Yahoo Finance IHS Holding Limited (NYSE:IHS) Q4 2023 Earnings Call Transcript
IHS Holding Limited (NYSE:IHS) Q4 2023 Earnings Call Transcript March 12, 2024
IHS Holding Limited misses on earnings expectations. Reported EPS is $-1.36 EPS, expectations were $-0.14. IHS Holding Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day. And welcome to the IHS Holding Limited 4Q and Full-Year Earnings Results Conference call. Please note that today's conference is being webcast and recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Colby Synesael. Please go ahead, sir.
Colby Synesael: Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Synesael, the EVP of Communications here at IHS. With me today are Sam Darwish, our Chairman and CEO, and Steve Howden, our CFO. This morning, we filed our annual report on Form 20-F for the full year ended December 31, 2023 with the SEC, which can also be found on the Investor Relations section of our website, and issued a related earnings release and presentation. 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 with the cautionary statement regarding forward-looking statements set out in our earnings release and 20-F 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 and uncertainties and other important factors, some of which are beyond our control that 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 today with the Securities and Exchange Commission and our other filings with the SEC. We will 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 on our earnings presentation, which is available on the Investor Relations section of our website. With that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.
Sam Darwish : Thanks, Colby. And welcome everyone to our fourth quarter and year-end 2023 earnings results call. We're reporting a strong quarter of performance across our key metrics with revenue, adjusted EBITDA, and ALFCF in line or ahead of our expectations, despite the meaningful Nigerian currency devaluation that began in June, while CapEx was meaningfully below expectations. Our results reflect the continued strong secular trends we are seeing across our business, including growth in lease amendments, new tenants, new sites, or build-to-suit and targeted fiber roll-out. For 2023 as a whole, we are reporting 8% revenue growth, 10% adjusted EBITDA growth, 19% ALFCF growth, and an 8% reduction in CapEx. Organic growth was 37%.
Groupwide, we added 1,041 colocations and 4,929 lease amendments, and we surpassed our expectations for new sites, having built 1,329 new towers, mostly in Brazil with 812 in the country as we continue to prioritize organically growing our asset base in that market. These strong growth trends should continue in 2024 as evidenced by our recently announced deal with Airtel in Nigeria that extended Airtel's contract to 2031 and included a commitment to add 3,950 new tenancies over the next five years, much of it front-loaded to 2024 and 2025. Which takes me to an important point. These strong fundamental trends are occurring against a challenging backdrop. The naira continues to devalue at levels that sadly are offsetting much of these strong secular trends.
From January to December 2023, the naira suffered a 98% unfavorable movement. And from January 2024 to date, we have seen a further 75% unfavorable movement. This means a total unfavorable movement of 246% since January 2023. Most of this negative movement came as a result of positively viewed government actions of unifying multiple exchange rates, removing the expensive petrol subsidies, and trying to contain the soaring inflation, which hit 28.9% in December 2023. While these actions were generally viewed positively by market observers and us, other supporting measures are required to contain the naira devaluation. Some of these required changes began to occur recently in Q1, as the Nigerian Monetary Policy Committee hiked the main policy interest rate by 400 basis points and are adding much-needed forex to the daily market.
This has helped stabilize the currency over the past few weeks. Some analysts, including Goldman Sachs, among others, are even predicting a strengthening naira by of this year. Market observers expect the Monetary Policy Committee to further increase the main policy interest rate throughout 2024 as they aim to lower inflation and further stabilize the forex market. From a 2023 year results perspective, the forex protection mechanisms in our revenue contracts helps us offset the majority of this pressure in the year and was evident in our Q4 2023 results. However, we expect the additional devaluation that began in January to further impact our results in 2024. While Steve will discuss this further when he discusses guidance, to give you some context, our guidance for 2024 assumes an average rate of NGN 1,610 to the dollar, whereas the average rate in 2023 was NGN 638 and that the devaluation in the naira will have a negative $535 million impact on revenue year-on-year even after adjusting for the impact of the forex resets.
Given the macroenvironment we're operating in, particularly in Nigeria which represented 63% of revenue in Q4 2023, we continue to take what we believe is a more balanced approach to growth and cash generation. We also expect the significant reduction in CapEx that started in the second half of 2023 to continue in 2024 along with a continued focus on improving operating efficiencies through productivity enhancements and cost reductions. Excitingly, this also includes an increased focus on innovation including the deepening usage of AI in how we utilize, maintain and operate our towers and it's something I'm very passionate about and personally spearheading. A dedicated team has been working for a while on developing use cases that can help us improve our efficiencies using the massive amounts of data we have due to our extensive operations over decades.
