Liberty Latin America Ltd. — Q3 2023 Form 10-Q
Business context and reporting period. The company provides fixed, mobile and subsea telecommunications services across Latin America and the Caribbean. This unaudited report covers the three and nine months ended September 30, 2023; amounts are in U.S. dollars unless stated otherwise. Comparisons are affected by the October 2022 formation of the Chile JV, after which VTR was no longer consolidated, and by the July 2022 Claro Panama acquisition.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,125.8 million | $1,220.8 million | $3,347.5 million | $3,649.4 million |
| Operating income (loss) | $162.7 million | $151.7 million | $404.7 million | $(20.4) million |
| Adjusted OIBDA | $428.4 million | $413.8 million | $1,269.7 million | $1,307.3 million |
| Adjusted OIBDA margin | 38.1% | 33.9% | 37.9% | 35.8% |
| Net earnings (loss) attributable to shareholders | $59.7 million | $75.7 million | $29.2 million | $(309.3) million |
| Basic and diluted EPS | $0.29 | $0.34 | $0.14 | $(1.38) |
Adjusted OIBDA is a non-GAAP measure. Q3 2023 operating income included $11.1 million of impairment, restructuring and other operating items; the nine-month amount was $81.6 million, versus $583.4 million in 2022, which included substantial goodwill impairment.
Cash flow, debt and liquidity
- For the first nine months, operating cash flow was $506.5 million, compared with $491.8 million; capital expenditures, net, were $422.9 million, compared with $494.1 million.
- Investing cash outflow was $452.5 million; financing cash outflow was $254.9 million. Cash, cash equivalents and restricted cash decreased $206.2 million to $582.7 million. Balance-sheet cash and cash equivalents were $571.6 million.
- Debt and finance lease obligations totaled $7.915 billion carrying value; principal debt before discounts and financing costs was $7.980 billion. The weighted-average stated borrowing rate was 7.05% (6.0% including specified derivative and other effects, excluding financing costs).
- Cash and cash equivalents were $558.1 million classified as current debt and finance lease obligations; $7.363 billion was not due until 2027 or later. Debt maturities are concentrated in 2027 ($2.877 billion) and 2028 ($2.618 billion).
- Unused borrowing capacity was $887 million. The company reported compliance with borrowing-group debt covenants and stated it believes it has resources to meet foreseeable liquidity needs over the next 12 months, while noting refinancing and cash-access uncertainties.
- At September 30, 2023, the company said 96% of total debt bore fixed or capped interest after derivatives. Its ability to move cash from subsidiaries may be limited by legal, tax, noncontrolling-interest and foreign-exchange restrictions.
Material changes versus the prior comparable period
- Q3 revenue declined $95.0 million year over year, primarily reflecting the $129.8 million absence of VTR revenue following the Chile JV transaction; organic revenue increased $10.5 million. Nine-month revenue declined $301.9 million, including the $450.6 million VTR disposition effect, partly offset by Claro Panama acquisition revenue and organic growth.
- Q3 Adjusted OIBDA rose $14.6 million, with margin increasing to 38.1%. Nine-month Adjusted OIBDA fell $37.6 million, reflecting the absence of VTR results and organic pressures, partly offset by improved results in some segments.
- Q3 segment revenue increased in Panama, Liberty Networks and Costa Rica, while Liberty Puerto Rico declined. In Puerto Rico, lower mobile revenue outweighed fixed-service growth. Nine-month reported growth in Panama and Costa Rica included acquisition and foreign-exchange effects; Costa Rica’s organic revenue growth was modest.
- Net earnings attributable to shareholders were lower in Q3 despite higher operating income, partly because net non-operating expenses increased to $104.4 million from $31.0 million. Nine-month results improved markedly versus 2022, substantially because the prior-year period included large impairment charges and larger foreign-currency losses.
- Interest expense was $152.3 million in Q3 and $448.0 million for the nine months, up from $149.2 million and $415.8 million, respectively. Net derivative gains were $47.5 million in Q3 and $52.8 million year to date, versus $135.4 million and $385.0 million in 2022; management cautions such gains and foreign-exchange movements are volatile.
Outlook, commentary, risks and unusual items
- The filing provides no numerical revenue, earnings or cash-flow guidance. Management says competition is significant across markets and can pressure subscriber counts, average revenue per user and pricing; inflation and foreign-exchange movements may raise costs that cannot always be passed to customers.
- Risk factors include competitive and regulatory developments, interest rates and currency movements, access to financing and subsidiary cash, debt maturities, programming costs, technology changes, cybersecurity and network disruption, natural disasters, and legal or tax outcomes.
- On November 5, 2023, the company agreed to acquire DISH spectrum assets and approximately 120,000 prepaid mobile subscribers in Puerto Rico and the USVI for $256 million, payable in four annual installments beginning at closing. The transaction remains subject to customary conditions, including regulatory approvals, and was expected to close in 2024.
- Management reported that disclosure controls and procedures remained ineffective at September 30, 2023 because previously identified material weaknesses in internal control over financial reporting had not been remediated. Remediation work continued.
- The company revised certain prior-period financial statement amounts for errors it concluded were immaterial to previously issued statements, principally involving revenue, deferred tax liabilities and noncontrolling interests.
- Regulatory, tax, litigation and other ordinary-course contingencies remain; the company said it cannot provide a meaningful range of potential losses for certain matters. The annual goodwill impairment test found no impairment in Q3 2023, but management notes future charges could be significant if operating or market assumptions deteriorate.
Important facts for investors to verify
- How much of reported revenue and Adjusted OIBDA movement reflects organic performance versus the Chile JV disposition, Claro Panama acquisition and foreign exchange.
- Whether growth in Panama and Costa Rica, and Puerto Rico’s mobile revenue trends, continue in subsequent quarters.
- Debt refinancing plans and subsidiary-level liquidity, especially ahead of the 2027–2028 maturity concentration; also monitor variable-rate exposure and covenant headroom.
- Progress and testing evidence for remediation of internal-control material weaknesses, and the implications of the prior-period error revisions.
- Regulatory approval, closing timing, installment terms and expected economics of the DISH transaction.
- Potential cash or earnings effects from contingencies, currency movements, derivatives, impairment risks and competitive or cost pressures.