Good day, and welcome to the IHS Holding Limited Second Quarter 2024 Earnings Results Call for the Three Month Period Ended June 30, 2024. Please note that today's conference is being webcast and recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Naya Bermudez. Please go ahead.

Thank you, operator. Thanks also to everyone for joining the call today. I'm Naya Bermudez, Senior Manager of Investor Relations here at IHS. With me today are Sam Darwish, our Chairman and CEO; and Steve Howden, our CFO. This morning we published our unaudited financial statements for the three month period ended June 30, 2024 with the SEC, which can also be found on the Investor Relations section of our website. We also issued a related earnings release, presentation and supplemental deck. These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS and which comprises the entirety of the Group's operations. Before we discuss the results, I would like to draw your attention to the disclaimer set out at the beginning of the presentation on Slide 2, which should be read in full along the cautionary statements regarding forward-looking statements set out in our earnings release and 6-K filed as well today. In particular, the information to be discussed may contain forward-looking statements, which, by their nature, involve known and unknown risks, uncertainties and other important factors, some of which are beyond our control, are difficult to predict and other factors which may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking statements, including those discussed in the Risk Factors section of our Form 20-F filed with the Securities and Exchange Commission and our other filings with the SEC. We'll also refer to non-IFRS measures, including adjusted EBITDA that we view as important in assessing the performance of our business, and ALFCF, that we view as important in assessing the liquidity of our business. A reconciliation of non-IFRS metrics to the nearest IFRS metrics can be found in our earnings presentation, which is available on the Investor Relations section of our website. And with that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.

Thanks, Naya, and welcome everyone to our second quarter 2024 earnings results call. We're reporting solid performance on revenue, adjusted EBITDA and ALFCF, while CapEx decreased meaningfully. This quarter, we began putting the negative impacts of the January 2024 Naira devaluation in the rearview mirror as we started to realize more of the benefits of the ForEx resets in our revenue contracts and saw a significant step-up in adjusted EBITDA and adjusted EBITDA margin from the first quarter. The reduction in CapEx reflects the actions we're taking to generate more cash and narrow our focus to projects that we believe will deliver the highest returns, two of the main goals of our ongoing strategic review, which I will discuss in more detail shortly. We've made important progress on commercial matters in the quarter with the extension of our contract with MTN South Africa through 2034 and the renewal of contracts with MTN Rwanda, also through 2034. And most notably, just last week, we announced a significant milestone in our long-term commercial relationship with MTN in Nigeria. We renewed and extended all our tower contracts with MTN in Nigeria through 2032, covering nearly 13,500 tenancies and approximately 23,800 lease amendments. This also includes 1,430 of approximately 2,500 tenancies that were due to expire in 2024 and 2025, but will now remain with IHS Nigeria. Over the last month, we have renewed or extended all 26,000 tenancies with MTN in addition to approximately 26,000 lease amendments across six countries into the next decade. With the MTN renewals completed, we can now focus on value creation and operational efficiencies. We now have approximately $12.3 billion of contracted revenues with an average remaining tenant term of more than eight years. Let me also touch on some of our financial highlights in the quarter. We…

Thanks, Sam, and hello, everyone. Turning to Slide 10. As Sam mentioned here, we show our Q2 performance. As you see, both towers and tenants are up approximately 3% in Q2 '24 versus Q2 '23, while lease amendments again increased by double-digit percentages, positive signs of the fundamental underlying tenancy growth continuing across our key markets. The year-on-year financial performance in Q2 '24, however, was impacted by the Naira devaluation from an average rate of NGN508 to the dollar in Q2 of last year to NGN1,392 in the second quarter of this year. Therefore, on a reported basis, revenue and adjusted EBITDA declined year-over-year. However, as indicated last quarter, we now see a meaningful step-up in profitability as our revenue contract FX reset kicked in following the impact of the January devaluation of the Naira. Specifically, in Q2, we saw revenue increase by 4% and adjusted EBITDA increased 35% from the first quarter of this year. Versus the second quarter of last year, revenue declined 20%, adjusted EBITDA decreased by 11.9% and ALFCF fell by 9.6%, in each case on a reported basis and driven largely by the impact of the devaluation more than offsetting the strong organic growth. However, our adjusted EBITDA margin increased to 57.6%, a notable improvement year-over-year and quarter-over-quarter. Our level of CapEx investment decreased by 73% in the quarter, driven by the significant pullback in CapEx across all our segments. And finally, our consolidated net leverage ratio increased to 3.9 times at the end of Q2, up 0.1 times versus Q1 of this year, and that's consistent with the expected increase we flagged following the Nigeria devaluation in January. But we remain and expect to remain within our 3 to 4 times leverage target as guided. Moving to Slide 11, and I wanted to provide…

Your first question comes from the line of Jim Schneider from Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my questions. Just wanted to get a sense as to how you characterize the overall new lease activity in both Nigeria and your broader African profile. Any -- I mean, you mentioned some activity. Do you feel like there is more of a positive kind of macro view at this point? And would you -- at what point -- any time in this year, would you expect that leasing activity to step-up or accelerate? Thank you.

