TMCnet News
Trilogy International Partners Inc. Reports Fourth Quarter and Full Year 2017 Results
BELLEVUE, Wash., March 21, 2018 (GLOBE NEWSWIRE) -- Trilogy International Partners Inc. (“TIP Inc.”) (TSX:TRL), an international wireless and fixed broadband telecommunications operator, today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2017.
“We made continued progress on our 2017 strategic objectives of expanding LTE network coverage in both operating markets, growing data revenue and increasing our postpaid subscriber penetration in New Zealand,” said Brad Horwitz, President and CEO. “At the end of the year, over 80% of our consolidated cell sites were optimized for LTE. Wireless Data ARPU, excluding SMS, increased 12%. Our New Zealand operations added nearly 24 thousand postpaid subscribers in 2017, which now make up 28% of our New Zealand base. In Bolivia, we regained our competitive footing in the fourth quarter, adding over 92 thousand prepaid subscribers.”
“Although we made progress on our strategic objectives, the year was challenging as we faced increasing competitive pressure in the Bolivian prepaid space, and a wide range of issues impacting our customers following the transition to our new IT business support system in New Zealand.”
“These issues severely impacted subscriber growth, revenue and operating expenses. While we have stabilized subscriber activation in both of our markets, customer churn, although improving, remains higher than targeted levels, particularly in New Zealand. Looking to 2018, we are extremely focused on improving the customer experience, reducing churn, growing data revenue on our enhanced networks and improving EBITDA.”
Consolidated Financial Highlights
Conference Call Information
Call Date: March 22, 2018
US Toll Free: 1-844-826-3035
Please ask the operator to be joined into the Trilogy International Partners (TRL) call.
Online info (audio only): http://www.trilogy-international.com/events-and-presentations
A replay of the conference call will be available at approximately 12:30 p.m. (PT) the day of the live call. Replay dial-in access is as follows:
US Toll Free: 1-877-344-7529
About Trilogy International Partners Inc. (“TIP Inc.”)
TIP Inc. is the parent of Trilogy International Partners LLC (“Trilogy LLC”), a wireless telecommunications operator formed by wireless industry veterans John Stanton, Theresa Gillespie and Brad Horwitz. Trilogy LLC’s founders have an exceptional track record of successfully buying, building, launching and operating communications businesses in 15 international markets and the United States.
Trilogy LLC, together with its consolidated subsidiaries in New Zealand and Bolivia, is a provider of wireless voice and data communications services including local, international long distance and roaming services, for both subscribers and international visitors roaming on its networks. Trilogy LLC also provides fixed broadband communications services to residential and enterprise customers in New Zealand.
Trilogy LLC completed a transaction with Alignvest Acquisition Corporation (“AQX”) on February 7, 2017 (the “Arrangement”). For accounting purposes, the Arrangement was treated as a “reverse acquisition” and recapitalization. Trilogy LLC was considered the accounting acquirer and upon closing AQX was renamed Trilogy International Partners Inc. Accordingly, Trilogy LLC’s historical financial statements as of and for the periods ended prior to the acquisition became the historical financial statements of TIP Inc. prior to the date of the transaction.
Unless otherwise stated, the financial information provided here is for TIP Inc. as of December 31, 2017.
TIP Inc.’s head office is located at 155 108th Avenue NE, Suite 400, Bellevue, Washington, 98004 USA. Its common shares trade on the Toronto Stock Exchange under the ticker TRL and its warrants trade on the exchange under the ticker TRL.WT.
For more information, visit www.trilogy-international.com.
Business segments
TIP Inc.’s reportable segments are New Zealand and Bolivia. Segment information is regularly reported to our Chief Executive Officer (the chief operating decision-maker). Segments and the nature of their businesses are as follows:
About this earnings release
This earnings release contains information about our business and performance for the three and twelve months ended December 31, 2017, as well as forward-looking information about our fiscal year 2018. This discussion should be read together with supplementary information filed on the date hereof under TIP Inc.’s profile on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).
The financial information included in this earnings release was prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In our discussion, we also use certain Non-GAAP financial measures to evaluate our performance. See “Non-GAAP Measures and Other Financial Measures; Basis of Presentation” for more information.