Skipping to slide 7, I want to discuss some of our key highlights. Starting with commercial progress, as of year-end 2023, we had $11 billion of revenue under contract with an average remaining tenant term of 7.5 years. I think it's important to highlight these metrics as they point to the durability we believe inherent in our business model despite what the perception may be. We continue to make progress on the commercial front across the business as we have signed contracts with MTN in Cameroon and in Cote d'Ivoire for a further 10 years. In Nigeria, as MTN highlighted in their most recent earnings announcement earlier this month, we continue to engage constructively with them to find ways to alleviate some of the operating pressure they are under, given our key role in running the majority of their network in the country, while also maintaining appropriate economic results for ourselves.
Also, as previously mentioned, we signed an extended contract with Airtel in Nigeria this past February, taking the term into the next decade in an agreement that includes a commitment by Airtel Nigeria to add 3,950 new tenancies over the next five years and is front-loaded over the next two. We are very excited about the potential of this mutually beneficial partnership. Shifting to governance progress, in January of this year, we announced a settlement agreement with Wendel in relation to the public dispute which you are aware of, reflecting a commitment to strong corporate governance and constructive shareholder engagement. The text of the proposed amendments to the articles of association will be made available to shareholders before the next AGM.
On stock liquidity, more progress here. We have removed all lockups on the pre-IPO shareholders. We also estimate approximately 14% of our shares are now owned by post-IPO shareholders compared to just 5% at the time of the IPO, an almost 300% improvement in float size. This is also evident in our average daily trading volume, which is now 574,000 shares, almost five times higher than what it was in May 2022. During the quarter, we continued to buy shares under our two-year buyback program, with a total of $10 million worth of shares bought over the past two quarters. I'd like now to provide an update on Project Green. For 2023, we spent $103 million of CapEx versus our guidance of $90 million to $100 million and achieved ALFCF savings of approximately $24 million versus guidance of $22 million.
Overall, the project remains on target, as you can see by our results. We will provide a more comprehensive update on the impact Project Green and our carbon reduction roadmap is having when we publish our annual sustainability report, which we expect to be next quarter. Moving on to our balance sheet, we continue to feel comfortable with our liquidity position, but also continue to increase our focus on cash generation and continue to evaluate and execute various ways to do such. As of year-end, we had $724 million of available liquidity, including our undrawn group RCF and the remaining undrawn portion of our group term loan. We continue to actively pursue initiatives to shift more debt into local currency, extend maturities and manage interest expense.
This was evident in our recent local currency 160 million equivalent facility in Cote d'Ivoire. The proceeds of this local opco loan will refinance US dollar obligations at the holding company level. Also, as previously announced in November, we extended the maturity of our $300 million group RCF to October 2026. Leverage ended the year at 3.4 times and, as we had previously commented, was impacted by the naira devaluation in June. We expect leverage to further increase in 2024, given the additional naira devaluation, but expect to remain within our target 3 to 4 times and continue to have an adequate liquidity position, which Steve will cover further in his section. And finally, on shareholder return, I would like to make the following statement.
Despite the currency headwinds in Nigeria, we believe in the underlying strength of our business and believe our equity is undervalued, given Africa's perceived place in the global markets. For example, Nigeria. When I moved to Nigeria 25 years ago, the country had approximately 120 million people. Today, it has approximately 225 million people, added a total population higher than Germany, France or the UK and is growing by 2.4% a year. That's 5 million people a year. To put into perspective, that's almost the size of Colorado a year. Nigeria also has a young energetic population, with the majority of the population younger than the age of 20 as compared to aging developed markets. Hundreds of millions of people with no landlines, poor roads, poor transport infrastructure depend on their mobile phone for almost every aspect of their life.
It has become as important as food or water or education. The trend in mobile phone adaptability and usage is irreversible and is showing through our growth and also through the massive growth in the underlying numbers of our key customers in Nigeria despite the forex headwinds. Macroconditions will tighten and loosen in cycles, but the growth in mobile usage is one way – to the sky – and thus why we believe Nigeria's value is still significantly underestimated, especially in our sector. The value and long-term growth prospects of the Latin America business are also very strong. When we moved to LatAm during the COVID year, we had zero base. Today, we have almost 8,000 towers and one of the largest fiber networks in Brazil, with a business that generated $146 million in adjusted EBITDA in 2023, more than 800 new towers and 1.3 million more homes passed in 2023 alone.
