Liberty Latin America(US:LILA)2025-05-07 20:56Part I FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance, position, and cash flows, including detailed financial statements, notes, and management's discussion and analysis Financial Statements This quarter, the company's total revenue was $1.0835 billion, a slight year-over-year decrease; despite operating profit increasing from $92.8 million to $128.1 million, net loss significantly expanded from $0.5 million to $126.7 million due to substantial derivative instrument losses, while operating cash flow remained stable at $24.6 million, and company assets and liabilities slightly contracted compared to the end of 2024 Consolidated Financial Statements Summary Consolidated Statements of Operations (For the Three Months Ended March 31, 2025) | Item | 2025 Q1 (million USD) | 2024 Q1 (million USD) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 1,083.5 | 1,099.4 | -1.4% | | Operating Profit | 128.1 | 92.8 | +38.0% | | Net (Loss) Gain on Derivative Instruments | (62.9) | 46.4 | - | | (Loss) Income Before Income Taxes | (117.6) | 4.6 | - | | Net Loss | (126.7) | (0.5) | - | | Net Loss Attributable to Shareholders | (136.4) | (0.5) | - | | Diluted Loss Per Share | (0.69) | 0.00 | - | Consolidated Balance Sheets | Item | March 31, 2025 (million USD) | December 31, 2024 (million USD) | | :--- | :--- | :--- | | Total Assets | 12,597.5 | 12,800.0 | | Total Current Assets | 2,059.8 | 2,131.5 | | Total Liabilities | 11,071.8 | 11,174.0 | | Total Current Liabilities | 1,913.3 | 2,043.9 | | Total Equity | 1,525.7 | 1,626.0 | Consolidated Statements of Cash Flows (For the Three Months Ended March 31, 2025) | Item | 2025 Q1 (million USD) | 2024 Q1 (million USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 24.6 | 23.3 | | Net Cash Used in Investing Activities | (95.0) | (116.9) | | Net Cash Provided by (Used in) Financing Activities | 3.4 | (225.7) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (78.8) | (320.1) | Note 4: Acquisitions The company has two significant transactions: an agreement with Millicom for a planned merger of Costa Rican operations in H2 2025, and the acquisition of EchoStar's prepaid business and spectrum assets in Puerto Rico and the U.S. Virgin Islands completed in September 2024 - The company has two significant transactions: an agreement with Millicom for a planned merger of Costa Rican operations in H2 2025, and the acquisition of EchoStar's prepaid business and spectrum assets in Puerto Rico and the U.S. Virgin Islands completed in September 20245658 Note 10: Debt and Finance Lease Obligations The company's total principal debt was $8.2452 billion as of March 31, 2025, with a weighted average interest rate of 7.36%, and it engaged in significant financing activities during Q1 2025, including new term loans and notes issuance and repayments Debt Summary (As of March 31, 2025) | Item | Amount (million USD) | | :--- | :--- | | Total Principal Debt | 8,245.2 | | Undrawn Borrowing Capacity | 768.2 | | Weighted Average Interest Rate | 7.36% | - In Q1 2025, the company undertook multiple financing activities, including C&W issuing $1.5224 billion in B-7 term loans and $755 million in 2033 Senior Notes, while repaying $1.51 billion in B-5 term loans and $735 million in 2027 Senior Notes9499 Note 16: Segment Reporting Consolidated revenue slightly decreased by 1.4% year-over-year, primarily due to a significant decline in Liberty Puerto Rico, while consolidated Adjusted OIBDA increased by 10.7% driven by strong performance in C&W Caribbean and Panama Revenue by Segment (For the Three Months Ended March 31) | Segment | 2025 Q1 (million USD) | 2024 Q1 (million USD) | YoY Change | | :--- | :--- | :--- | :--- | | C&W Caribbean | 363.9 | 364.2 | -0.1% | | C&W Panama | 177.0 | 169.2 | +4.6% | | Liberty Networks | 110.4 | 108.5 | +1.8% | | Liberty Puerto Rico | 298.4 | 327.2 | -8.8% | | Liberty Costa Rica | 158.2 | 152.3 | +3.9% | | Consolidated Total Revenue | 1,083.5 | 1,099.4 | -1.4% | Adjusted OIBDA by Segment (For the Three Months Ended March 31) | Segment | 2025 Q1 (million USD) | 2024 Q1 (million USD) | YoY Change | | :--- | :--- | :--- | :--- | | C&W Caribbean | 173.3 | 150.6 | +15.1% | | C&W Panama | 64.6 | 56.8 | +13.7% | | Liberty Networks | 57.9 | 59.2 | -2.2% | | Liberty Puerto Rico | 81.5 | 69.1 | +18.0% | | Liberty Costa Rica | 58.9 | 58.3 | +1.0% | | Total Segment Adjusted OIBDA | 436.2 | 394.0 | +10.7% | Management's Discussion and Analysis (MD&A) Management analysis indicates a 1.4% year-over-year revenue decrease, but a strong 10.7% Adjusted OIBDA growth to $406.6 million, primarily due to cost control measures, with Liberty Puerto Rico's revenue decline offset by OIBDA growth from cost reductions, while C&W Caribbean and Panama segments performed steadily, and the company's total debt is $8.25 billion with a 7.4% weighted average interest rate, reduced to 6.5% after derivatives, maintaining sufficient liquidity for the next 12 months but facing refinancing risks Results of Operations Analysis Operating profit increased by $35.3 million in Q1 2025, driven by organic operating cost reductions of $60.2 million, which offset a $25.4 million organic revenue decline, with C&W Caribbean improving OIBDA margin through cost savings and Liberty Puerto Rico's OIBDA margin increasing despite revenue decline due to lower integration and operating costs, while net loss was primarily due to non-operating derivative losses - In Q1 2025, the company's operating profit increased by $35.3 million