Successfully Completed Split-Off From Liberty Global
Exceeded Target with 465,000 Homes Upgraded / Added in 2017
Financial Results Impacted By Hurricanes Irma and Maria
Puerto Rican Restoration On-Track; Over 450,000 Subscribers
Online
Announced Acquisition of Leading Costa Rican Cable Operator
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 ("Q4") and twelve months
("2017" or "FY 2017") ended December 31, 2017.
CEO Balan Nair stated, "We are entering an exciting new
phase for Liberty Latin America having completed the split-off from
Liberty Global. We believe we have a significant opportunity to
grow through our unique asset base, encompassing a comprehensive
range of telecommunications services from our extensive subsea
network and B2B operations to our high-speed consumer mobile and
fixed networks. Our assets are well-positioned across a region that
remains underpenetrated and underserved by high-speed
telecommunications products."
"To drive this growth, we are committed to building the best
networks and delivering innovative products to enhance the
experience for our customers. In 2017, we upgraded or newly built
approximately 465,000 homes and there is more room to grow with a
fifth of our network footprint at Cable & Wireless still served
by low-speed copper connections and many homes in our markets yet
to be passed. We also accelerated the roll-out of our WiFi Connect
Boxes during the year, with 40% of our customers in Chile now
benefiting from a market-leading in-home broadband connectivity
experience."
"In addition to the organic growth potential in our existing
markets, we also see a significant consolidation opportunity across
a fragmented region where we can leverage our scale to drive
synergies and improve operating performance. Our recently announced
acquisition in Costa Rica is a clear example of the high quality
assets available in the region and the potential for us to add
value through the application of our operating model."
"Looking to 2018, it will be a challenging year as we work
towards recovery in several of our Caribbean markets following the
hurricanes, however, we are on-track to getting our networks and
customers back on-line. Combined with strong ongoing performance in
Chile and momentum building at Cable & Wireless, we are
establishing an exciting platform for sustainable growth."
Key Business Highlights
- VTR delivered another year of strong
performance:
- Reported rebased revenue and OCF1
growth of 6% and 8%, respectively
- Best broadband additions in a decade
with 90,000 internet additions in 2017
- Built / upgraded 196,000 homes in 2017;
~50% higher than 2016
- C&W building operating momentum:
- 45,000 RGUs added in 2017; Q4 strongest
quarter since acquisition with 30,000 RGUs added
- 254,000 homes added / upgraded in 2017;
creating a platform for future growth
- Mobile data growing – upgraded or added
390,000 LTE subscribers in 2017
- Liberty Puerto Rico rebuild on-track:
- Over 450,000 subscribers back on-line
as of February 8, 2018; 530 miles of cable restored
- Operations turned OCF positive in
December 2017
- Successfully negotiated leverage
maintenance covenant holiday for one year
Liberty Latin America 2018 Financial Guidance2
In 2018, we expect:
- Greater than $1.4 billion of OCF;
and
- P&E additions as a percentage of
revenue between 19% and 21%.
Liberty Latin America Q4 2017
YoYGrowth/(Decline)*
FY 2017
YoYGrowth/(Decline)*
Subscribers
Organic RGU net additions (31,200 ) N.M. 65,900 (30 %)
Financial (in USD
millions)
Revenue $ 850 (10 %) $ 3,590 (2 %) OCF $ 295 (23 %) $ 1,367 (6 %)
Property & equipment additions $ (273 ) $ (777 ) As a
percentage of revenue 32 % 22 % Operating loss $ (244 ) N.M.
$ (148 ) N.M. Adjusted FCF3 $ (6 ) N.M. $ (92 ) N.M. Cash
provided by operating activities $ 181 $ 574 Cash used by investing
activities $ (186 ) $ (640 ) Cash provided by financing activities
$ 5 $ 42 N.M. – Not Meaningful. * Revenue and OCF YoY growth
rates are on a rebased basis(4).
Definitions for OCF and Adjusted FCF were changed effective
December 31, 2017. All prior year amounts reflect these new
definitions.
- Under our new definition we are now
including charges from Liberty Global in OCF. During 2017 and 2016,
these charges were $12.0 million and $8.5 million, respectively. We
will continue to incur charges from Liberty Global post split-off
under a framework services agreement.
- With respect to Adjusted FCF, under our
new definition we are deducting distributions to non-controlling
interests, which are reflected as a component of cash provided by
financing activities. During 2017 and 2016, these distributions
were $45.9 million and $61.9 million, respectively.
Subscriber Growth5
Three months ended Year
ended December 31, December 31, 2017
2016 2017 2016
Organic RGU net additions (losses) by product Video (21,000
) (6,200 ) (13,400 ) 11,600 Data 13,500 14,500 110,000 100,200
Voice (23,700 ) (8,500 ) (30,700 ) (17,800 ) Total (31,200 ) (200 )
65,900 94,000
Organic RGU net additions
(losses) by segment C&W 30,100 (20,400 ) 44,600 (4,700 )
Chile 3,700 10,300 81,900 76,500 Puerto Rico (65,000 ) 9,900
(60,600 ) 22,200 Total (31,200 ) (200 ) 65,900 94,000
Organic Mobile SIM additions (losses) by
product Postpaid 400 3,300 29,200 33,100 Prepaid (33,600 )
58,600 (86,900 ) 14,300 Total (33,200 ) 61,900
(57,700 ) 47,400
Organic Mobile SIM additions
(losses) by segment C&W (41,900 ) 48,500 (106,400 ) 13,200
Chile 8,700 13,400 48,700 34,200
Total
(33,200 ) 61,900 (57,700 ) 47,400
- Product
Additions: Organic fixed RGU losses of 31,000 in Q4
2017.
- C&W:
Added 30,000 RGUs during Q4, including 21,000 broadband and 6,000
fixed telephony RGUs.
- Broadband additions were driven by
network upgrades, leading to gains of 15,000 RGUs in Jamaica. In
Panama, we recorded an overall decline of 1,000 subscribers as
higher sales of Mast3r bundles were offset by churn on our legacy
products.
