LiLAC Group's 2016 Results: Driven by Acquisitions

By Travis Hoium Markets Fool.com

LiLAC Group (NASDAQ: LILAK) continues to struggle a bit absorbing the major acquisition of CWC, and failing to experience much subscriber growth. But this is really a time that LiLAC Group is setting up its business for future growth, consolidating its capabilities, and figuring out a broad growth strategy.

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The numbers from the fourth quarter are a little skewed by the CWC acquisition, but below I'll put a bit of context to the raw numbers.

Image source: Getty Images.

LiLAC Group results: The raw numbers

Metric

Q4 2016

Q3 2015

Year-Over-Year Change

Sales

$922.9 million

$309.3 million

198.4%

Operating cash flow

$376.5 million

$127.4 million

195.5%

Free cash flow

$116.3 million

$47.6 million

144.3%

Data source: LiLAC Group Q4 2016 earnings release.

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What happened with LiLAC Group this quarter?

While this growth looks outstanding, the subscriber figures tell a slightly different story:

  • The acquisition of CWC helped drive most of the growth you see above. Rebased revenue growth for LiLAC Group was a much more modest 1.8% and 4.2% without CWC.
  • Overall, the company lost 200 revenue generating units (RGUs) in the quarter, driven by 6,200 lost video RGUs and 8,500 lost telephone RGUs. Most of the losses were made up for with the addition of 14,500 data RGUs. Overall in 2016, 94,000 RGUs were added if you include CWC.
  • 77,000 RGUs were added in Chile during 2016, accounting for most of the company's growth.
  • 47,000 mobile subscribers were added in 2016, driven by 62,000 additions in the fourth quarter. Again, Chile was the biggest driver with 34,000 subscribers added.

What management had to say

While there was growth on a rebased basis at LiLAC Group, the company's performance won't wow many investors. Subscriber growth was fairly weak, and acquisitions are just now being fully integrated.

Management said its focus in 2017 will be further integrating the company's assets and building a more coherent operating model. To that end, John Reid has been named CWC's CEO, and will be "laser focused on improving the results at CWC."

Looking forward

Management is still very bullish on the business and hopes to translate operating success from Europe to Latin America. The company also plans to buy back stock under a $300 million stock-purchase program, so that could give investors some leverage if operations improve.

As 2017 plays out, look to see whether LiLAC can grow its customer base and expand margins as it consolidates the business's focus. That's what management hopes to do, and given the company's success in multiple European markets, its progress could be faster than many people think.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Liberty LiLAC Group. The Motley Fool has a disclosure policy.