RGUs in the prior-year period. This was driven by an improved performance in Jamaica, where we added 4,000 RGUs through increased penetration of our upgraded network, and Panama, where we continued to promote our Mast3r packages, supporting 4,000 additions. We continued the roll-out of enhanced in-home connectivity for subscribers through our WiFi “Connect Box”, now installed across over 20% of our broadband subscriber base.Video RGU additions totaled 8,000, our best quarterly performance since Q2 2016, supported by our network expansion / upgrades and product enhancements, such as “Flow Evo”. Jamaica had a particularly strong quarter, adding 5,000 video RGUs.Fixed-line telephony RGU additions of 10,000 were driven by our successful bundling strategy.Mobile subscribers declined by 89,000 in Q2, primarily driven by prepaid losses in Panama (51,000) and Jamaica (16,000). This was mainly the result of competitive factors and a more targeted approach to promotional activity. VTR added 22,000 RGUs in Q2, driven by 27,000 broadband and 8,000 video RGU additions, partially offset by losses in fixed-line telephony RGUs. We continue to leverage our superior broadband speeds of up to 400 Mbps in combination with the WiFi “Connect Box”, which is deployed to over 55% of VTR’s broadband subscribers. To further enhance the video experience, VTR launched “VTR Play” in July, offering up to 80 channels on-the-go. Mobile: We added 13,000 postpaid subscribers in Q2, as we continued to successfully sell services to our fixed subscribers, increasing the total mobile subscriber base to 236,000. Liberty Puerto Rico added 11,000 RGUs in Q2, which represents our first quarter of net additions since the hurricanes in 2017 driven by our product quality, as well as the speed of network restoration. Of note, we removed 23,000 subscribers from our reported figures in June, the majority of which were located in areas where we currently are not planning to rebuild 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:

N.M. – Not Meaningful.

Our reported revenue for the three and six months ended June 30, 2018 remained relatively flat. The Q2 and YTD results include decreases of $28 million and $73 million, respectively, at Liberty Puerto Rico, primarily attributable to the hurricanes, partly offset by increases due to FX of $18 million and $41 million, respectively, and an increase of $10 million during the YTD period attributable to the impact of the C&W Carve-out Acquisition. From a rebased perspective, revenue declined by 2% and 3% for the three and six months ended June 30, 2018 , respectively, as the impact of Hurricanes Irma and Maria was partially offset by strong rebased growth at VTR, as described below.

Q2 2018 Rebased Revenue Growth - Segment Highlights

C&W: Rebased revenue growth was slightly negative. Lower mobile subscription revenue was partially offset by growth in our (i) sub-sea and managed services B2B businesses and (ii) residential fixed subscription revenue, driven by an increase in the average number of subscribers.The decrease in mobile subscription revenue is primarily attributable to the net effect of (i) lower revenue in the Bahamas and Panama associated with a decrease in the average number of subscribers, mainly driven by continued competition, and (ii) higher revenue in hurricane impacted markets.B2B growth was impacted by the recognition on a cash basis of $5 million of revenue in Q2 2017 related to payments for services provided in prior quarters to a significant customer. 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) mobile subscription revenue, mainly driven by subscriber growth, and (iii) B2B subscription revenue due to growth in SOHO RGUs. Liberty Puerto Rico: Rebased revenue decline of 26% year-over-year was primarily driven by the adverse impact of the hurricanes in 2017. However, we continued to show sequential improvement in Q2, as revenue expanded from $62 million in Q1 2018 to $80 million in Q2 2018.

Operating Income

Operating income was $124 million and $155 million in Q2 2018 and Q2 2017, respectively, and $223 million and $290 million for the six months ended June 30, 2018 and 2017, respectively. These declines were primarily driven by (i) increases in depreciation and amortization, (ii) higher restructuring charges, primarily resulting from employee severance and termination costs associated with certain reorganization programs at C&W, and (iii) lower OCF, as further described below.

Operating Cash Flow Highlights

The following table presents (i) OCF 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:

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