- Excluding DTH losses of 4,000 in
Panama, our fixed video RGUs grew by 7,000 across C&W's
markets. This performance represented an improvement compared to
prior quarters as we drove increased uptake of our bundle
propositions and promoted Flow Sports - the leading sports channel
in the English speaking Caribbean.
- Fixed voice additions resulted from our
increased focus on promoting bundles, particularly in Jamaica and
Trinidad.
- Mobile:
subscribers declined by 42,000 in Q4 as continued growth in Jamaica
(23,000 additions) was more than offset by declines in Panama
(61,000 decline) and the Bahamas (11,000 decline). The decline in
Panama reflects our ongoing focus on higher ARPU customers and
competitive intensity in the market, while increased competition
continued to impact the Bahamas.
- Chile: VTR
added 4,000 RGUs in Q4, a seasonally slower period, driven by
17,000 broadband subscriber additions, partially offset by
fixed-line voice attrition. The strong broadband performance
reflects our speed leadership in Chile.
- Mobile: We
added 9,000 postpaid subscribers in Q4 as we continued to penetrate
our fixed subscriber base with our mobile product.
- Puerto
Rico: Our subscriber base fell by 65,000 in Q4. This figure
represents the net number of subscribers that disconnected from our
services during the quarter.
Revenue Highlights
C&W was acquired on May 16, 2016, and accordingly, is
included in our financial results under our U.S. GAAP accounting
policies since the acquisition date. 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
Increase/(decrease) Year ended
Increase/(decrease) December 31, December 31,
2017 2016 % Rebased %
2017 2016 % Rebased %
in millions, except % amounts C&W $ 584.9 $ 590.7
(1.0 ) (2.6 ) $ 2,322.1 $ 1,444.8 60.7 (1.3 ) Chile 250.3 227.6
10.0 4.7 952.9 859.5 10.9 6.4 Puerto Rico 16.9 105.2 (83.9 ) (83.9
) 320.5 420.8 (23.8 ) (23.8 ) Intersegment eliminations (2.0 ) (0.6
)
N.M.
N.M.
(5.5 ) (1.3 )
N.M.
N.M.
Total $ 850.1 $ 922.9 (7.9 ) (9.9 ) $ 3,590.0
$ 2,723.8 31.8 (2.1 )
N.M. – Not Meaningful.
- Reported revenue for the three and
twelve months ended December 31, 2017 declined by 8% and grew
by 32%, respectively.
- The Q4 reported decline reflects the
negative impact of Hurricanes Irma and Maria, partially offset by
beneficial exchange rate movements, organic revenue growth at VTR
and inclusion of certain previously carved-out entities at C&W.
The 2017 reported growth was primarily driven by the acquisition of
C&W in the second quarter of 2016.
- In September 2017, Hurricanes Irma and
Maria impacted a number of our markets in the Caribbean. During the
three months ended December 31, 2017, the hurricanes negatively
impacted Liberty Puerto Rico’s and C&W's revenue by an
estimated $90 million and $7 million, respectively. For FY 2017,
the effects of the hurricanes negatively impacted Liberty Puerto
Rico’s and C&W's revenue by an estimated $109 million and $10
million, respectively.
- From a rebased perspective, revenue
declined by 10% and 2% for the three and twelve months ended
December 31, 2017, respectively, driven by the impact of
Hurricanes Irma and Maria partially offset by rebased growth in
Chile.
Q4 2017 Rebased Revenue Growth - Segment
Highlights
- C&W:
Rebased revenue declined 3% overall.
- Lower revenue was driven by (i) a
decline in Bahamas' mobile performance where we continue to be
impacted by the entry of a new mobile competitor, (ii) reduced
fixed-line revenue in Caribbean markets impacted by the hurricanes
and lower carrier revenue in Jamaica, and (iii) a fall in low
margin project-related B2B revenue in Panama compared to a very
strong performance in Q4 2016. This decline was partly offset by
(a) continued growth in Jamaica's mobile revenue, (b) increased
penetration of high-speed fixed services, particularly in Panama
and Jamaica and (c) growth in our wholesale capacity business.
- Chile:
Rebased revenue growth of 5% was primarily related to increases in
(i) residential cable subscription revenue, mainly from higher ARPU
per RGU and an increase in the average number of subscribers, (ii)
mobile subscription revenue, driven by subscriber growth and (iii)
B2B subscription revenue due to growth in SOHO RGUs.
- Puerto
Rico: Rebased revenue decline of 84% was driven by impacts
related to Hurricanes Irma and Maria.
- In 2018, we anticipate there will be a
continued adverse impact on our financial performance as we rebuild
our business, however we are making good progress reconnecting our
customers, with over 450,000 RGUs back online as of February 8,
2018.
Operating Income (Loss)
- Operating income (loss) was ($244
million) and $141 million in Q4 2017 and Q4 2016, respectively, and
($148 million) and $319 million for the year ended December 31,
2017 and 2016, respectively.
- The FY 2017 decrease was primarily
driven by increases in impairments and depreciation and
amortization, which were partially offset by higher OCF as further
described below. During 2017, we recorded $660 million of
impairments, primarily resulting from the hurricanes and our annual
goodwill testing at C&W. The increase in depreciation and
amortization was primarily driven by the acquisition of
C&W.
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:
Three months ended
Increase/(decrease) Year ended
Increase/(decrease) December 31, December 31,
2017 2016 % Rebased %
2017 2016 % Rebased %
in millions, except % amounts C&W $ 215.2 $ 226.4
(4.9 ) (6.2 ) $ 876.3 $ 541.9 61.7 (3.8 ) Chile 101.4 94.3 7.5 2.4
383.3 339.3 13.0 8.3 Puerto Rico (12.1 ) 58.9
N.M.
N.M.
132.6 211.8 (37.4 ) (37.4 ) Corporate and other (9.7 ) (5.2 ) 86.5
N.M.
(25.1 ) (17.4 ) 44.3
N.M.
Total $ 294.8 $ 374.4 (21.3 ) (22.9 ) $ 1,367.1
$ 1,075.6 27.1 (6.3 ) OCF Margin 34.7 %
40.6 % 38.1 % 39.5 %
N.M. – Not Meaningful.