All dollar amounts are in United States dollars unless otherwise stated. Amounts for subtotals, totals and percentage changes included in tables in this release may not sum or calculate using the numbers as they appear in the tables due to rounding. Differences between amounts set forth in the following tables and corresponding amounts in TIP Inc.’s Annual Financial Statements and related notes are a result of rounding. Information is current as of March 21, 2018, and was approved by TIP Inc.’s Board of Directors. This earnings release includes forward-looking statements and assumptions. See “About Forward-Looking Information” for more information.
Additional information relating to TIP Inc., including our financial statements, MD&A and other filings with Canadian securities commissions and the U.S. Securities and Exchange Commission are available on TIP Inc.’s website (www.trilogy-international.com) in the investor relations section and under TIP Inc.’s profile on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).
Consolidated Financial Results
Results of Our Business Segments
New Zealand
Financial Results
Revenues
New Zealand’s total revenues were flat for the three months ended December 31, 2017, compared to the same period in 2016. The conversion to a new IT business support system in the first quarter negatively impacted subscriber acquisition and churn for most of the year. This was partially offset by improving subscriber acquisition levels late in the year.
Adjusted EBITDA
New Zealand’s Adjusted EBITDA decreased 17% for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, primarily resulting from an increase in operating expenses.
Fourth quarter results in New Zealand were also affected by a 2% strengthening of the New Zealand Dollar as compared to the U.S. Dollar.
Capital Expenditures
The $4.7 million, or 42%, increase in capital expenditures in the fourth quarter of 2017, compared to the fourth quarter of 2016, was the result of continued investment and timing relating to LTE network expansion projects. At December 31, 2017, 93% of our New Zealand network was overlaid with LTE and our network covered 97% of New Zealand’s population.
Bolivia
Financial Results
Revenues
Bolivia’s total revenues for the three months ended December 31, 2017, decreased $11.2 million, or 16%, compared to the same period in 2016.
Adjusted EBITDA
Bolivia’s Adjusted EBITDA decreased 35% in the fourth quarter compared to the fourth quarter of 2016, primarily due to a decrease of $11.2 million in total revenues, partially offset by $2.9 million of lower operating expenses.
Capital Expenditures
Capital expenditures increased $3.4 million, or 21%, in the fourth quarter compared to the fourth quarter of 2016, primarily due to the timing of the investment in LTE coverage and network expansion projects. At December 31, 2017, 70% of our network was overlaid with LTE.
Review of Consolidated Performance
Earnings per share
Finance costs
Interest expense
Interest expense decreased $7.2 million for the three months ended December 31, 2017, compared to the same period in 2016, primarily due to the May 2017 refinancing of the $450 million Trilogy LLC 13.375% Notes due in 2019, with the proceeds of the issuance of the $350 million Trilogy LLC 8.875% Notes due in 2022, together with cash on hand.
Change in fair value of warrant liability
As of February 7, 2017, TIP Inc.’s issued and outstanding warrants were reclassified from equity to liability, as the warrants are written options that are not indexed to the TIP Inc. Common Shares. The warrant liability is marked-to-market each reporting period with the changes in fair value recorded as a gain or loss in the Consolidated Statement of Operations. The change in fair value of the warrant liability due to the decline in the share price of TIP Inc. Common Shares was a non-cash gain of $5.6 million for the three months ended December 31, 2017.
Depreciation, amortization and accretion
Depreciation, amortization and accretion decreased by $0.5 million, or 2%, for the three months ended December 31, 2017, compared to the same period in 2016.
Income tax expense
Income tax expense increased by $1.0 million for the three months ended December 31, 2017, compared to the same period in 2016, resulting from changes in taxable income, certain withholding taxes and other related impacts for both NuevaTel and 2degrees, none of which were significant individually or in the aggregate.
Managing our Liquidity and Financial Resources
Operating, investing and financing activities
Operating activities
Cash flow provided by operating activities increased by $16.0 million for the year ended December 31, 2017, compared to 2016. This change is mainly due to $11.5 million of lower interest paid, net of capitalized interest. Further, a decline in cash paid for income and withholding taxes also contributed to increase in cash flow provided by operating activities.
Investing activities
Cash flow used in investing activities increased by $44.9 million for the year ended December 31, 2017, compared to the same period in 2016, primarily due to the proceeds from the sale of Trilogy Dominicana of $28.7 million in 2016. Additionally, cash used to purchase short-term investments, net of sales, increased by $24.2 million contributing to the increase of cash used in investing activities. These changes were partially offset by a lower amount of capital expenditure in Bolivia as network expansion and LTE buildout were more significant during the year ended December 31, 2016.