year-over-year, primarily due to an organic decrease in operating costs of $60.2 million, which effectively offset an organic decrease in revenue of $25.4 million167 Consolidated Adjusted OIBDA | Item | 2025 Q1 (million USD) | 2024 Q1 (million USD) | | :--- | :--- | :--- | | Operating Profit | 128.1 | 92.8 | | Add: Share-based Compensation Expense | 34.0 | 27.0 | | Add: Depreciation and Amortization | 228.8 | 247.8 | | Add: Impairment, Restructuring, and Other Items | 15.7 | 6.6 | | Consolidated Adjusted OIBDA | 406.6 | 374.2 | - C&W Caribbean segment: Revenue was flat year-over-year, but Adjusted OIBDA margin significantly improved from 41.4% to 47.6%, primarily due to cost savings measures, especially reductions in personnel and network-related costs172178203 - Liberty Puerto Rico segment: Revenue decreased by 8.8% year-over-year, an organic decline of $38.3 million, mainly due to customer churn and ARPU decline from mobile network migration issues; however, Adjusted OIBDA margin improved from 21.1% to 27.3%, primarily due to higher integration costs in the prior year period and current period reductions in personnel and network costs172184210 - Net loss was primarily driven by non-operating items, specifically unrealized losses of $51.1 million and realized losses of $8.2 million on derivative instruments, a stark contrast to gains in the prior year period221 Liquidity and Capital Resources As of March 31, 2025, the company held $575.5 million in cash and equivalents, with $514.4 million held by borrowing groups potentially subject to restrictions, total debt of $8.25 billion with $539 million current, a 7.4% weighted average interest rate reduced to 6.5% after derivatives, and Q1 2025 capital expenditures of $120.3 million (11.1% of revenue), with financing activities providing $3.4 million net cash - As of March 31, 2025, the company held $575.5 million in cash and cash equivalents, of which $514.4 million was held by various borrowing groups and may be subject to tax, legal, or other restrictions233234 - The company's total debt is $8.25 billion, with $539 million classified as current liabilities due within one year; the weighted average interest rate is 7.4%, which is reduced to 6.5% after derivative hedges244245 - In Q1 2025, the company's capital expenditures were $120.3 million, representing 11.1% of revenue, lower than $134.9 million (12.3% of revenue) in the prior year period250 - Financing activities provided $3.4 million in net cash during the quarter, primarily from $62 million in net debt borrowings, partially offset by $24 million in financing costs and $29 million in non-controlling interest distributions, compared to a net outflow of $225.7 million in the prior year period251 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange and interest rate risks, with 95% of total debt fixed or capped rate as of March 31, 2025, managed through derivatives, and sensitivity analysis showing a 100 basis point interest rate change would impact C&W and Puerto Rico derivative fair values by approximately $115 million and $16 million respectively - The company hedges interest rate risk through interest rate derivative contracts, with 95% of its total debt being fixed-rate or capped-rate as of March 31, 2025258 - Sensitivity analysis indicates that a hypothetical 100 basis point instantaneous change in relevant benchmark interest rates would result in an approximate $115 million change in the fair value of C&W's interest rate derivative contracts and approximately $16 million for Liberty Puerto Rico's contracts260261 Projected Net Cash Flows from Derivatives (Million USD) | Period | Interest Rate Related Net (Receipts) | Other Net Payments | Total | | :--- | :--- | :--- | :--- | | Remaining 2025 | (30.9) | 11.6 | (19.3) | | 2026 | (65.8) | 1.1 | (64.7) | | 2027 | (44.0) | — | (44.0) | | 2028 | (20.1) | — | (20.1) | | 2029 | (1.7) | — | (1.7) | | Thereafter | (3.9) | — | (3.9) | | Total | (166.4) | 12.7 | (153.7) | Controls and Procedures The company's material weaknesses in internal control over financial reporting, disclosed in its 2024 annual report, remain unremediated as of March 31, 2025, leading management to conclude that disclosure controls and procedures are ineffective, with ongoing remediation efforts including manual controls, new payroll technology, third-party IT experts, and employee training - Management confirms that the material weaknesses in internal control over financial reporting, as disclosed in the 2024 10-K report, have not been fully remediated266 - Due to the unremediated material weaknesses, company executives concluded that disclosure controls and procedures remained ineffective as of March 31, 2025266 - The company is implementing remediation measures, including increasing manual controls, introducing payroll technology solutions, engaging third-party experts to address IT control issues, and training employees on risk and control concepts267270 Part II OTHER INFORMATION This section provides additional information not covered in the financial statements, including details on equity securities sales and the use of proceeds Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any Class A or Class C common shares in Q1 2025, with $242 million remaining authorized under the share repurchase program as of March 31, 2025 - The company did not repurchase any Class A or Class C common shares during the three months ended March 31, 2025274 - As of March 31, 2025, $242 million remained authorized for repurchase under the share repurchase program274