Hey, Jim. It's Steve here. Yeah, certainly the quarter is demonstrating that the fundamental growth characteristics continue to be there. So if we think about the different buckets of growth we have right now in terms of new build sites, we did 207 in the quarter. Now a chunk of that is in LatAm, where we've decided to continue investing growth CapEx when we pulled back in Africa. But actually when you look at the colocation, which there was close to 400 in the quarter, and the lease amendments where there was 1,200 plus in the quarter, a lot of that's actually being driven out of the African portfolio, scattered around a little bit. We had a good chunk of colocation in Rwanda in the quarter, where we had reached a new deal with one of the carriers there, some in Nigeria as well. A lot of the lease amendments are actually coming out of Nigeria, particularly South Africa, as we see the continued slow and steady 5G rollout in those two particular markets. So, yes, the signs still continue to look good. I don't think we'll get too ahead of ourselves in terms of knowing that the carriers are looking at their CapEx spend plans and trying to sort of rationalize where they can given how global macro is impacting everybody in the industry. But we still see kind of a steady growth in our key markets.

Thanks. And maybe as a follow-up, can you maybe just characterize where you are on some of your asset sale discussions with potential buyers? Are there any major deals that are sort of towards the later stages, maybe in the, the 7th to 9th innings, if you want to use a baseball analogy?

Well, I'm a Brit. So I understand your baseball analogy, but I won't get drawn into it too much. No, look, we don't want to get too drawn into comments generally on that particular topic. We said last quarter in May that we were looking to raise $500 million to $1 billion of proceeds. We've reiterated that today. We gave ourselves a 12-month timeline back in May and so all of that is on track. There are discussions happening, but we'll just leave it there for now and we'll update people when there's something concrete to discuss.

Thank you very much.

The next question is from the line of Jon Atkin from RBC Capital Markets. Please go ahead.

I think Cricket has a lot of innings, so 7th to 9th inning might actually qualify as early. But I'll let you be the judge of that. So I was just interested, two things. On the strategic review, there's a lot of flexibility that you talk about in terms of potential outcomes, capital allocation, fair buybacks, dividends and so forth. But you also talked about not ruling out further initiatives to continue increasing shareholder value, which we continue to assess in parallel. Can you talk a little bit about what might be behind that and what would drive you towards that decision? And then just more of a LatAm question. I noticed that amendments increased significantly and what's driving that? Thanks.

So I'll comment first on the strategic review, then I'll let Sam jump in and add a bit of flavor as well. And then I'll come back to LatAm on the lease amendments. So in terms of the strategic review, look, the way we consistently characterize that is, we are looking at a whole broad variety of opportunities. We're very, very focused on what can create value for shareholders. And whilst we wanted to provide some guidance as to how we were thinking about it last quarter when we set those targets, we also don't want to rule out, potential other value-creating opportunities. Now, what we would also say is, things like the progress on the governance, things like progress with MTN renewal, that all sits squarely in our minds in terms of value creation. It might not be disposals of any type, but that sort of internal work, if you like, is also very important. So there's lots of different strands to our thinking around value creation, the disposals we've characterized so far, what we're targeting initially, and when we said, we will look to pay down some debt with that and we'll think about other shareholder direct return methods after that. So all of that remains the same. But Sam, I don't know if you want to add anything specific on that before I go back to LatAm.

Yeah. Hi, Jon. Look, I think it's very important that we remain focused on shareholder value unlock. We really believe our -- there is much more intrinsic value than the market is really awarding us. I mean, our free float at the moment is more than 20%. We have no major renewals anymore coming for at least eight years. We have more than $12.3 billion of contracted revenue, yet our market cap remains under $1 billion. So we will announce things as they happen. We'll wait until the ninth inning to kind of like finish and then we'll say what we've done. But for now, we will leave no stone unturned until the market realizes there is much more value to this company than it's been awarded.

