Transcript • May. 7, 2026 12:30 PM • Liberty Latin America Ltd. Class A Common Stock (LILA)
Transcript
May. 7, 2026 12:30 PM
Liberty Latin America Ltd. Class A Common Stock (LILA)
Paul Phillips: million of revenue and $64 million of adjusted EBITDA. Positive top-line performance in both fixed and mobile sustained by subscriber additions was more than offset by B2B, mainly impacted by price renegotiations of some government-related contracts in what is a seasonally much slower quarter. Additionally, operating costs are modestly higher year over year and sequentially. However, management has plans in place to help control rising costs. Turning to Liberty Networks, LN generated $121 million in revenue, resulting in rebase growth of 7%, while adjusted EBITDA declined by 5% year-over-year on a rebase basis to $55 million. Q1 revenue was fueled by the sustained expansion of our wholesale business through strong capacity sales, while adjusted EBITDA was impacted by timing of direct costs related to our El Salvador project. Aggregating all three operating segments within the C&W credit silo for Q1, we reported $631 million in revenue, resulting in flat year-over-year rebase growth and $282 million in adjusted EBITDA or a 5% year-over-year rebase decrease, mainly driven by the hurricane impact and the aforementioned El Salvador project. Rounding out our other two credit silos, Liberty, Costa Rica, and Liberty, Puerto Rico. On the left, we highlight LCR. We delivered Q1 revenue of $158 million and adjusted EBITDA of $57 million, representing year-over-year rebase declines of 4% and 8%, respectively. Residential mobile growth was more than offset by lower residential fixed and B2B revenue. The decline in residential fixed revenue was driven in part by ARPU pressure impacting subscription revenue and lower sales of equipment sold under our buy-to-own model, which affects non-subscription revenue. To support financial performance, we have also embarked on a comprehensive cost-out program, which is in its early days but should be hitting its stride as we get into H2. Concluding with Puerto Rico on the right, LPR posted Q1 revenue of $296 million, which reflects a 1% decline. Revenue is continuing to stabilize as mobile and B2B recovery is underway, while the residential fixed business has been hampered by modest increase in churn over the past year. Turning to adjusted EBITDA, we grew 12% to $91 million. The strong performance is largely a result of the continued efforts to improve LPR's cost base over the year, which includes lower labor and bad debt costs. Turning to LLA's adjusted OIBADA less P&E additions and adjusted FCF on slide 14. Building upon our adjusted OIBADA performance, we invested $111 million or 10% of revenue in P&E additions in the quarter, which represents an 8% reduction compared to last year. Typically, Q1 tends to be a seasonally low quarter for us, and thus we expect our spend to pick up over the rest of the year. Importantly, roughly $12 million of our spending Q1 was associated with the Jamaican recovery. And as Bala noted, we are hyper-focused on bringing back even more fixed residential connectivity to our footprint. The chart on the left depicts an important metric for us, which is the adjusted EBITDA less P&E additions. For Q1, we delivered $294 million, reflecting an improvement of 3% year over year and a margin of 27% of revenue. The absolute figure was adversely impacted by Hurricane Melissa for about $20 million on a net basis. Moving to the right side of the slide, we significantly improved our adjusted free cash flow before partner distributions delivering negative $64 million in the quarter, which is $40 million better year over year. This result was driven by a combination of stronger cash flow from operating activities and the lower capital spend just noted. As seen in prior years, Q1 working capital is always constrained. reflecting a partial unwind from the seasonally strong Q4. As a reminder, our adjusted FCF will be highly weighted to later in the year. On an LTM basis through March 31, our adjusted FCF before partner distributions increased to $190 million from $150 million for fiscal 2025. Next to slide 15 and a quick review of our capital structure. On a consolidated basis, LLA had total debt of $8.4 billion and $1.5 billion of liquidity consisting of just under $700 million in cash and almost $800 million in availability under our committed credit lines. Q1 2026 consolidated net leverage was 4.5 times. And if we exclude LPR leverage, LLA leverage would decline into the mid threes. The middle of the slide summarizes our two credit silos of C&W and LCR. We have total debt of $5 billion in covenant leverage of 3.7 times at CNW and total debt of $510 million in covenant leverage of two times at LCR. Over 75% of borrowings are due in 2031 and beyond. During the quarter, we reduced our outstanding LCR bonds by 10% as we exercised the 103 call that we had. On the right is our Liberty Puerto Rico credit silo, which has $3 billion of total debt and reported borrowing group net leverage of eight times, while covenant leverage of the restricted subsidiaries was 14 times. During the quarter and as noted on the year-end call, LPR borrowed the remaining $50 million available under its unrestricted subsidiary facility, bringing its total unrestricted subsidiary borrowing proceeds to $250 million. This borrowing strengthened LPR's liquidity position. The business continues to benefit from substantial flexibility in its credit documents, and we expect LPR to continue to utilize its assets to raise third-party capital to the extent that it is needed. In terms of the liability management exercise that has been ongoing since the summer, LPR is continuing to evaluate its options to maximize value, and this may or may not include direct engagement with its lenders and bondholders. We will provide further updates with respect to this process when we determine it is appropriate. Turning to slide 16 and building upon Balan's highlights at the start of the presentation and our increasing confidence in our underlying businesses, including our cash flow potential. We announced today the intent to dividend 9% cash pay preferred stock with a notional amount of $500 million to our equity shareholders. We are working to be able to complete this distribution before the end of Q2. This structure accomplishes several objectives, providing our shareholders with an attractive cash pay security and a re-gearing of our equity. LLA is obviously leaning into the levered equity model. This is backed by our conviction on future FCF generation. Over time, we believe the combination of the preferred stock and a skinnier common equity will positively impact overall value to our shareholders. Moving to slide 17 and our closing remarks. First, on the surface, our revenue and adjusted EBITDA were flattish, but relative to our plan, We overperformed, helped in part by a better than expected recovery in Jamaica, and importantly, our adjusted FCF was substantially better to start the year. We are setting the stage for what we expect to be a robust finish to 2026 in the fourth quarter. Second, a significant focus remains on Jamaica, and we are encouraged by the efforts of our management team. Still lots of work to do, particularly around the fixed network, but we believe our business and brand will come out of this unfortunate event even stronger. Third, we are excited about the preferred distribution that we discussed on the prior slide as we provide our shareholders with a consistent capital return. As we think about our equity, it was great that we could be back in the market repurchasing in Q1. As of quarter end, we had $184 million. remaining under our board authorization, and LLA will be opportunistic in the forthcoming quarters. And finally, I hope that you all saw our joint press release with GCI Liberty yesterday. GCI Liberty, which is majority controlled by Dr. Malone, announced that it purchased 12 million shares in LLA for $107 million from Searchlight Capital. GCI Liberty now owns about 6% of LLA's equity. Separately, Dr. Malone owns roughly 7% of LLA's equity. From our perspective, this incremental investment in LLA demonstrates substantial confidence in our business, our growth prospects, and our cash flow generation potential. With that operator, we'll open it up for questions.