- Reported OCF for the three and twelve
months ended December 31, 2017 declined by 21% and grew by
27%, respectively.
- The three month movement was primarily
due to the impacts of Hurricanes Irma and Maria, while the twelve
month change was driven by the C&W acquisition.
- In September 2017, Hurricanes Irma and
Maria impacted a number of our markets in the Caribbean. During the
three months ended December 31, 2017, the effects of the hurricanes
negatively impacted Liberty Puerto Rico’s and C&W's OCF by an
estimated $65 million and $8 million, respectively. In FY 2017, the
effects of the hurricanes negatively impacted Liberty Puerto Rico’s
and C&W's OCF by an estimated $80 million and $17 million,
respectively.
- The Q4 and FY 2017 growth rates were
negatively impacted by an $8 million and $13 million reversal in Q4
and FY 2016, respectively, of a previously-recorded provision and
related indemnification asset in connection with a favorable ruling
on an outstanding legal case in Puerto Rico.
- From a rebased perspective, including
the aforementioned negative impacts from Hurricanes Irma and Maria,
OCF declined by 23% and 6% for the three and twelve months ended
December 31, 2017.
- As previously identified, the FY 2017
rebased growth rate was negatively impacted by the C&W OCF
result in Q1 2016, which was not comparable to preceding and
subsequent quarters.
Q4 2017 Rebased OCF Growth - Segment
Highlights
- C&W:
Rebased OCF decline of 6% was driven by (i) the aforementioned
revenue drivers, (ii) negative impacts of Hurricanes Irma and Maria
and (iii) negative impacts totaling $9 million for the reassessment
of certain operating accruals and a provision for a non-cancellable
lease. These factors were partially offset by (a) improved margin
mix primarily associated with reduced low margin project-related
B2B revenue, and (b) favorable impact of a reduction in our bonus
accrual.
- Chile:
Rebased OCF increase of 2% was driven by the aforementioned solid
revenue growth slightly offset by increases in network related
expenses, marketing costs and programming and copyright costs.
- Puerto
Rico: Rebased OCF decline was driven by the aforementioned
negative impacts of Hurricanes Irma and Maria, and the legal ruling
benefit in the prior-year period.
Effective January 1, 2018, we will adopt a new accounting
standard with respect to certain defined benefit pension plans.
Specifically, certain components of our net periodic pension
benefit will be reclassified to non-operating income and, as such,
will no longer be included in OCF. During the year ended December
31, 2017, $14.5 million of such credits were included in OCF that
will be reclassified to non-operating income (expense) upon the
adoption of this new accounting standard.
Net Loss Attributable to Shareholders
- Net losses attributable to shareholders
were $401 million and $107 million for the three months ended
December 31, 2017 and 2016, respectively, and $778 million and $432
million for the year ended December 31, 2017 and 2016,
respectively.
Leverage and Liquidity (at December 31, 2017)
- Total capital
leases and principal amount of debt: $6,398 million.
- Leverage
ratios: Consolidated gross and net leverage ratios of 5.5x
and 5.1x, respectively. These ratios were calculated on a latest
quarter annualized ("LQA") basis and therefore impacted by the $73
million negative impact from Hurricanes Irma and Maria in Q4. This
impact increased gross and net leverage by approximately 1.1x and
1.0x, respectively.
- Average debt
tenor6: 6.1 years, with approximately 88% not due until 2022
or beyond.
- Borrowing
costs: Blended, fully-swapped borrowing cost of our debt was
6.3%. In February 2018, we entered into a new $1,875 million term
loan at C&W, which was used to refinance the existing C&W
$1,825 million term loan. The refinancing reduced our margin by 25
basis points to LIBOR + 3.25% and extended the tenor by one year to
January 2026. The incremental loan proceeds were used to repay
drawings under the C&W revolving credit facility.
- Liquidity:
Approximately $1.5 billion, including $530 million of cash and $938
million of aggregate unused borrowing capacity7 under our credit
facilities.
Forward-Looking Statements and Disclaimer
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements with respect to our strategies, future
growth prospects and opportunities; our expectations with respect
to subscribers, revenue, ARPU per RGU, OCF and Adjusted FCF;
statements regarding the impact of Hurricanes Irma and Maria on our
operations in the Caribbean, our plans regarding the markets
impacted by the hurricanes, the time it will take to restore
services in the markets impacted by the hurricanes and the amount
and timing of insurance proceeds; statements regarding the
development, enhancement and expansion of, our superior networks
and innovative and advanced products and services; plans and
expectations relating to new build and network extension
opportunities; opportunities with respect to our mobile, B2B and
subsea cable businesses, our estimates of future P&E additions
as a percentage of revenue; the strength of our balance sheet and
tenor of our debt; the potential value added by our acquisition of
a Costa Rican cable operator; and other information and statements
that are not historical fact. These forward-looking statements
involve certain risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by
these statements. These risks and uncertainties include events that
are outside of our control, such as hurricanes and other natural
disasters, the continued use by subscribers and potential
subscribers of our services and their willingness to upgrade to our
more advanced offerings; our ability to meet challenges from
competition, to manage rapid technological change or to maintain or
increase rates to our subscribers or to pass through increased
costs to our subscribers; the effects of changes in laws or
regulation; general economic factors; our ability to obtain
regulatory approval and satisfy regulatory conditions associated
with acquisitions and dispositions; our ability to successfully
acquire and integrate new businesses and realize anticipated
efficiencies from acquired businesses; the availability of
attractive programming for our video services and the costs
associated with such programming; our ability to achieve forecasted
financial and operating targets; the outcome of any pending or
threatened litigation; the ability of our operating companies to
access cash of their respective subsidiaries; the impact of our
operating companies' future financial performance, or market
conditions generally, on the availability, terms and deployment of
capital; fluctuations in currency exchange and interest rates; the
ability of suppliers and vendors (including our third-party
wireless network provider under our MVNO arrangement) to timely
deliver quality products, equipment, software, services and access;
our ability to adequately forecast and plan future network
requirements including the costs and benefits associated with
network expansions; and other factors detailed from time to time in
our filings with the Securities and Exchange Commission, including
our most recently filed Form 10-K. These forward-looking statements
speak only as of the date of this release. We expressly disclaim
any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein to
reflect any change in our expectations with regard thereto or any
change in events, conditions or circumstances on which any such
statement is based.
