Liberty Latin America Ltd. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; filed February 22, 2023. This is an annual report, not a standalone fourth-quarter report. The company provides fixed, mobile, broadband, video, business and wholesale telecommunications services across Latin America and the Caribbean.
Financial and operating performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $4.815 billion | $4.815 billion |
| Adjusted OIBDA | $1.718 billion | $1.815 billion |
| Operating income | $94 million | $67 million |
| Net loss attributable to Liberty Latin America shareholders | $176 million; $0.79 loss per share | $438 million; $1.88 loss per share |
| Cash from operating activities | $869 million | $1.016 billion |
| Capital expenditures, net | $660 million | $736 million |
| Property and equipment additions | $816 million | $856 million |
| Cash and cash equivalents at year-end | $781 million | $957 million |
| Debt and finance lease obligations | $7.975 billion principal/obligations; $227 million current | $7.566 billion carrying amount |
Reported revenue was effectively flat. Organic revenue increased $5 million, while acquisitions added $89 million and foreign exchange and disposals reduced revenue by a combined $94 million. Adjusted OIBDA declined about 5%; its aggregate margin was approximately 35.7%, compared with 37.7% in 2021. The company reported a $555 million goodwill impairment, primarily in C&W Caribbean. Interest expense rose to $557 million from $527 million.
Year-end current assets were $2.079 billion and current liabilities $1.762 billion. The company reported $899 million of unused borrowing capacity, subject to facility terms and other conditions. Management said it expected sufficient resources to meet foreseeable liquidity needs and repay or refinance current maturities over the next 12 months. Debt maturities are concentrated in later years; reported contractual debt maturities include $2.877 billion in 2027 and $3.987 billion thereafter. Weighted-average stated borrowing cost was 6.4% before derivative effects.
Material changes versus FY2021
- The Claro Panama acquisition closed July 1, 2022, for a stated enterprise value of $200 million. It contributed $70 million of revenue and a $14 million net loss in the period included in the company’s results.
- In October 2022, the company contributed its Chile operations to a 50:50 joint venture with América Móvil and began equity-method accounting. The transaction produced a $169 million pretax gain; the investment was reduced to zero by year-end after recognizing its share of fourth-quarter losses. Chile results are included through September 30, 2022.
- Liberty Costa Rica revenue increased substantially, largely reflecting the full-year contribution of the 2021 Telefónica acquisition. C&W Panama’s reported revenue also benefited from Claro Panama, while its Adjusted OIBDA margin fell from 35.2% to 29.4%, partly because the acquired business had a lower margin.
- Liberty Puerto Rico revenue rose 1.4%, but Adjusted OIBDA fell from $581 million to $538 million. VTR’s reported revenue and Adjusted OIBDA fell sharply, reflecting the Chile transaction, currency effects and organic declines amid competition.
- Net loss improved from $488 million to $202 million, but the comparison includes volatile derivative and foreign-exchange results and the Chile transaction gain. Operating cash flow declined by $147 million.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided in the supplied filing text. Management expects 2023 property and equipment additions to be approximately 16% of revenue, versus 17.0% in 2022; actual spending may vary.
- Management cites intense competition, customer and ARPU pressure, inflation, foreign-exchange movements, higher interest rates, regulation and the execution of acquisitions and network investment as important business factors.
- Material weaknesses in internal control over financial reporting remained unresolved at year-end, involving staffing and expertise, financial-information processes, IT risk assessment and general IT controls, and process-level controls. Management reported immaterial misstatements, some corrected. KPMG issued an adverse opinion on internal control effectiveness but an unqualified opinion on the consolidated financial statements. Claro Panama’s controls were excluded from the year-end assessment.
- Goodwill impairment remains a risk: the company recorded $555 million in 2022, following $605 million in 2021, and disclosed that further impairment could be significant if valuation assumptions or business performance worsen.
- Regulatory and funding uncertainties include potential infrastructure-sharing requirements in Jamaica and a proposed reduction in Puerto Rico and USVI mobile support from approximately $34 million to $8.5 million annually for two years if the FCC proposal is adopted. The FCC had not yet issued its final order in the period described.
- The company repurchased $170 million of shares in 2022 and had $57 million remaining under its repurchase authorization at year-end. It has no present intention to pay cash dividends.
- Subsequent to year-end, Liberty Costa Rica refinanced term loans and amended its revolving facility; the filing describes new 2031 term loans carrying a stated 10.875% rate.
Important facts for investors to verify
- Review the drivers and sustainability of organic revenue and Adjusted OIBDA, including subscriber trends, ARPU and margins by segment.
- Assess cash conversion and funding needs, including capital additions, vendor financing, interest payments, near-term maturities and access to cash held in restricted subsidiaries.
- Examine refinancing terms and foreign-currency and variable-rate exposures, including the effect of derivatives and the Costa Rica refinancing completed after year-end.
- Track remediation of the material weaknesses and any subsequent audit or reporting developments; distinguish the adverse internal-control opinion from the unqualified financial-statement opinion.
- Evaluate assumptions behind the goodwill valuations and potential additional impairments, and verify the ongoing financial position of the Chile JV and the economics of the Claro Panama integration.
- Monitor FCC funding decisions, regulatory license renewals and infrastructure-access rules, as well as litigation, tax and other contingencies for which the filing does not provide a meaningful potential-loss range.