South Africa is growing, sub-Saharan Africa is growing. We own and operate 40,000 towers across 11 markets, covering approximately 800 million people who need their phones for almost every basic aspect of their life and IHS sits at the heart of enabling such connectivity as a leader of its domain. It is for these reasons that we believe IHS towers is under appreciated at our current valuation and that we have to consider ways of unlocking value for our shareholders. So under the guidance of our board of directors, we have commenced work with our advisors, including J.P. Morgan, to evaluate strategic alternatives for the business across our portfolio and our capital allocation priorities. This exercise is intended to generate the best value for investors.
We will provide an update on this as appropriate, including any potential action. And with that, I will turn the call over to Steve.
Steve Howden : Thanks, Sam. And hello, everyone. Turning to slide 9. As Sam mentioned, we're pleased to share our FY 2023 and fourth quarter 2023 results were in line or better than expected against a challenging macro backdrop in Nigeria throughout the year. The business has shown its resilience in FY 2023, posting good results, but it's clearly not immune to such significant FX headwinds as we've seen in 2023 and continue to see in Nigeria in the early part of 2024. On slide 9, Towers and Tenants are up by 1% and 2% respectively year-over-year, while Lease Amendments increased by double-digit percentage. On a reported basis, in the quarter, revenue declined and adjusted EBITDA increased modestly, both metrics impacted by the devaluation in the naira in 2023.
Specifically in Q4, revenue declined by 3.1%, but adjusted EBITDA increased by 0.6%, while ALFCF increased 22%. For the full year, our revenue grew by 8%, adjusted EBITDA by 10% and ALFCF by 19% all on a reported basis. Our level of CapEx investment decreased by 33% in the fourth quarter and 7.5% for the year, largely due to lower capital expenditure for our Nigeria and SSA segments, partially offset by an increase in LatAm, all of which I'll discuss shortly. And finally, our consolidated net leverage ratio increased to 3.4 times following the naira devaluation, albeit still within our target 3 to 4 times range. Slide 10 shows the components of our 8.4% reported consolidated revenue growth for the full year 2023. Organic revenue growth of 36.9% for the year was driven primarily by FX resets, CPI escalations and new lease amendments.
Power-related revenue, fiber, new colocation and new sites also contributed to our organic growth in 2023. On the right, you can see the organic growth rates of each of our segments for the year, with Nigeria delivering 47% organic growth, including a large impact from FX resets. Inorganic growth for FY 2023 was 2.9%, primarily driven by the full year benefit of the MTN SA and GTS SP5 acquisitions and the fifth and sixth stages of the Kuwait acquisition. Inorganic growth will be immaterial in 2024, given we are now beyond the 12-month anniversary of the most meaningful recent acquisitions we did in South Africa and Brazil in 2022. Turning to our consolidated revenue growth for the quarter, you can see how the continued devaluation turned a quarter of strong organic growth into a 3.1% decline.
The naira devalued 15% in Q4 from NGN 776 to the dollar at the beginning of the quarter to NGN 912 to the dollar at the end of the fourth quarter. Yet organic revenue growth of 48.4% was driven primarily by FX resets that reflect a full quarter reset impact after the original June devaluation, CPI escalations and new lease amendments. Fiber, power-related revenue, new colocation and new sites also contributed to the organic growth in the quarter. The right side again shows the organic growth rates of each of our segments, where our Nigeria segment grew approximately 66%, including a large impact from FX resets. On slide 12, you can see our consolidated revenue, adjusted EBITDA and adjusted EBITDA margins for the fourth quarter 2023 and the full year 2023.
In fourth quarter 2023, IHS generated $510 million in reported revenue, a 3.1% decline versus the prior year. While the naira devaluation drove the decline, organic revenue growth of 48% reflects the contribution from our FX resets and CPI escalators, as well as the strong secular growth trends of the business. Fourth quarter 2023 reported revenue includes a $25 million FX headwind versus FX rates of last quarter and a $16 million headwind when including all FX assumptions that were assumed in our guidance. For full year 2023, we delivered over $2.1 billion of revenue, an 8% increase, while organic revenue increased by almost 37%. Aggregate inorganic revenue was $57 million, equating to 2.9%, again reflecting the acquisitions previously discussed.