About Liberty Latin America
Liberty Latin America is a leading telecommunications company
operating in over 20 countries across Latin America and the
Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil
and BTC. The communications and entertainment services that we
offer to our residential and business customers in the region
include combinations of services comprised of digital video,
broadband internet, telephony and mobile services. Our business
products and services include enterprise-grade connectivity, data
center, hosting and managed solutions, as well as information
technology solutions with customers ranging from small and medium
enterprises to international companies and governmental agencies.
In addition, Liberty Latin America operates a sub-sea and
terrestrial fiber optic cable network that connects over 40 markets
in the region.
Liberty Latin America has three separate classes of common
shares, which are traded on the NASDAQ Global Select Market under
the symbols "LILA" (Class A) and "LILAK" (Class C), and on the OTC
link under the symbol "LILAB" (Class B).
For more information, please visit www.lla.com.
Footnotes
1.
For the definition of Operating Cash Flow
("OCF") and required reconciliations, please see OCF Definition and
Reconciliation below.
2.
OCF guidance is based on FX rates as of
February 9, 2018.
3.
For the definition of Adjusted Free Cash
Flow (“Adjusted FCF”) and required reconciliations, please see
Adjusted Free Cash Flow Definition and Reconciliation below. For
more detailed information concerning our operating, investing and
financing cash flows, see the consolidated statements of cash flows
included in our Form 10-K.
4.
The indicated growth rates are rebased for
acquisitions and FX. Please see Revenue and Operating Cash Flow for
information on rebased growth.
5.
Please see Footnotes for Operating Data
and Subscriber Variance Tables for the definition of RGUs. Organic
figures exclude RGUs of acquired entities at the date of
acquisition and other nonorganic adjustments, but include the
impact of changes in RGUs from the date of acquisition. All
subscriber/RGU additions or losses refer to net organic changes,
unless otherwise noted.
6.
For purposes of calculating our average
tenor, total debt excludes vendor financing.
7.
Our aggregate unused borrowing capacity of
$938 million represents the maximum undrawn commitments under our
subsidiaries' applicable facilities without regard to covenant
compliance calculations or other conditions precedent to borrowing.
Upon completion of the relevant December 31, 2017 compliance
reporting requirements for our credit facilities, and assuming no
further changes from quarter-end borrowing levels, we anticipate
the full amount of unused borrowing capacity will continue to be
available to be borrowed under each of the respective subsidiary
facilities. For information regarding limitations on C&W's
ability to access this cash, see the discussion under "Liquidity
and Capital Resources" in our Form 10-K.
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Latin America are included in
our Annual Report on Form 10-K.
Rebase Information
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2017, we have
adjusted our historical revenue and OCF for the three and twelve
months ended December 31, 2016 to (i) include the pre-acquisition
revenue and OCF of certain entities acquired during 2016 and 2017
in our rebased amounts for the three and twelve months ended
December 31, 2016 to the same extent that the revenue and OCF of
such entities are included in our results for the three and twelve
months ended December 31, 2017 and (ii) reflect the translation of
our rebased amounts for the three and twelve months ended December
31, 2016 at the applicable average foreign currency exchange rates
that were used to translate our results for the three and twelve
months ended December 31, 2017. We have included the Carve-out
entities in the determination of our rebased revenue and OCF for
the three months ended December 31, 2016. We have included C&W
and the Carve-out entities in whole or in part in the determination
of our rebased revenue and OCF for the twelve months ended December
31, 2016. We have reflected the revenue and OCF of the acquired
entities in our 2016 rebased amounts based on what we believe to be
the most reliable information that is currently available to us
(generally pre-acquisition financial statements), as adjusted for
the estimated effects of (a) any significant differences between
U.S. GAAP and local generally accepted accounting principles, (b)
any significant effects of acquisition accounting adjustments, (c)
any significant differences between our accounting policies and
those of the acquired entities and (d) other items we deem
appropriate. We do not adjust pre-acquisition periods to eliminate
nonrecurring items or to give retroactive effect to any changes in
estimates that might be implemented during post-acquisition
periods. As we did not own or operate the acquired businesses
during the pre-acquisition periods, no assurance can be given that
we have identified all adjustments necessary to present the revenue
and OCF of these entities on a basis that is comparable to the
corresponding post-acquisition amounts that are included in our
historical results or that the pre-acquisition financial statements
we have relied upon do not contain undetected errors. The
adjustments reflected in our rebased amounts have not been prepared
with a view towards complying with Article 11 of Regulation S-X. In
addition, the rebased growth percentages are not necessarily
indicative of the revenue and OCF that would have occurred if these
transactions had occurred on the dates assumed for purposes of
calculating our rebased amounts or the revenue and OCF that will
occur in the future. The rebased growth percentages have been
presented as a basis for assessing growth rates on a comparable
basis, and are not presented as a measure of our pro forma
financial performance. The following table provides adjustments
made to the 2016 amounts to derive our rebased growth rates:
Revenue OCF
Three months endedDecember
31,
Year endedDecember 31,
Three months endedDecember
31,
Year endedDecember 31,
2016 2016 2016 2016 in millions
Acquisitions $ 8.7 $ 917.2 $ 3.1 $ 373.9 Foreign Currency
12.3 24.4 4.7 9.6 Total $ 21.0 $ 941.6
$ 7.8 $ 383.5
OCF Definition and Reconciliation
As used herein, OCF has the same meaning as the term "Adjusted
OIBDA" that is referenced in our Form 10-K. OCF is the primary
measure used by our chief operating decision maker to evaluate
segment operating performance. OCF is also a key factor that is
used by our internal decision makers to (i) determine how to
allocate resources to segments and (ii) evaluate the effectiveness
of our management for purposes of annual and other incentive
compensation plans. As we use the term, OCF is defined as operating
income before depreciation and amortization, share-based
compensation, provisions and provision releases related to
significant litigation and impairment, restructuring and other
operating items. Other operating items include (i) gains and
losses on the disposition of long-lived assets, (ii) third-party
costs directly associated with successful and unsuccessful
acquisitions and dispositions, including legal, advisory and due
diligence fees, as applicable, and (iii) other acquisition-related
items, such as gains and losses on the settlement of contingent
consideration. Our internal decision makers believe OCF is a
meaningful measure because it represents a transparent view of our
recurring operating performance that is unaffected by our capital
structure and allows management to (i) readily view operating
trends, (ii) perform analytical comparisons and benchmarking
between segments and (iii) identify strategies to improve operating
performance in the different countries in which we
operate. Effective December 31, 2017, we include certain
charges previously allocated to us by Liberty Global in the
calculation of OCF. These charges represent fees for certain
services provided to us and totaled $12.0 million and $8.5 million
for the years ended December 31, 2017 and 2016, respectively.
