Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Helios Towers PLC (HTWSF, Financial) reported over 2000 tenancy additions year-to-date, showing strong progress towards their 2026 target of a 2.2 tenancy ratio.
- The company achieved a year-to-date EBITDA increase of 16% year-on-year, with expectations to end the year at the top of the range with around $420 million, representing a 14% year-over-year increase.
- Helios Towers PLC (HTWSF) has a strong base of $5.3 billion in future committed revenue, equating to over seven years of remaining leases before renewals.
- The company is on track to become free cash flow generative from next year, marking a significant shift from historically high investment and negative free cash flow.
- The company has successfully reduced leverage by 0.3x year-on-year and expects to continue reducing leverage to around 3x by the end of 2025, opening the door for potential investor distributions.
Negative Points
- The company experienced a free cash flow outflow of about $20 million year-to-date up to Q3, primarily driven by working capital timing issues.
- There are concerns about potential currency risks in markets like the DRC and Tanzania, although the company reports no significant changes in currency availability.
- Despite strong tenancy growth, the company faces challenges in maintaining a balance between site builds and co-locations, which could impact future revenue streams.
- The company remains cautious about M&A activities, indicating that it is not a priority within the current capital allocation framework, potentially limiting growth opportunities.
- Helios Towers PLC (HTWSF) has a high leverage ratio of 4.2x, which, although decreasing, still poses a risk until it reaches the target of 3x.
Q & A Highlights
Q: Could you explain the working capital outflows in Q3 and the cash flow expectations for the year-end to meet leverage targets?
A: Manjit Dhillon, CFO, explained that the $20 million free cash flow outflow was mainly due to timing issues with working capital. As of October, they are now free cash flow neutral, and they expect a positive free cash flow in Q4 to meet leverage targets.
Q: Are there any changes in currency use in the DRC or issues with USD availability in Tanzania?
A: Manjit Dhillon stated that there are no changes in the DRC, with the market remaining dollarized. In Tanzania, there is no issue with USD availability, and they have been able to move funds regularly.
Q: Can you elaborate on the 2025 guidance, particularly the relationship between tenancy growth and EBITDA growth?
A: Manjit Dhillon noted that different tenancies contribute differently to EBITDA. The 2025 growth will be driven by a mix of organic tenancy growth, operational improvements, and a higher proportion of co-locations, which have a favorable EBITDA impact.
Q: How does Helios Towers view M&A opportunities versus shareholder returns as leverage decreases?
A: Tom Greenwood, CEO, indicated that while they will continue to assess M&A opportunities, the focus remains on organic growth. By 2026, with leverage around 3X, they may consider investor distributions, prioritizing value creation.
Q: What is the outlook for site additions and the impact of potential network sharing agreements?
A: Tom Greenwood mentioned a strong pipeline for site additions, with expectations for continued momentum. Network sharing is uncommon, but if it occurs, fees would be collected as per industry standards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