And then, Jon, on your lease amendment question, so there wasn't too much of a step-up on LatAm lease amendments. So there are about 196 now in Q2. They were 186 last quarter, albeit they were sort of 69 when you're looking at the comparative quarter from a year ago. Where we did see some step-up in lease amendments this quarter versus Q1 was in the SSA segment, which was in South Africa, and that's -- that was 5G rollout in South Africa.

What's driving the year-on-year step-up in LatAm?

That's simply customers taking more space on the towers. But, again, I wouldn't overplay that just yet. It's stepping up from 69 to 196, which doesn't compare that kind of that sizeably to the 37,000 that we have across the portfolio.

And then just on LatAm, and then one more question to Sam's answer, because I was going to ask that as well. But -- so LatAm, some of your peers have noted that the judicial recovery proceedings around Oi will have a kind of a multi-year impact. And I know that you're kind of less exposed given the tenant mix there, but any color there as to how your organic growth aspirations in the region might be affected by the Oi judicial recovery proceedings?

Yeah. I mean, if you look at our LatAm growth rates from this time around, when you kind of unpack them for FX and those sorts of items, we were about 1% growth, but that's because we backed out Oi this year versus last year. So actually, the organic growth rate is more like 12%, 13% for LatAm. So we continue to see, decent double-digit growth in the absence of, that Oi revenue, and we'll see how that progresses. As you say, that's tied to the judicial recovery plan that they have, and we've effectively taken it out of our numbers. So to the extent that there's realizations from that, then that will all be upside.

And then lastly, Sam repeated what you put in the script around the contracted backlog. And as we think about a medium to longer term margin and EBITDA generation path, how would you bracket kind of the incremental margins associated with that backlog? And I know there's a lot of moving pieces around FX and energy pricing, but any kind of brackets or guardrails to put on in terms of margins associated with that contracted revenue backlog?

I mean -- yeah, I mean, I'll sort of take that. The way that $12.3 billion of contracted revenue works is that that's the business on the sites today. So that effectively gets you to your 57% margin this quarter, or as we're guiding to the full year, about 54% margin. So I triangulate people around 54% margins this year, which is what we've pretty consistently said through our guidance through the course of the last few quarters. But we are seeing -- when you break it down into the quarter-on-quarter piece, we are starting to now see higher margins and we expect to be exiting the year in the mid- to high-50s. And we think that that sort of progression can continue through '25 and into '26. So we're certainly targeting, and we said this for a long time, we're targeting something beginning with a 6, so 60% in terms of EBITDA margins. That's a couple of years away yet, but we're trending in the right direction.

Thank you.

And we also believe, Jon, that -- we also believe, John, that the fact that we have now a power indexation in Nigeria with our largest client with MTN, which we did not have before, in addition to the fact that power as a service has moved on from our business in South Africa, is going to make our margin way more stable going forward into the future.

Very clear. Thank you.

Your next question is from the line of Richard Choe from J. P. Morgan. Please go ahead.

Hi. I have two questions, one kind of macro level and then one more company-specific. What are you seeing in Nigeria and your other major markets on data usage? Is it growing at the rate that, I guess, you had expected? And then on -- specifically for the company, as you kind of transition to more indexation and less of the power managed services, are there costs that could come out of the business? And maybe, talk a little bit about potential cost initiatives overall?

Sure. Sam, do you want to take the data usage one? I'll just cover the cost side of things first, but if you want to take the macro one. So Richard, you're right. The initial areas to look at are obviously locally within the OpCos, which we've been doing as we've been transitioning those business models. And so that's kind of been happening as we go along and you'll see the realization of that in elements over this quarter a little bit, but then into next quarter as well. As it relates to further kind of cost initiatives, and that is also an element of our strategic review, if you like, which is looking at profitability around the group, including central cost structures. And we're continuing to look at different ways that we can operate more efficiently. Some of that's because of the shift in business model away from this power element, but some of it's just new ways of working. We're looking at trying to introduce more technology, trying to use artificial intelligence, such that we can be more efficient, more accurate, and, ultimately, reduce overall costs. So that's kind of an ongoing element of the strategic review and will continue that for quite a period of time there. Don't want to put any numbers on that just yet, but that is happening.

In terms of the market growth, we're seeing massive growth on the African side, Richard. So, for example, in Nigeria, I believe, MTN reported recently more than 50% increase year-on-year in terms of data usage. I mean, these are the kind of numbers we're seeing. So that runway remains there. LatAm is more modest, but again, data growth remains large.

Right. So it seems like despite some economic headwinds or volatility, there's -- the growth in data has been pretty strong and at some point the carriers will have to keep investing in their networks?