Non-recurring items also made up $48 million this year compared to $18 million the year before and partially distorts the comparisons. Regarding adjusted EBITDA and adjusted EBITDA margins, in Q4 2023, adjusted EBITDA of $274 million increased by approximately 1% versus fourth quarter 2022 and adjusted EBITDA margin was 53.8%, up 200 basis points from the prior year. For the full year, adjusted EBITDA was $1.1 billion, a 9.9% increase versus the prior year and adjusted EBITDA margin was 53.3%, up 70 basis points from full year 2022. The year-on-year changes in adjusted EBITDA and adjusted EBITDA margin primarily reflect the increase in revenue we've already discussed, whilst the cost base was positively impacted by reducing power costs, but negatively impacted by FX-related impacts.
As previously highlighted through Project Green, we continue to prioritize alternative sources of power to reduce our dependency on diesel. On slide 13, we first review our adjusted levered free cash flow or ALFCF. In Q4 2023, we generated ALFCF of $118 million, a 22% increase versus Q4 2022, primarily due to a reduction in maintenance CapEx, lease and rent payments made and withholding tax, partially offset by the increase in net interest paid. Our ALFCF cash conversion rate increased to 43.1% versus 35.6% in the prior year's quarter. For the full year, we generated ALFCF of $433 million, a 19.2% increase versus FY22, and our ALFCF conversion rate was 38.2%, up from 35.2% in FY22. One-time items in each year impacted that comparison. However, the year-on-year increase in ALFCF is primarily due to underlying business growth we've already discussed as well as a reduction in maintenance CapEx. Turning to CapEx. In Q4 2023, total CapEx was $131 million which decreased 33% year-on-year and full year 2023 CapEx of $586 million decreased 7.5% year-on-year.
The decrease in full year 2023 was primarily due to a lower CapEx spend in Nigeria related to new site CapEx and SSA related to refurbishment, but that was offset by higher CapEx in LatAm related to new site builds. In the latter part of the year, we started to pull back our capital allocation for growth CapEx in certain markets like Nigeria, which was one of the reasons our FY 2023 total CapEx of $586 million was lower than our $610ml to $650 million CapEx guidance. More of this when we come to the FY 2024 guidance shortly. Slide 14 looks at our returns and capital allocation. In FY 2023, we continue to focus on driving returns and delivered a return on invested capital of 14.6% vs 9.9% the prior year. Our improved 2023 ROIC reflects, amongst other things, growth in cash flow, a first full year contribution from the MTN South Africa and GTS SP5 acquisitions completed in 2022, the first year in numerous years when we have not deployed capital on M&A transactions and, of course, the impact of the naira devaluation.
In terms of capital allocation, you can see that a significant portion of our spend in FY 2023 or $352 million was related to discretionary CapEx that excluded new sites, followed by maintenance or non-discretionary CapEx and new site CapEx where we are a leading builder of new sites in Brazil, but we also allocated $10 million towards our share repurchase program that was authorized in August 2023. The $352 million discretionary CapEx excluding new sites was largely spent on fiber rollout, Project Green, augmentation for colocation and lease amendments and other cost saving initiatives. Turning to the segment review on slide 15. First walk through our Nigeria business. When the new president was sworn in last May, we saw swift action to unify multiple exchange rates and end the petrol subsidy.
The Nigerian macroenvironment, however, remains complex. And while we are still encouraged by the actions taken by the new government, the additional steps taken in January have had a meaningfully negative impact on the naira, which obviously is not showing in these results today, but you will see it in our 2024 guidance. We remain in close contact with our key customers, regulators, our vendors and our local banking partners to continue to best position IHS. FX reserves decreased to $32.9 billion in Nigeria at the end of 2023 from $37.1 billion in 2022. More recently, the Nigerian monetary policy committee raised interest rates by 400 basis points to 22.75% and moved design to curb inflationary and FX pressures. Meanwhile the price of both oil and ICE gas oil have decreased recently.
