Liberty Latin America : Reports Q3 2020 Results

Liberty Latin America Reports Q3 2020 Results

Sequential financial and operating improvement from Q2

Net RGU additions driven by record C&W and Puerto Rico performance Operating income growth and Adj. OIBDA returning towards pre-COVID levels Completed acquisition of AT&T's Puerto Rico and USVI assets

Denver, Colorado - November 4, 2020: 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, 2020.

CEO Balan Nair commented, "Following a challenging second quarter, we delivered improved financial and operating performance in Q3, as the majority of our markets began to recover from the impacts of COVID-19."

"We saw strong demand for our high-speedbroadband-led propositions and achieved record quarterly fixed RGU additions in each of C&W and Puerto Rico, with over 100,000 new subscribers across both reporting segments. Our C&W markets also swung back to mobile subscriber growth following declines during Q2, and we will build on this momentum through the rest of the year. In Chile, we were impacted by severe lockdown restrictions and VTR experienced greater churn with net subscriber losses in the period although proactive operational actions led to improvements each month from July, which was our most challenging month."

"Our financial performance also recovered in Q3 with sequential revenue growth of 5%. Growth was achieved across all reporting segments, including mobile and B2B products within C&W, and we anticipate our markets will continue to recover over time. In addition, the early actions we took to manage our cost base led to operating income growth and Adjusted OIBDA returning towards Q1 2020 pre-COVID levels."

"We see a compelling opportunity to drive stakeholder value through our disciplined inorganic growth strategy and we are pleased that we completed the acquisition of AT&T's assets in Puerto Rico and the USVI. We believe that the combination of these assets with our high-performing Puerto Rico operations, will create a leading integrated communications player capable of providing enhanced value to customers, generating significant synergies, and bolstering LLA's adjusted free cash flow."

"During the quarter, as part of the funding for our agreed acquisition of Telefonica's Costa Rica assets, we also successfully completed our $350 million rights offering. Our balance sheet remains robust with extended maturities and significant available liquidity through cash and undrawn facilities."

"As we approach the year-end, we are excited to begin the work of integrating our newly acquired assets in Puerto Rico and USVI, and we continue to focus on generating positive adjusted free cash flow in 2020 despite the impacts of COVID-19. Looking further ahead, we continue to invest in expanding our high-speed network footprint, building or upgrading over 230,000 homes year-to-date, and investing in innovative products and services to establish a foundation for further operational and financial growth in future years."

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Business Highlights

• C&W operational recovery from Q2 as COVID-19 restrictions eased; Adj. OIBDA margin higher:
• • Record additions of 66,000 RGUs and return to mobile net additions
  • Sequential revenue growth and Adjusted OIBDA margin up by 140 bps to 40.9%
  • New build / upgrade activity added over 45,000 homes, mainly in Panama and Jamaica
• VTR/Cabletica performance impacted by COVID-19 in Chile:
• • Network challenges and competition drove VTR RGU losses
  • COVID-19impact and FX impacts on USD based costs
  • Added over 25,000 homes through new build activity
• Liberty Puerto Rico delivered another record quarter:
• • Highest ever quarterly RGU additions of 43,000 driven by broadband demand
  • Q3 revenue growth of 10% and Adjusted OIBDA up 14%
  • New build / upgrade activity added ~5,000 homes

Financial and Operating Highlights

						YoY							YoY
Financial Highlights	Q3 2020	Q3 2019	YoY	Rebase		YTD 2020	YTD 2019	YoY	Rebase
					Growth/	Growth/	1					Growth/	Growth/	2
					(Decline)	(Decline)						(Decline)	(Decline)
(USD in millions)
Revenue........................................	$	888	$	967	(8.2%)	(3.6%)	$	2,667	$	2,892	(7.8%)	(3.2%)
Adjusted OIBDA2...........................	$	360	$	380	(5.1%)	(0.7%)	$	1,057	$	1,133	(6.7%)	(1.6%)
Operating income (loss)................	$	87	$	(70)	N.M.			$	(12)	$	187	N.M.
Property & equipment additions....	$	157	$	187	(16.1%)			$	443	$	492	(10.0%)
As a percentage of revenue .......		18%		19%					17%		17%
Adjusted FCF3...............................	$	(22)	$	4				$	59	$	120
Cash provided by operating	$	137	$	159				$	491	$	590
activities.........................................
Cash used by investing activities...	$	(156)	$	(136)				$	(419)	$	(557)
Cash provided (used) by financing	$	(123)	$	30				$	465	$	350
activities.........................................
					YoY	YoY FX
4	Q3 2020	Q3 2019	Neutral
Operating Highlights	Growth/	Growth/
					5
					(Decline)	(Decline)
Total Customers.............................	3,201,700	3,130,500	2.3%
Organic customer adds.................		3,200		26,000
Total RGUs....................................	6,144,200	5,993,800	2.5%
Organic RGU adds/(losses)........		34,500		67,300
Broadband..................................		32,500		41,600
Video...........................................		(7,800)		19,200
Telephony...................................		9,800		6,500
Mobile subscribers.........................	3,378,500	3,682,100	(8.2%)
Organic mobile adds...................		68,800		12,500
Fixed ARPU...................................	$	47.24	$	50.30	(6.1%)	(1.5%)
Mobile ARPU.................................	$	12.41	$	13.16	(5.7%)	(3.2%)

*N.M. - Not Meaningful.