We believe changing the definition of OCF to include these charges
is meaningful given they represent operating costs we will continue
to incur subsequent to the split-off as a standalone public
company. This change has been given effect for all periods
presented. We believe our OCF measure is useful to investors
because it is one of the bases for comparing our performance with
the performance of other companies in the same or similar
industries, although our measure may not be directly comparable to
similar measures used by other public companies. OCF should be
viewed as a measure of operating performance that is a supplement
to, and not a substitute for, operating income, net earnings or
loss, cash flow from operating activities and other U.S. GAAP
measures of income or cash flows. A reconciliation of our
operating income (loss) to total segment OCF is presented in the
following table:
Three months ended Year ended
December 31, December 31, 2017
2016 2017 2016 in millions
Operating income (loss) $ (243.6 ) $ 141.2 $ (148.4 ) $
319.1 Share-based compensation expense 2.3 4.7 14.2 15.4
Depreciation and amortization 207.2 208.2 793.7 587.3 Impairment,
restructuring and other operating items, net 328.9 20.3
707.6 153.8 Total OCF $ 294.8 $ 374.4 $
1,367.1 $ 1,075.6
Summary of Debt, Capital Lease Obligations & Cash and
Cash Equivalents
The following table details the U.S. dollar equivalent balances
of the outstanding principal amount of our debt, capital lease
obligations and cash and cash equivalents at December 31,
2017:
Capital Debt &
Capital Cash Lease Lease and
Cash Debt Obligations Obligations
Equivalents in millions Liberty Latin America1
$ — $ — $ — $ 133.4 C&W 3,900.6 16.7 3,917.3 266.1 VTR 1,497.4
0.8 1,498.2 89.4 Liberty Puerto Rico 982.5 — 982.5
41.0 Total $ 6,380.5 $ 17.5 $ 6,398.0 $
529.9 1. Represents the amount held by Liberty Latin America
on a standalone basis plus the aggregate amount held by
subsidiaries of Liberty Latin America that are outside of our
borrowing groups. Subsidiaries of Liberty Latin America that are
outside our borrowing groups rely on funds provided by our
borrowing groups to satisfy their liquidity needs.
Property and Equipment Additions and Capital
Expenditures
The table below highlights the categories of the property and
equipment additions for the indicated periods and reconciles those
additions to the capital expenditures that are presented in the
consolidated statements of cash flows included in our Form
10-K.
Three months ended Year
ended December 31, December 31, 2017
2016 2017 2016 in millions,
except % amounts Customer premises equipment $ 29.3 $
27.6 $ 143.5 $ 137.7 New Build & Upgrade 57.5 9.2 96.9 44.0
Capacity 7.1 7.1 32.1 37.6 Baseline 14.8 13.7 41.1 44.5 Product
& Enablers 13.3 7.9 31.3 21.8 C&W P&E Additions 151.2
137.7 431.8 282.6 Property and
equipment additions 273.2 203.2 776.7 568.2 Assets acquired under
capital-related vendor financing arrangements (7.7 ) (11.8 ) (54.9
) (45.5 ) Assets acquired under capital leases (0.5 ) (2.4 ) (4.2 )
(7.4 ) Changes in current liabilities related to capital
expenditures (73.2 ) (41.1 ) (78.3 ) (24.9 ) Capital expenditures1
$ 191.8 $ 147.9 $ 639.3 $ 490.4
Property and equipment additions as % of revenue 32.1 % 22.0 % 21.6
% 20.9 % 1. The capital expenditures that we report in our
consolidated statements of cash flows do not include amounts that
are financed under capital-related vendor financing or capital
lease arrangements. Instead, these amounts are reflected as
non-cash additions to our property and equipment when the
underlying assets are delivered and as repayments of debt when the
related principal is repaid.
Adjusted Free Cash Flow Definition and Reconciliation
We define Adjusted FCF as net cash provided by our operating
activities, plus (i) cash payments for third-party costs directly
associated with successful and unsuccessful acquisitions and
dispositions and (ii) expenses financed by an intermediary, less
(a) capital expenditures, (b) distributions to noncontrolling
interest owners, (c) principal payments on amounts financed by
vendors and intermediaries and (d) principal payments on capital
leases. We changed the way we define Adjusted FCF effective
December 31, 2017 to deduct distributions to noncontrolling
interest owners. This change was given effect for all periods
presented. We believe that our presentation of Adjusted FCF
provides useful information to our investors because this measure
can be used to gauge our ability to service debt and fund new
investment opportunities. Adjusted FCF should not be understood to
represent our ability to fund discretionary amounts, as we have
various mandatory and contractual obligations, including debt
repayments, which are not deducted to arrive at this amount.