Looking at ICE gas oil, it was $792 per tonne in Q4 of 2023 and that's down from $911 per tonne in Q3 of 2023. Moving to real GDP growth, it expanded by 3.5% in the quarter, bringing the full year 2023 growth rate to 2.7%. Inflation jumped to 28.9% this past December versus 21.3% in December 2022, bringing the full year 2023 average CPI rate to 24.7%. For IHS, Q4 2023 revenue in Nigeria of $321 million decreased 10% year-on-year on a reported basis, reflecting the devaluation in the quarter that increased 66% organically. Organic growth was driven primarily by FX resets and escalations. The negative FX impact was $267 million or 75.3% due to the devaluation. Our tower and tenant count decreased 3.5% and 0.8% respectively versus Q4 2022, which continued to reflect the planned decommissioning that occurred in Q1 2023 with no impact on revenue.
Our colocation rate consequently improved to 1.59 times, up from 1.54 times in Q4 2022. And lease amendments continue to be a strong driver of growth, increasing 12.5% year-on-year as our customers added additional equipment to our sites, particularly 5G upgrades. Q4 2023 segment adjusted EBITDA in Nigeria was $200 million, a 3% decrease from a year ago, while segment adjusted EBITDA margin was up 430 basis points to 62.3%, primarily reflecting a reduction in cost of sales, mostly coming from diesel savings. In our sub-Saharan African segment, towers and tenants increased by 1.5% and 2.6% respectively versus Q4 2022, and revenue increased by 5.6%, of which organic revenue grew 12%, driven primarily by escalations and FX resets. Segment adjusted EBITDA decreased by 6.3%, which primarily reflects an increase in cost of sales, partially offset by the increase in revenue.
Segment adjusted EBITDA margin decreased to 50.3% from 56.6% in Q4 2022 as a result of higher power generation costs, permit and fees, and diesel costs. We continue to monitor the macroenvironment in South Africa, particularly the ongoing power load shedding by the national utility, which did moderate versus the previous quarter. We also continue to evaluate our power managed service offerings. In our LatAm segment, towers and tenants grew by 9.3% and 6.6% respectively versus Q4 2022, revenue increased by 24%, of which organic revenue growth was 17%, driven primarily by an increase in fiber, escalations, and those new sites. Segment adjusted EBITDA increased by 31%, leading to a 75.6% segment-adjusted EBITDA margin, a 400 basis point increase versus Q4 2022.
In Brazil, our second largest market, with 7,663 towers, macro conditions were largely positive as FX rates marginally strengthened, interest rates came down, and inflation stayed relatively flat. In MENA, towers and tenants grew by 9.2% and 9.7% respectively, while revenue increased by 13%, including 6% organic revenue growth, that driven primarily by new sites and escalations. Segment adjusted EBITDA grew by nearly 80%, mainly as a result of the revenue growth and a decrease in cost of sales. The Q4 2023 segment adjusted EBITDA margin increased to 73.5%. On to slide 16, and I'll briefly highlight our KPIs. As of December 31, our tower count was 40,075, up 1.1% from the end of 2022, driven primarily by ongoing new sites in LatAm and some in Nigeria.
As you can see in the chart on the top right, collectively, we built more than 1,300 towers during the year, exceeding our guidance of approximately 1,250. Total tenants grew 2%, with a colocation rate of 1.49 times, up slightly versus last year. Lease amendments continue to be a significant factor of our growth, particularly in our Nigerian segment, given the historic 4G and now increasing 5G activity we have seen. Lease amendments increased by almost 16% year-on-year. Moving on to slide 17, we look at our debt profile and related items. At December 31, 2023, we had approximately $4.1 billion of external debt and IFRS 16 lease liabilities. Of the $4.1 billion of debt, $1.94 billion represent our bond financings and other indebtedness includes $370 million that has been drawn down from the $500 million three-year bullet term loan at IHS Holding Limited level.
We have undertaken various balance sheet initiatives to extend maturities, manage interest rate expense, swap dollar obligations into local currency where possible and add flexibility to our capital structure. As mentioned, in October, we reduced the available undrawn commitments under the term loan by $100 million to $130 million and extended the availability period of this undrawn balance to April 2024. We have reduced the amount of $1.4 billion that has been drawn down from the $1.4 billion that was previously drawn down to March 2024. We have reduced the available undrawn commitments by another $70 million earlier this month in March as a result of pushing this USD exposure down into the Cote d'Ivoire market with a $116 million equivalent term loan that matures in December 2028.
