Liberty Latin America Ltd. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024, compared with the three months ended March 31, 2023; balance-sheet comparisons are with December 31, 2023. Liberty Latin America provides fixed, mobile, business and subsea-network services across Latin America and the Caribbean, including Puerto Rico, USVI and Costa Rica.
Key financial results
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $1,099.4 million | $1,101.5 million; down $2.1 million |
| Adjusted OIBDA | $374.2 million | $400.1 million; down 6.5% |
| Operating income | $92.8 million | $106.6 million |
| Net loss | $0.5 million | $68.1 million |
| Net loss attributable to shareholders per share | Reported as zero after rounding | $(0.30) |
| Cash from operating activities | $23.3 million | $62.4 million |
| Capital expenditures, net | $109.7 million | $114.1 million |
| Cash after capital expenditures, net | $(86.4) million | $(51.7) million |
Revenue was essentially flat as reported; excluding foreign-exchange effects, it declined $17.9 million organically. Adjusted OIBDA margin, calculated from reported consolidated figures, was approximately 34.0%, versus 36.3% a year earlier. The company reported a $46.4 million net gain on derivatives in Q1 2024, compared with a $59.1 million net loss in Q1 2023, and foreign-currency transaction gains of $23.3 million versus $49.2 million. These volatile non-operating items substantially affected the year-over-year net-loss comparison.
Segments and material changes
- C&W Caribbean: Revenue increased 3% to $364.2 million and Adjusted OIBDA rose to $150.6 million from $140.2 million, supported by residential mobile and B2B growth.
- C&W Panama: Revenue increased 2% to $169.2 million; Adjusted OIBDA rose to $56.8 million from $43.5 million. B2B growth, including government-related projects, offset lower residential mobile revenue.
- Liberty Networks: Revenue was nearly flat at $108.5 million; Adjusted OIBDA declined to $59.2 million from $63.6 million. Lower wholesale revenue reflected, among other factors, prior-period prepaid-capacity contract changes.
- Liberty Puerto Rico: Revenue fell 10% to $327.2 million and Adjusted OIBDA fell to $69.1 million from $128.0 million. Lower mobile subscribers, handset sales and inbound roaming, reduced FCC funding revenue, and higher integration costs weighed on results. Q1 2024 included $14 million of integration costs in this segment.
- Liberty Costa Rica: Revenue increased 18% to $152.3 million, including $13.0 million of favorable FX impact; Adjusted OIBDA increased to $58.3 million from $45.2 million.
Consolidated other operating costs rose $27.9 million, including a $21.1 million increase in service-related costs, largely reflecting Puerto Rico integration costs. Interest expense increased $9 million to $155.9 million, primarily due to higher average rates and debt associated with tower transactions. Depreciation and amortization increased $13.2 million. Impairment, restructuring and other operating items declined to $6.6 million from $29.7 million, mainly because 2023 included impairment charges on certain lease assets.
Cash, debt and liquidity
- Cash and cash equivalents were $668.5 million at March 31, 2024, down from $988.6 million at December 31, 2023. Cash, cash equivalents and restricted cash totaled $679.7 million at quarter-end.
- Operating cash flow was $23.3 million; investing activities used $116.9 million and financing activities used $225.7 million. The resulting net decrease in cash, cash equivalents and restricted cash was $320.1 million. Management attributed lower operating cash flow principally to higher interest and tax payments and lower Adjusted OIBDA.
- Debt and finance lease obligations had a carrying amount of $8,056.0 million, including $465.2 million classified as current; reported outstanding principal together with finance lease obligations was approximately $8,116 million. The weighted-average stated borrowing rate was 7.1%; including the effects described by the company, the weighted-average rate was 6.0%.
- Debt maturities are concentrated in 2027 and 2028: $2,881.7 million and $2,623.7 million, respectively. The company expects to refinance or extend later maturities but gives no assurance it can do so.
- Unused borrowing capacity was $870.5 million. The company said all borrowing groups were covenant-compliant and it believed resources were sufficient for foreseeable liquidity needs and current maturities over the next 12 months. Access to subsidiary cash may be limited by legal, tax, noncontrolling-interest and currency restrictions.
- During Q1, the company repurchased shares for $56 million of cash, and reported $61 million aggregate repurchase value. It repurchased 2.5 million Class A and 6.8 million Class C shares. The remaining authorization at March 31 was $79 million; on May 7, 2024, directors approved an additional $200 million authorization through December 2026.
Outlook, risks and unusual items
- The filing provides no quantified full-year revenue, profit or cash-flow guidance. Management expects significant interest expense to continue and anticipates refinancing or extending debt maturities as they approach.
- The proposed Puerto Rico and USVI spectrum and prepaid-subscriber acquisition from DISH Network has an aggregate purchase price of $256 million, payable in four annual installments beginning at closing, subject to adjustments and regulatory and other conditions. It was expected to close during 2024.
- Management cites competition, inflation, foreign-exchange and interest-rate movements, regulation, programming and supplier costs, subscriber retention, technology changes, financing access, and weather or other disruptions as risks. It cautions that derivative and currency gains are volatile and are not a dependable source of income.
- Contingencies include legal, tax and interconnection, programming and copyright disputes. The company says it cannot provide a meaningful range of potential losses for certain matters; unfavorable outcomes could materially affect results, cash flows or financial position.
- Disclosure controls and procedures remained ineffective as of March 31, 2024 because previously reported material weaknesses in internal control over financial reporting had not been remediated. Management described ongoing remediation actions.
- The company reported approximately $270 million of unfulfilled long-term capacity-contract obligations, generally expected to be recognized as revenue over an average remaining life of four years.
Important facts for investors to verify
- Whether Puerto Rico mobile subscriber trends and integration costs improve, and how much of the segment’s OIBDA decline is temporary or recurring.
- Debt refinancing plans, the 2027–2028 maturity concentration, borrowing costs, and the practical availability of subsidiary cash and credit capacity.
- Cash conversion and working-capital movements, given low Q1 operating cash flow and cash use after capital expenditures.
- Progress toward remediating the disclosed material weaknesses and any related changes in reporting or controls.
- Closing conditions, timing, funding and expected economics of the DISH spectrum acquisition, and the use of the expanded share-repurchase authorization.
- Potential outcomes of legal, tax and regulatory contingencies, for which the filing does not provide a clear potential-loss range.