Investors should view adjusted free cash flow as a supplement to,
and not a substitute for, U.S. GAAP measures of liquidity included
in our consolidated statements of cash flows. The following table
provides the reconciliation of our net cash provided by operating
activities to Adjusted FCF for the indicated periods:
Three months ended Year ended
December 31, December 31, 2017
2016 2017 2016 in millions
Net cash provided by operating activities $ 180.8 $ 240.7 $
573.9 $ 468.2 Cash payments for direct acquisition and disposition
costs 1.4 23.3 4.2 86.0 Expenses financed by an intermediary1 25.8
1.9 82.7 3.0 Capital expenditures (191.8 ) (147.9 ) (639.3 ) (490.4
) Distributions to noncontrolling interest owners (12.6 ) (6.3 )
(45.9 ) (61.9 ) Principal payments on amounts financed by vendors
and intermediaries (7.3 ) — (59.4 ) — Principal payments on capital
leases (1.9 ) (1.7 ) (8.6 ) (5.2 ) Adjusted FCF $ (5.6 ) $ 110.0
$ (92.4 ) $ (0.3 ) 1. For purposes of our
consolidated statements of cash flows, expenses financed by an
intermediary are treated as hypothetical operating cash outflows
and hypothetical financing cash inflows when the expenses are
incurred. When we pay the financing intermediary, we record
financing cash outflows in our consolidated statements of cash
flows. For purposes of our Adjusted Free Cash Flow definition, we
add back the hypothetical operating cash outflow when these
financed expenses are incurred and deduct the financing cash
outflows when we pay the financing intermediary.
ARPU per Customer Relationship
The following table provides ARPU per customer relationship for
the indicated periods:
Three months ended December 31,
FX-Neutral1 2017
2016 % Change % Change Liberty Latin
America2,3 $ 49.87 $ 47.97 4.0 % 0.8 % C&W2 $ 44.80 $ 43.74 2.4
% 2.3 % Chile CLP 33,659 CLP 33,953 (0.9 %) (0.9 %) 1. The
FX-neutral change represents the percentage change on a
year-over-year basis adjusted for FX impacts and is calculated by
adjusting the prior-year figures to reflect translation at the
foreign currency rates used to translate the current year amounts.
2. As a part of our ongoing effort to conform C&W's subscriber
counting policies to our policies, we have reflected nonorganic
reductions totaling 223,000 to C&W's customer count during the
twelve months ended December 31, 2017. In order to provide a more
meaningful comparison of ARPU, we have reflected all of these
nonorganic reductions in the customer figures used to calculate
ARPU for the three months ended December 31, 2017 and 2016. 3. Due
to the uncertainties surrounding our Q4 2017 customer count in
Puerto Rico as a result of the hurricanes, we have omitted Puerto
Rico ARPU for the three months ended December 31, 2017 and December
31, 2016. For the three months ended December 31, 2016, Puerto Rico
ARPU was $78.36. In order to provide a more meaningful comparison,
Puerto Rico ARPU has been omitted from consolidated Liberty Latin
America ARPU for the three months ended December 31, 2017 and 2016.
Including Puerto Rico, Liberty Latin America ARPU was $52.51 for
the three months ended December 31, 2016.
Mobile ARPU
The following tables provide ARPU per mobile subscriber for the
indicated periods:
Three months endedDecember
31,
FX-Neutral 2017 2016 %
Change % Change Including interconnect revenue $
17.45 $ 17.01 2.6 % 2.2 % Excluding interconnect revenue $ 16.21 $
15.80 2.6 % 2.2 %
Subscriber Tables
Consolidated Operating Data — December 31, 2017
Video
HomesPassed
Two-wayHomesPassed
Fixed-lineCustomerRelationships
Basic VideoSubscribers
EnhancedVideoSubscribers
DTHSubscribers
TotalVideo
InternetSubscribers
TelephonySubscribers
TotalRGUs
Total Mobile
Subscribers1
C&W: Panama 541,500 541,500 179,200 — 47,900 29,700 77,600
104,500 125,200 307,300 1,682,300 Jamaica2 458,300 448,300 233,300
— 102,500 — 102,500 168,500 176,900 447,900 953,700 The Bahamas
128,900 128,900 47,400 — 6,200 — 6,200 26,600 47,400 80,200 254,900
Barbados 124,500 124,500 85,500 — 17,700 — 17,700 62,000 75,100
154,800 124,300 Trinidad and Tobago 316,000 316,000 156,300 —
107,400 — 107,400 124,300 49,500 281,200 — Other3 362,400
342,600 207,900 11,700 66,700 —
78,400 129,200 102,800 310,400 401,300
C&W total 1,931,600 1,901,800 909,600 11,700 348,400 29,700
389,800 615,100 576,900 1,581,800 3,416,500 Chile 3,394,700
2,912,800 1,406,900 67,500 999,900 — 1,067,400 1,181,600 628,400
2,877,400 214,900 Puerto Rico3 1,076,900 1,076,900
377,700 — 232,100 — 232,100
313,100 193,300 738,500 — Total 6,403,200
5,891,500 2,694,200 79,200 1,580,400
29,700 1,689,300 2,109,800 1,398,600
5,197,700 3,631,400
Organic
Subscriber Variance Table - December 31, 2017 vs September 30,
2017 Video
HomesPassed Two-wayHomes
Passed
Fixed-lineCustomerRelationships
Basic VideoSubscribers
EnhancedVideoSubscribers
DTHSubscribers
TotalVideo
InternetSubscribers
TelephonySubscribers TotalRGUs Total
Mobile Subscribers1 C&W: Panama 6,400 31,300
(7,400 ) — 2,300 (4,300 ) (2,000 ) (600 ) (1,900 ) (4,500 ) (60,900
) Jamaica 24,800 24,800 9,900 — 5,300 — 5,300 14,800 9,400 29,500
23,200 The Bahamas — — (2,100 ) — 300 — 300 400 (2,100 ) (1,400 )
(11,200 ) Barbados 800 800 500 — 900 — 900 1,200 600 2,700 —
Trinidad and Tobago 900 900 (900 ) — (900 ) — (900 ) 900 3,100
3,100 — Other3 3,400 3,400 1,000 400
(800 ) — (400 ) 4,400 (3,300 ) 700 7,000
C&W total 36,300 61,200 1,000 400 7,100 (4,300 ) 3,200
21,100 5,800 30,100 (41,900 ) VTR 34,000 44,700 11,600 (2,400 )
1,100 — (1,300 ) 17,100 (12,100 ) 3,700 8,700 Liberty Puerto Rico3
(30,000 ) (30,000 ) (30,500 ) — (22,900 ) — (22,900 )
(24,700 ) (17,400 ) (65,000 ) — Total change 40,300
75,900 (17,900 ) (2,000 ) (14,700 ) (4,300 ) (21,000 )
13,500 (23,700 ) (31,200 ) (33,200 )
1. Mobile subscribers are comprised of the
following:
Mobile Subscribers Consolidated
Operating Data Q4 Organic Subscriber Variance
Prepaid Postpaid Total
Prepaid Postpaid Total C&W:
Panama 1,523,600 158,700 1,682,300 (57,800 ) (3,100 ) (60,900 )
Jamaica 934,900 18,800 953,700 23,700 (500 ) 23,200 The Bahamas
228,100 26,800 254,900 (10,100 ) (1,100 ) (11,200 ) Barbados 97,300
27,000 124,300 400 (400 ) — Other 346,300 55,000
401,300 10,200 (3,200 ) 7,000 C&W total