In November, we extended the Group RCF maturity from March 2025 to October 2026, which continues to have a $300 million capacity and is undrawn. Most recently, we have signed a $270 million bilateral loan to refinance essentially all of our letters of credit in Nigeria. This will extend the maturity of these obligations, reduce the interest expense by approximately 300 basis points and release approximately $115 million equivalent of cash collateral previously held against these letters of credit. As you can imagine, we are pleased to have completed these initiatives which further de-risk the balance sheet and increased our financial flexibility. Cash and cash equivalents decreased to $294 million at December 31. In terms of where that cash is held, approximately 12% was held in naira at our Nigeria business.
Moreover, in 2023, we upstreamed a total of $65 million from Nigeria alone at an average rate of approximately NGN 699 to the dollar versus $207 million at a rate of approximately NGN 550 million in 2022, despite the USD shortages in the second half of 2023. More positively, we've seen an increase in daily FX turnover or USD availability since government actions taken in January 2024, but we do caution it remains to be determined if such an increase will be sustained. Consequently, from all these moving elements, at the end of the fourth quarter 2023, our consolidated net debt was approximately $3.8 billion and we had a consolidated net leverage ratio of 3.4 times, up 0.2 times year-on-year. In light of the continued Nigeria devaluation, we do expect leverage to increase over the coming quarters.
However, our debt metrics are expected to remain within our target 3 to 4 times net leverage ratio. Now moving to slide 18, and we're introducing 2024 guidance that includes revenue in the range of $1.7 billion to $1.73 billion, adjusted EBITDA in the range of $935 million to $955 million, ALFCF in the range of $285 million to $305 million, and total CapEx in the range of $330 million to $370 million. A few points I'd like to make here. Number one, revenue guidance includes an approximate $17 million reduction compared to 2023 as a result of an expected change in our accounting methodology on power pass-through revenue in South Africa, which will likely be accounted for as net revenue going forward rather than gross revenue and gross power cost.
This, however, will have no impact on adjusted EBITDA or ALFCF, as historically we've recognized an equal amount of power cost and power revenue. Number two, I'll speak more about FX rates in a moment, but excluding the change in how we recognize that power pass-through in South Africa, the expected year-on-year reduction in financials is entirely the result of the naira evaluation. And as Sam mentioned, it's expected to be a $535 million year-on-year headwind to revenue after adjusting for the impact of FX resets. And lastly, you may have seen in our disclosures, we have signed an agreement to sell our Peru business to SBA. While immaterial, given the small size of the business of 61 towers, our guidance assumes that this transaction closes at the end of Q2 2024.
You'll also see that CapEx is expected to come down significantly year-on-year as we increase our focus on cash generation, while still upholding the goal to maintain double-digit organic revenue growth, which includes 49% in 2024. This does include a remaining small portion for Project Green of approximately $10 million. Then for the year, we expect to build approximately 850 towers, including approximately 600 in Brazil. Then turning the page on slide 19, on the left, you can see revenue by reporting currency for Q4 in the year, whereas on the right-hand side, we provide the breakout of revenue based on contract split. At the bottom of the slide shows the annual average FX rate assumptions used in our 2024 guidance. And for the year, we're assuming a guidance NGN 1,610 to the dollar, which includes NGN 1,315 in Q1 of 2024 based on actual through February and NGN 1,815 on average in Q4 of 2024.
And then, finally, on slide 20, we provide the estimated full year financial impact a theoretical 10% devaluation in the naira would have on our financials. While our 2024 guidance already assumes an average annual NGN 1,610 to the dollar for the full year with the naira rate getting to NGN 1,850 by December 2024. Here we've shown the impact of a 10% devaluation beyond what we've assumed in the guidance. The figures in the middle of the page including the approximate $40 million to $45 million and $20 million to $25 million impact to revenue and adjusted EBITDA respectively provide a sense of what the 12-month run rate impact would be using our 2024 expectations. However, as you'll see on the right hand side, the illustration in the middle of the page excludes an incremental approximate $15 million impact that could impact the quarter the devaluation actually occurs, assuming the devaluation was to occur at the beginning of the quarter.
This represents the maximum lag that could occur between the devaluation and when most of our FX resets would start to kick in the next quarter. And as a reminder, the vast majority of our resets are quarterly. This now brings us to the end of our formal presentation and we thank you for your time today. And, operator, please now open the line for questions.
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