Operator: Thank you. The question and answer session will be conducted electronically. If you would like to ask a question regarding the company's operations, please do so by pressing star 1 to ask a question. In order to accommodate everyone, we request that you only ask one question with one follow-up. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to give everyone an opportunity to signal for questions. Your first question comes from Matthew Harrigan with Benchmark StoneX. Your line is open.
Matthew Harrigan: Thank you. Congratulations on the results and the dividend. Usual facile financial engineering from yourself and presumably some Dr. Malone input. I was curious. We had a couple of companies, Xfinity in the U.S. and Vodafone, Zugo, JV, really side issues on the front book, back book. issue and really have to rectify their pricing. You called that out on Costa Rica. Is that a phenomenon in some of your other markets as well? And how can you provide, you know, further value? I mean, the UCLA ratings and everything are quite positive, you know, to make sure that people are getting, you know, better price value rather than have to adjust your pricing on kind of a step function, you know, manner, which can be pretty disruptive. Thank you.
Balan Nair: Thank you, Matthew. You know, one thing that's really good about LLA is that we actually have been very disciplined in managing our front book pricing. And the one place where we actually had lots of price increases and a very high front book was in Chile a while back. We learned a lot from that experience as well. But I think between 2019 and 2024, we did not take any price increases anywhere. And as a result, our front book is very competitive. Costa Rica is slightly just an aberration. As a matter of fact, even in Costa Rica, our front book is extremely competitive. We are not the highest price in Costa Rica. The company that's really being impacted by the price challenges there is the incumbent. And what we've been trying to do there is mostly on our retention desk. And certainly, if you look at our back book in Costa Rica, the back book is very solid. So we feel pretty good about where our pricing is. Now, we'll be very competitive. And one of the things we've learned as well, hanging on to market share is extremely important. And therefore, you see we'll play the ARPU game to hang on to market share. And in Costa Rica specifically, We actually grew fixed broadband. We actually grew our business ever so slightly. But nevertheless, in a highly competitive market, we're doing fine. Now, eventually the market will restore. And so having good market share is always going to be the better outcome.
Matthew Harrigan: Thanks, Paul. Thanks, Chris.
Operator: Your next question comes from David Lopez with New Street Research. Your line is open.
David Lopez: Hi, and thanks for the opportunity, and congrats on the results. I have a question on the cost structure. I was wondering if the rise in energy costs we are seeing currently has any impact on your cost structure, and if you can comment on that a bit, please. Thanks.
Balan Nair: We are very focused on our cost. You can see, you know, we have actually a pretty healthy EBITDA margin in the business, and more importantly, a very healthy operating free cash flow margin. We expect that there's still opportunity to increase both those metrics. And our business over the last 24 months have gone through a lot of cost reduction, but it doesn't end. This year, we also have some pretty good cost improvements, and they'll continue to 27 and 28. And by the way, we are really leaning in on AI. And we expect a lot of further cost improvements in our business through our complete embracement of AI technology, which already, by the way, on the front line, we've implemented it in our back office. We are working to implement it. And we've recently appointed an individual in our company to fully lead our AI transformation. We expect some pretty good returns.
Chris Alvarado: I mean, I would add, you know, around the energy point, you know, we continue to focus on, you know, it's only about roughly 2% of revenue overall energy costs. So a couple of things to, I think, take note. One is the network is fiber or HFC. It's not copper. That obviously uses a lot of energy. So over time, our move to improve the network topology has reduced energy costs. So we'll continue to be quite agile to the extent energy increases in the region, particularly in the islands. So we have a number of mitigating strategies to reduce cost to the extent that energy moves up. Thanks, Chris.
Balan Nair: I missed the energy questions.
David Lopez: Very clear. Thank you.
Operator: That will conclude today's question and answer session. I'd like to hand back to Baladner for any additional or closing remarks.
Balan Nair: Well, thank you, operator. Well, you can clearly see we are excited about these morning's announcements. And from what we announced, you can also draw the conclusion that we have significant confidence in our business and future free cash flow growth prospects. We are also very excited about Dr. Malone's increased investment in LLA. Overall, the future is bright. And thank you for your support.
Operator: Ladies and gentlemen, this concludes Liberty Latin America's first quarter 2026 investor call. As a reminder, a replay of the call will be available in the investor relations section of Liberty Latin America's website at www.lla.com. There you can find a copy of today's presentation materials. Thank you for joining. You may now disconnect.