Financing activities
Cash flow provided by financing activities increased by $99.0 million for the year ended December 31, 2017, compared to the same period in 2016. This change is primarily due to the proceeds from the equity issuance that occurred on February 7, 2017, in connection with the completion of the Arrangement with Alignvest, partially offset by the refinancing of the Trilogy LLC 13.375% Notes due in 2019 and the related costs incurred of $9.1 million.
Capital Structure
In December 2017, NuevaTel entered into a $7.0 million debt facility (the “Bolivian Bank Loan”) with Banco BISA S.A. This loan has a five year term and is required to be repaid in quarterly installments commencing in 2019 through 2022, with 25% of the principal amount to be repaid each year. Interest on the Bolivian Bank Loan accrues at a fixed rate of 6.0% and is payable quarterly. This loan will be used to fund capital expenditures as NuevaTel continues to expand its LTE coverage. The total outstanding debt in Bolivia is $27.7 million.
In March 2018, 2degrees entered into an amendment of its Senior Facilities Agreement with existing syndicate members representing $190 million NZD to extend the maturity date from January 2019 to January 2020. Borrowings totaling $10 million NZD will retain the January 2019 maturity date. Terms of the Senior Facilities Agreement, as amended, including interest rates and financial covenants are generally consistent with the prior agreement. Distributions will continue to be subject to free cash flow tests and 2degrees may be required to make certain prepayments of principal to the syndicate members.
Financial Guidance
The following table presents the company’s full-year 2018 guidance.
Consolidated Capital expenditures are expected to be consistent with 2017 investment levels.
The above information outlines guidance ranges for selected full year 2018 consolidated financial metrics. These ranges take into consideration our current outlook and our actual results for 2017. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2018 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "Cautionary Note Regarding Forward-Looking Statements" in the 2017 TIP Inc. MD&A and in the TIP Inc. AIF, and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.
We provide annual guidance ranges on a full year basis, which are consistent with annual full year TIP Inc. Board of Director approved plans. Any updates to our full year financial guidance over the course of the year would only be made to the guidance ranges that appear above.
Non-GAAP Measures and Other Financial Measures; Basis of Presentation
In managing our business and assessing our financial performance, we supplement the information provided by the financial statements presented in accordance with GAAP with several customer-focused performance metrics and non-GAAP financial measures which are utilized by our management to evaluate our performance. Although we believe these measures are widely used in the wireless industry, some may not be defined by us in precisely the same way as by other companies in the wireless industry, so there may not be reliable ways to compare us to other companies. Adjusted EBITDA represents Loss from continuing operations (the most directly comparable GAAP measure) excluding amounts for: income tax expense; interest expense; depreciation, amortization and accretion; equity-based compensation (recorded as a component of General and administrative expense); (gain) loss on disposal and abandonment of assets; and all other non-operating income and expenses. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Service Revenues. Adjusted EBITDA and Adjusted EBITDA Margin are common measures of operating performance in the telecommunications industry. We believe Adjusted EBITDA and Adjusted EBITDA Margin are helpful measures because they allow us to evaluate our performance by removing from our operating results items that do not relate to our core operating performance. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of financial performance under GAAP and should not be considered in isolation or as a substitute for Loss from continuing operations, the most directly comparable GAAP financial measure. Adjusted EBITDA and Adjusted EBITDA Margin are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same.
Reconciliation of Adjusted EBITDA and EBITDA Margin
Other Information
Consolidated financial results – quarterly summary
TIP Inc.’s operating results may vary from quarter to quarter because of changes in general economic conditions and seasonal fluctuations, among other things, in each of TIP Inc.’s operations and business segments. Different products and subscribers have unique seasonal and behavioral features. Accordingly, one quarter’s results are not predictive of future performance.
Fluctuations in net income (loss) from quarter to quarter can result from events that are unique or that occur irregularly, such as losses or gains on the refinance of debt, foreign exchange gains or losses, changes in the fair value of derivative instruments, impairment of assets, and changes in income taxes.
The following table shows selected quarterly financial information prepared in accordance with GAAP.