3,130,200 286,300 3,416,500 (33,600 ) (8,300 ) (41,900 ) VTR 6,900
208,000 214,900 — 8,700 8,700
Total 3,137,100 494,300 3,631,400
(33,600 ) 400 (33,200 ) 2. In Q4 2017, we made a
39,100 adjustment to lower Jamaica's fixed-line telephony
subscribers to align with Liberty Latin America's policies. This
also reduced Jamaica's customer relationships by 39,100. 3. During
September 2017, Hurricanes Irma and Maria caused significant damage
to our operations in Puerto Rico, as well as certain geographies
within C&W, including the British Virgin Islands, Dominica and
Anguilla, and to a lesser extent, Turks & Caicos, the Bahamas,
Antigua and other smaller markets, resulting in disruptions to our
telecommunications services within these islands. With the
exception of the Bahamas, all of these C&W markets are included
in the “Other” category in the accompanying table. For Puerto Rico,
British Virgin Islands, Dominica and Anguilla, where we are still
in the process of assessing the impacts of the hurricanes on our
networks and subscriber counts, (i) the subscriber levels reflect
the pre-hurricane RGU (as defined below) counts as of August 31,
2017, adjusted for net known disconnects through December 31, 2017
and (ii) the homes passed levels reflect the pre-hurricane homes
passed counts as of August 31, 2017, adjusted for an estimated
30,000 homes in Puerto Rico that were destroyed in geographic areas
we currently do not anticipate rebuilding our network. As of
December 31, 2017, we have been able to restore service to
approximately 340,000 RGUs of our total 738,500 RGUs at Liberty
Puerto Rico. Additionally, services to most of our fixed-line
customers have not yet been restored in the British Virgin Islands,
Dominica and Anguilla. While mobile services have been largely
restored in these markets, we are still in the process of
completing the restoration of our mobile network infrastructure.
Glossary
ARPU – Average revenue per unit refers to the average
monthly subscription revenue (subscription revenue excludes
interconnect, mobile handset sales, late fees and installation
fees) per average customer relationship or mobile subscriber, as
applicable. ARPU per average customer relationship is calculated by
dividing the average monthly subscription revenue from residential
cable and SOHO services by the average of the opening and closing
balances for customer relationships for the period. ARPU per
average mobile subscriber is calculated by dividing residential
mobile and SOHO revenue for the indicated period by the average of
the opening and closing balances for mobile subscribers for the
period. Unless otherwise indicated, ARPU per customer relationship
or mobile subscriber is not adjusted for currency impacts. ARPU per
RGU refers to average monthly revenue per average RGU, which is
calculated by dividing the average monthly subscription revenue
from residential and SOHO services for the indicated period, by the
average of the opening and closing balances of the applicable RGUs
for the period. Unless otherwise noted, ARPU in this release is
considered to be ARPU per average customer relationship or mobile
subscriber, as applicable. Customer relationships, mobile
subscribers and RGUs of entities acquired during the period are
normalized.
B2B – Business-to-business subscription revenue
represents revenue from services to certain SOHO subscribers (fixed
and mobile). B2B non-subscription revenue includes business
broadband internet, video, telephony, mobile and data services
offered to medium to large enterprises and, on a wholesale basis,
to other operators.
Basic Video Subscriber – A home, residential multiple
dwelling unit or commercial unit that receives our video service
over our broadband network either via an analog video signal or via
a digital video signal without subscribing to any recurring monthly
service that requires the use of encryption-enabling technology.
Encryption-enabling technology includes smart cards, or other
integrated or virtual technologies that we use to provide our
enhanced service offerings. With the exception of RGUs that we
count on an equivalent billing unit ("EBU') basis, we count RGUs on
a unique premises basis. In other words, a subscriber with
multiple outlets in one premises is counted as one RGU and a
subscriber with two homes and a subscription to our video service
at each home is counted as two RGUs. We exclude DTH subscribers (as
defined below) from basic video subscribers.
Direct-to-Home ("DTH") Subscriber – A home, residential
multiple dwelling unit or commercial unit that receives our video
programming broadcast directly via satellite.
Enhanced Video Subscriber – A home, residential multiple
dwelling unit or commercial unit that receives our video service
over our broadband network or through a partner network via a
digital video signal while subscribing to any recurring monthly
service that requires the use of encryption-enabling technology.
Enhanced video subscribers that are not counted on an EBU basis are
counted on a unique premises basis. For example, a subscriber
with one or more set-top boxes that receives our video service in
one premises is generally counted as just one subscriber. An
enhanced video subscriber is not counted as a basic video
subscriber. As we migrate customers from basic to enhanced
video services, we report a decrease in our basic video subscribers
equal to the increase in our enhanced video subscribers.
Fixed-line Customer Relationships – The number of
customers who receive at least one of our video, internet or
telephony services that we count as RGUs, without regard to which
or to how many services they subscribe. To the extent that RGU
counts include EBU adjustments, we reflect corresponding
adjustments to our customer relationship counts. For further
information regarding our EBU calculation, see Additional General
Notes below. Fixed-line customer relationships generally are
counted on a unique premises basis. Accordingly, if an individual
receives our services in two premises (e.g., a primary home and a
vacation home), that individual generally will count as two
customer relationships. We exclude mobile-only customers from
customer relationships.