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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							Nine months ended
		September 30,		Increase/(decrease)			September 30,		Increase/(decrease)
		2020			2019		%		Rebased %			2020			2019		%		Rebased %
							in millions, except % amounts
C&W..................................	$	538.9	$	595.9	(9.6)	(6.0)	$	1,642.8	$	1,772.3	(7.3)	(5.3)
VTR/Cabletica...................		236.9			268.4	(11.7)	(3.3)			704.7			819.4	(14.0)	(1.7)
Liberty Puerto Rico............		114.4			104.3	9.7	9.7			328.1			306.7	7.0	6.1
Intersegment eliminations.		(2.7)			(1.8)		N.M.		N.M.			(8.2)			(6.0)		N.M.		N.M.
Total..............................	$	887.5	$	966.8	(8.2)	(3.6)	$	2,667.4	$	2,892.4	(7.8)	(3.2)

N.M. - Not Meaningful.

• Our reported revenue for each of the three and nine months ended September 30, 2020 decreased by 8%.
• • Reported revenue decline in Q3 was largely driven by (1) negative impacts from COVID-19, particularly in C&W, (2) a net negative foreign exchange ("FX") impact of $32 million, primarily related to a 10% appreciation of the U.S. dollar in relation to the Chilean peso, and (3) a $15 million reduction from the disposal of C&W's Seychelles business in the fourth quarter of 2019. These declines were partially offset by organic growth in Liberty Puerto Rico.
  • Reported revenue decline YTD was primarily driven by (1) a net negative FX impact of $126 million, primarily related to a 17% appreciation of the U.S. dollar in relation to the Chilean peso, and (2) negative impacts from COVID-19, particularly in C&W. These declines were partially offset by organic growth in Liberty Puerto Rico.

Q3 2020 Revenue Growth - Segment Highlights

• C&W: Revenue declined on a reported and rebased basis by 10% and 6%, respectively. The higher reported decline was primarily driven by inclusion of our now divested C&W Seychelles business in the prior-year period and adverse currency movements.
• • B2B revenue declined 8% on a reported basis and 4% on a rebased basis, as compared to the prior-year period. The rebased decline was primarily due to lower revenues from fixed and mobile services mostly due to discounts and credits related to reduced or suspended service across our markets as a result of the COVID-19 lockdowns and a strategic decision to reduce low margin transit revenue.
  • • On a sequential basis, we grew reported revenue by 6%. This was driven by the return of certain non-recurring projects that had been put on hold due to COVID-19, and a reduction in discounts and credits offered to customers as markets began to recover.
  • Fixed residential revenue was down 4% on a reported basis and 1% lower on a rebased basis, as compared to the prior-year period. Revenue declined overall on a rebased basis as subscription revenue growth, driven by organic RGU additions, were more than offset by a decline in non-subscription revenue due to lower interconnect volumes.

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• • • Fixed revenue was flat sequentially on a reported basis. Subscription revenue declined as ARPU was lower primarily due to temporary discounts in Panama related to COVID-19 and adverse currency movements in the Jamaican dollar. This was offset by growth in non-subscription revenue.
  • Mobile revenue declined 18% on a reported basis and 14% on a rebased basis, as compared to the prior-year period. Subscription revenue was impacted by reduced recharge activity and fewer subscribers during the COVID-19 related lockdown periods. Inbound roaming revenue declined by $6 million year-over-year, with the largest impact in the Bahamas due to a reduction in tourism as a result of COVID-19.
  • • On a sequential basis, reported mobile revenue grew by 7% driven by higher ARPU as prepaid recharges increased with easing of lockdown restrictions.
• VTR/Cabletica: Revenue declined on a reported and rebased basis by 12% and 3%, respectively. The higher reported year-over-year decline was driven by a 10% appreciation of the U.S. dollar in relation to the Chilean peso. Rebased revenue at VTR declined due to lower ARPU associated with the cancellation of live soccer matches broadcast on our premium programming, which were only partly offset by higher broadband revenue. Cabletica grew revenue on both a reported and rebased basis driven by subscriber growth over the year.
• Liberty Puerto Rico: Reported and rebased revenue growth of 10% was driven by strong subscriber growth as we added approximately 100,000 RGUs over the last twelve months, including over 60,000 new broadband RGUs.

Operating Income (Loss)

• Operating income (loss) was $87 million and ($70 million) for the three months ended September 30, 2020 and 2019, respectively, and ($12 million) and $187 million for the nine months ended September 30, 2020 and 2019, respectively.
• • We reported operating income during the three months ended September 30, 2020, compared with operating loss for the corresponding period during 2019 as the 2019 period was negatively impacted by goodwill impairments. This comparable benefit was slightly offset by a decline in Adjusted OIBDA, as further discussed below.
  • We reported operating loss during the nine months ended September 30, 2020, compared with operating income for the corresponding period during 2019, primarily due to (i) higher goodwill impairments recorded during the second quarter of 2020 in certain C&W markets, compared to the comparative period, and (ii) lower Adjusted OIBDA, as further discussed below.

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