They have to, in our opinion. They have no choice. I mean, to be able to meet the demands of the population, whether in terms of fintech adoption, in terms of smartphone adoption, in terms of new entries into new users adopting phones, it's just one way traffic. At the moment what we're seeing is global macro, local macro is putting a pressure on their CapEx cycle, but that pressure is cyclical and they just have to meet the demands at some point in time, which we believe sooner than later.

Great. Thank you.

And your next question is from the line of Maurice Patrick from Barclays. Please go ahead.

Yeah. Good morning, guys. Thanks for taking the question. I've got a couple, please. The first one a follow a bit on from Richard's question on identification and traffic growth. When I was on the Helios call last week, they were talking very -- a very sort of upbeat message really around the operator need for densification, partly for traffic but also new coverage. And I think they were referring to it as here and now as well as the future. You seem to be a bit more cautious and I'm just keen to understand if that's more to do with geographic mix, so more LatAm and Nigeria rather than differences between the companies. And the second question is on Nigerian EBITDA trajectory. I doubt you want to give 2025 outlooks quite yet, but investors are asking quite a lot around the moving parts of cost and revenues for next year in EBITDA. I guess you're happy tailwind coming from CPI resets, you'll have the tailwind from the increased tenancies in Airtel. You'll have a -- presumably a headwind from the lost 1,100 tenancies. So just if you could walk us through some moving parts, even if you can't say you think EBITDA will go up or not in Nigeria next year. Thank you.

Let's talk about that last one first. So, Maurice, I mean, you're right, we're too early for 2025 metrics and guidance, but you have started to unpack some of the moving parts. Another element I would point you to is macroeconomically speaking, obviously the biggest driver for IHS in 2024 so far, and one looks like it's going to be for the rest of '24, was the Q1 devaluation. So obviously there was a significant dip in revenue and earnings in Q1 post the Naira devaluation, which has then now rebounded in Q2. But obviously as you drop that quarter of dip, let's say, then you start to get a more even run rate through the back end of the year. So as you move forward into 2025 we'll be having a good hard think about what our forward curve looks like, but certainly at this point in time, one would hope it doesn't include any kind of form of step change, but let's see. So that's probably one area to look at. You're absolutely right. In Nigeria, organic growth being driven by Airtel. MTN are continuing to do business by the way, so they'll come through as well. We're seeing plenty of traction in Brazil towards the back end of this year and into next year around new build sites, around colocation, around more lease up -- excuse me, more lease amendments as 5G starts to roll out more seriously. I think as it relates to LatAm, the 5G take up while it's there, I think it's been a bit slower than people had originally thought, but it's now starting to gather some pace. I think we're going to see that come through into next year. So -- and then you're right, in terms of contractual resets, those will all flow through as usual. So those are some of the moving parts without us putting numbers on it yet. And obviously, it's a bit early for that.

Thanks. On the densification point?

Yeah, densification point. I mean, I think it's a little bit to do with different markets at different points in their technology cycle, right? And so I'm not sure you can draw a complete apples to apples across it. Our markets are largely 4G penetrated now and we're sort of on that cusp of 5G. We're starting to see it a little bit in Nigeria, but early days. We're starting to see a bit of it in South Africa. I would still say early days, but more advanced than Nigeria. And as I just mentioned LatAm, it's starting to flow now. So I think it's more a question of where are we in the technology cycle of the given markets, recognizing that over the last few years we've continued to add thousands and thousands of lease amendments and colocations as well. Just keep in mind, Helios report those two metrics differently to how we do. We split them out, they merge them. So just keep that in mind.

Helpful. Just one very small question, if I may. Just on the CapEx guidance, you reiterated the $300 million and $370 million. I think the first half you're running at $110 million, so well below that run rate. I don't think you've got a huge step-up in BTS. What's some -- what's driving the kind of significant 2H, 1H based on the CapEx?

It's a fair point. We've got a little step-up in BTS CapEx as we're delivering our pipelines, and a little step in fiber as well. But we'll see how that guidance go -- that guidance number goes. We've been looking at whether that's the right metric to retain or maybe trim slightly, and we'll look at that again as we go through Q3. We are certainly trending at the bottom end of that range. Yes.

Thanks so much.

And that brings us to the end of the IHS Holdings Limited second quarter 2024 earnings results call. Should you have any questions, please contact the Investor Relations team via the e-mail address investorrelations@ihstowers.com. The management team, thank you for your participation today and wish you a good day.