Fully-swapped Borrowing Cost – Represents the weighted
average interest rate on our aggregate variable- and fixed-rate
indebtedness (excluding capital leases and including vendor
financing obligations), including the effects of derivative
instruments, original issue premiums or discounts and commitment
fees, but excluding the impact of financing costs.
Homes Passed – Homes, residential multiple dwelling units
or commercial units that can be connected to our networks without
materially extending the distribution plant, except for DTH homes.
Certain of our homes passed counts are based on census data that
can change based on either revisions to the data or from new census
results. We do not count homes passed for DTH.
Internet (Broadband) Subscriber – A home, residential
multiple dwelling unit or commercial unit that receives internet
services over our networks, or that we service through a partner
network. Our internet subscribers do not include customers that
receive services from dial-up connections.
Liquidity – Refers to cash and cash equivalents plus the
maximum undrawn commitments under subsidiary borrowing facilities,
without regard to covenant compliance calculations.
Mobile Subscribers – Our mobile subscriber count
represents the number of active subscriber identification module
(“SIM”) cards in service rather than services provided. For
example, if a mobile subscriber has both a data and voice plan on a
smartphone this would equate to one mobile subscriber.
Alternatively, a subscriber who has a voice and data plan for a
mobile handset and a data plan for a laptop (via a dongle) would be
counted as two mobile subscribers. Customers who do not pay a
recurring monthly fee are excluded from our mobile telephony
subscriber counts after periods of inactivity ranging from 30 to 60
days, based on industry standards within the respective country. In
a number of countries, our mobile subscribers receive mobile
services pursuant to prepaid contracts.
Net Leverage – Our gross and net debt ratios are defined
as total debt and net debt to annualized OCF of the latest quarter.
Net debt is defined as total debt less cash and cash equivalents.
For purposes of these calculations, debt is measured using swapped
foreign currency rates, consistent with the covenant calculation
requirements of our subsidiary debt agreements.
NPS – Net promoter score.
OCF Margin – Calculated by dividing OCF by total revenue
for the applicable period.
Revenue Generating Unit ("RGU") – RGU is separately a
basic video subscriber, enhanced video subscriber, DTH subscriber,
internet subscriber or telephony subscriber. A home, residential
multiple dwelling unit, or commercial unit may contain one or more
RGUs. For example, if a residential customer in Chile subscribed to
our enhanced video service, fixed-line telephony service and
broadband internet service, the customer would constitute three
RGUs. Total RGUs is the sum of basic video, enhanced video, DTH,
internet and telephony subscribers. RGUs generally are counted on a
unique premises basis such that a given premises does not count as
more than one RGU for any given service. On the other hand, if an
individual receives one of our services in two premises (e.g., a
primary home and a vacation home), that individual will count as
two RGUs for that service. Each bundled cable, internet or
telephony service is counted as a separate RGU regardless of the
nature of any bundling discount or promotion. Non-paying
subscribers are counted as subscribers during their free
promotional service period. Some of these subscribers may choose to
disconnect after their free service period. Services offered
without charge on a long-term basis (e.g., VIP subscribers or free
service to employees) generally are not counted as RGUs. We do not
include subscriptions to mobile services in our externally reported
RGU counts. In this regard, our RGU counts exclude our separately
reported postpaid and prepaid mobile subscribers.
SOHO – Small office/home office subscribers.
Telephony Subscriber – A home, residential multiple
dwelling unit or commercial unit that receives voice services over
our networks, or that we service through a partner network.
Telephony subscribers exclude mobile telephony subscribers.
Two-way Homes Passed – Homes passed by those sections of
our networks that are technologically capable of providing two-way
services, including video, internet and telephony services.
Additional General Notes
Most of our broadband communications subsidiaries provide
telephony, broadband internet, data, video or other B2B services.
Certain of our B2B service revenue is derived from SOHO subscribers
that pay a premium price to receive enhanced service levels along
with video, internet or telephony services that are the same or
similar to the mass marketed products offered to our residential
subscribers. All mass marketed products provided to SOHOs, whether
or not accompanied by enhanced service levels and/or premium
prices, are included in the respective RGU and customer counts of
our broadband communications operations, with only those services
provided at premium prices considered to be “SOHO RGUs” or “SOHO
customers.” To the extent our existing customers upgrade from a
residential product offering to a SOHO product offering, the number
of SOHO RGUs or SOHO customers will increase, but there is no
impact to our total RGU or customer counts. Due to system
limitations, SOHO customers of C&W are not included in our
respective RGU and customer counts as of December 31, 2017.
With the exception of our B2B SOHO subscribers, we generally do not
count customers of B2B services as customers or RGUs for external
reporting purposes.
Certain of our residential and commercial RGUs are counted on an
EBU basis, including residential multiple dwelling units and
commercial establishments, such as bars, hotels, and hospitals, in
Chile and Puerto Rico. Our EBUs are generally calculated by
dividing the bulk price charged to accounts in an area by the most
prevalent price charged to non-bulk residential customers in that
market for the comparable tier of service. As such, we may
experience variances in our EBU counts solely as a result of
changes in rates.
While we take appropriate steps to ensure that subscriber
statistics are presented on a consistent and accurate basis at any
given balance sheet date, the variability from country to country
in (i) the nature and pricing of products and services, (ii) the
distribution platform, (iii) billing systems, (iv) bad debt
collection experience and (v) other factors add complexity to the
subscriber counting process. We periodically review our subscriber
counting policies and underlying systems to improve the accuracy
and consistency of the data reported on a prospective basis.
Accordingly, we may from time to time make appropriate adjustments
to our subscriber statistics based on those reviews.
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version on businesswire.com: http://www.businesswire.com/news/home/20180214006446/en/
Liberty Latin AmericaInvestor RelationsKunal Patel, +1
786 376 9294
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