Supplementary Information
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
About Forward-Looking Information
Forward-looking information and statements
This presentation contains “forward-looking information” within the meaning of applicable securities laws in Canada and “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 of the United States of America. Forward-looking information and forward–looking statements may relate to our future outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “estimates”, “plans”, “targets”, “expects” or “does not expect”, “an opportunity exists”, “outlook”, “prospects”, “strategy”, “intends”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, estimates, projections or other characterizations of future events or circumstances contain forward-looking information and statements.
Forward-looking information and statements are provided for the purpose of assisting readers in understanding management’s current expectations and plans relating to the future. Readers are cautioned that such information and statements may not be appropriate for other purposes. Forward-looking information and statements contained in this presentation are based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. These opinions, estimates and assumptions include but are not limited to: general economic and industry growth rates; currency exchange rates and interest rates; product pricing levels and competitive intensity; income tax; subscriber growth; pricing, usage, and churn rates; changes in government regulation; technology deployment; availability of devices; timing of new product launches; content and equipment costs; vendor and supplier performance; the integration of acquisitions; industry structure and stability; and data based on good faith estimates that are derived from management’s knowledge of the industry and other independent sources. Despite a careful process to prepare and review the forward-looking information and statements, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct.
Numerous risks and uncertainties, some of which may be unknown, relating to TIP Inc.’s business could cause actual events and results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking information and statements. Among such risks and uncertainties, are those that relate to: TIP Inc.’s history of losses; TIP Inc. and Trilogy LLC’s status as holding companies; TIP Inc.’s significant level of indebtedness and the refinancing, default and other risks, as well as limits, restrictive covenants and restrictions resulting therefrom; TIP Inc.’s or Trilogy LLC’s ability to incur additional debt despite its indebtedness level; TIP Inc.’s or Trilogy LLC’s ability to refinance its indebtedness; the risk that TIP Inc.’s or Trilogy LLC’s credit ratings could be downgraded; TIP Inc. having insufficient financial resources to achieve its objectives; risks associated with any potential acquisition, investment or merger; the significant political, social, economic and legal risks of operating in Bolivia; TIP Inc.’s operations being in markets with substantial tax risks and inadequate protection of shareholder rights; the need for spectrum access; the regulated nature of the industry in which TIP Inc. participates; the use of “conflict minerals” and the effect thereof on availability of certain products, including handsets; anti-corruption compliance; intense competition; lack of control over network termination, roaming and international long distance revenues; rapid technological change and associated costs; reliance on equipment suppliers; subscriber “churn” risks, including those associated with prepaid accounts; the need to maintain distributor relationships; TIP Inc.’s future growth being dependent on innovation and development of new products; security threats and other material disruptions to TIP Inc.’s wireless networks; the ability of TIP Inc. to protect subscriber information; health risks associated with handsets; litigation, including class actions and regulatory matters; fraud, including device financing, customer credit card, subscription and dealer fraud; reliance on limited management resources; risks associated with the minority shareholders of TIP Inc.’s subsidiaries; general economic risks; natural disasters including earthquakes; foreign exchange and interest rate changes; currency controls; interest rate risk; TIP Inc.’s ability to utilize carried forward tax losses; risks that TIP Inc. may not pay dividends; tax related risks; TIP Inc.’s dependence on Trilogy LLC to pay taxes and other expenses; Trilogy LLC may be required to make distributions to TIP Inc. and the other owners of Trilogy LLC; differing interests among TIP Inc’s. and Trilogy LLC’s equity owners in certain circumstances; volatility of TIP Inc.’s common shares price; dilution of TIP Inc.’s common shares; market coverage; TIP Inc.’s internal controls over financial reporting; new laws and regulations; and risks as a publicly traded company, including, but not limited to, compliance and costs associated with the U.S. Sarbanes-Oxley Act of 2002 (to the extent applicable).
Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information and statements in this presentation, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information in this presentation. Please see our continuous disclosure filings available under TIP Inc.’s profile at www.sedar.com and at www.sec.gov for information on the risks and uncertainties associated with our business.
Readers should not place undue reliance on forward-looking information and statements, which speak only as of the date made. The forward-looking information and statements contained in this presentation represent our expectations as of the date of this presentation or the date indicated, regardless of the time of delivery of the presentation. We disclaim any intention or obligation or undertaking to update or revise any forward-looking information or statements whether as a result of new information, future events or otherwise, except as required under applicable securities laws.
Investment Relations Contacts
Ann Saxton
Erik Mickels
Media Contact
Ann Saxton |