Liberty Latin America Ltd.
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(a) | Except as otherwise noted, the amounts presented for each C&W jurisdiction include revenue from residential and B2B operations. |
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(b) | The amounts represent wholesale services revenue from various jurisdictions across the Caribbean and Latin America, primarily related to the sale and lease of telecom capacity on C&W’s sub-sea and terrestrial networks. |
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(c) | The amounts relate to a number of countries in which C&W has less significant operations, all but one of which are located in Latin America and the Caribbean. In addition, these amounts include C&W intercompany eliminations. |
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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
See the Glossary of defined terms at the beginning of this Quarterly Report on Form 10-Q.
The following discussion and analysis, which should be read in conjunction with our 2022 Form 10-K and the condensed consolidated financial statements and the discussion and analysisaccompanying notes included in our 2017Part I, Item 1 of this Quarterly Report on Form 10-K,10-Q, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
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• | •Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. •Overview. This section provides a general description of our business and recent events. •Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three and six months ended June 30, 2023 and 2022. • This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. |
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• | Overview. This section provides a general description of our business and recent events.
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• | Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three months ended March 31, 2018 and 2017.
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• | Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments. |
The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Latin America or collectively to Liberty Latin America and its subsidiaries.
Unless otherwise indicated, convenience translations into U.S. dollars are calculatedoperational data (including subscriber statistics) is presented as of March 31, 2018.June 30, 2023.
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report on Form 10-Q are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 3. Quantitative and Qualitative Disclosures About Market Riskand Item 4. Controls and Procedures may contain forward-looking statements, including statements regarding: our business, product,products, foreign currency and finance strategies in 2018; the anticipated rate and cost of our recovery in certain markets from the impact of Hurricanes Maria and Irma;strategies; our property and equipment additions in 2018;additions; grants or renewals of licenses; subscriber growth and retention rates; changes in competitive, regulatory and economic factors; our anticipated integration plans, synergies, opportunities and integration costs in Puerto Rico following the timingAT&T Acquisition, in Costa Rica following the Liberty Telecomunicaciones Acquisition and impacts of proposed transactions; anticipatedin Panama following the Claro Panama Acquisition; changes in our revenue, costs, or growth rates; debt levels; our liquidity;liquidity and our ability to access the liquidity of our subsidiaries; interest rate risks; credit risks; internal control over financial reporting and remediation of material weaknesses; foreign currency risks; target leverage levels;compliance with debt, financial and other covenants; our future projected contractual commitmentssources and cash flows;uses of cash; and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In evaluating these statements, you should consideraddition to the risks and uncertainties discussedrisk factors described in Part I, Item 1A in our 20172022 Form 10-K, as well as the following list ofare some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
•economic and business conditions and industry trends in the countries in which we operate;
•the competitive environment in the industries in the countries in which we operate, including competitor responses to our products and services;
•fluctuations in currency exchange rates, inflation rates and interest rates;
•our relationships with third-party programming providers and broadcasters, some of which are also offering content directly to consumers, and our ability to maintain access to desirable programming on acceptable economic terms;
•our relationships with suppliers and licensors and the ability to maintain equipment, software and certain services;
•instability in global financial markets, including sovereign debt issues and related fiscal reforms;
•our ability to obtain additional financing and generate sufficient cash to meet our debt obligations;
•the impact of restrictions contained in certain of our subsidiaries’ debt instruments;
•consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
•changes in consumer television viewing preferences and habits;habits, including on mobile devices that function on various operating systems and specifications, limited bandwidth, and different processing power and screen sizes;
•customer acceptance of our existing service offerings, including our video, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
•our ability to manage rapid technological changes;
•the impact of 5G and wireless technologies on broadband internet;
•our ability to maintain or increase the number of subscriptions to our video, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;household and mobile subscriber;
•our ability to provide satisfactory customer service, including support for new and evolving products and services;
•our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
•the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
•changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings;
•government intervention that requires opening our broadband distribution networks to competitors;
•our ability to renew necessary regulatory licenses, concessions or other operating agreements and to otherwise acquire future spectrum or other licenses that we need to offer new mobile data or other technologies or services;
•our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions;
•our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from and implement our business plan with respect to the businesses we have acquired or that we expect to acquire;acquire, such as with respect to the AT&T Acquisition, the Liberty Telecomunicaciones Acquisition, and the Claro Panama Acquisition;
•changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.S. or in other countries in which we operate and the results of any tax audits or our affiliates operate;tax disputes;
•changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks;
•the ability of suppliers and vendors, (including ourincluding third-party wireless networkchannel providers under our MVNO arrangement)and broadcasters, to timely deliver quality products, equipment, software, services and access;
•the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;
•uncertainties inherent in the development and integration of new business lines and business strategies;
•our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with our network extension and upgrade programs;
•the availability of capital for the acquisition and/or development of telecommunications networks and services;services, including property and equipment additions;
certain factors outside of our control that may impact the timing and extent of the restoration of our networks and services in Puerto Rico and certain of our C&W markets following Hurricanes Irma and Maria;
•problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;acquire, such as with respect to the AT&T Acquired Entities, the Liberty Telecomunicaciones Acquisition and the Claro Panama Acquisition;
•our ability to profit from investments in joint ventures that we do not solely control;
•the effect of any of the identified material weaknesses in our internal control over financial reporting;
•piracy, targeted vandalism against our networks, and cybersecurity threats or other security breaches, including the leakage of sensitive customer data;data, which could harm our business or reputation;
•the outcome of any pending or threatened litigation;
•the loss of key employees and the availability of qualified personnel;
•the effect of any strikes, work stoppages or other industrial actions that could affect our operations;
•changes in the nature of key strategic relationships with partners and joint venturers;
•our equity capital structure;
•our ability to realize the full value of our intangible assets;
•changes in and compliance with applicable data privacy laws, rules, and regulations;
•our ability to recoup insurance reimbursements and settlements from third-party providers;
•our ability to comply with anti-corruption laws and regulations, such as the FCPA;
•our ability to comply with economic and trade sanctions laws, such as the U.S. Treasury Department’s OFAC;
•the impacts of climate change such as rising sea levels or increasing frequency and intensity of certain weather phenomena; and
•events that are outside of our control, such as political conditions and unrest in international markets, terrorist attacks, malicious human acts, hurricanes and other natural disasters, pandemics, including the COVID-19 pandemic, and other similar events.
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report on Form 10-Q are subject to a significant degree of risk. These forward-looking statements and the above described risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q,, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are an international provider of video, broadband internet, fixed-line telephonyfixed, mobile and mobilesubsea telecommunications services. We provide,
A.residential and B2B communications services in (i) 18in:
i.over 20 countries primarily inacross Latin America and the Caribbean through two of our reportable segments, C&W (ii) Chile through VTRCaribbean and (iii) C&W Panama;
ii.Puerto Rico, through our reportable segment Liberty Puerto Rico. C&W also providesRico; and
iii.Costa Rica, through our reportable segment Liberty Costa Rica.
B.through our reportable segment Liberty Networks, (i) B2B communicationenterprise services in certain other countries in Latin America and the Caribbean and (ii) wholesale communication services over its sub-seaour subsea and terrestrial fiber optic cable networks that connect overapproximately 40 markets in that region.
Operations
As described below, Hurricanes Irma and Maria caused significant damage to our operations in the Impacted Markets, as defined below, resulting in disruptions to our telecommunications services. As we are still in the process of assessing the operational impacts of the hurricanes in the Impacted Markets, we are unable to accurately estimate our homes passed and subscriber numbers as of March 31, 2018. Accordingly, the March 31, 2018 subscriber numbers for the Impacted Markets reflect subscriber amounts as of August 31, 2017 as adjusted through March 31, 2018 for (i) net voluntary disconnects and (ii) disconnects related to customers whose accounts are delinquent. The Liberty Puerto Rico homes passed reflect the August 31, 2017 levels adjusted for approximately 30,000 homes in geographic areas we may not rebuild.
At March 31, 2018,June 30, 2023, we (i) owned and operated fixed networks that passed 6,457,9004,407,200 homes and served 5,231,000 revenue generating units (RGUs),3,874,200 RGUs, comprising 2,146,8001,770,200 broadband internet subscribers, 1,691,700 video subscribers and 1,392,5001,165,100 fixed-line telephony subscribers and 938,900 video subscribers and (ii) served 3,620,4008,011,500 mobile subscribers.
Hurricane Impact UpdateTransactions
Chile JV.In September 2017, Hurricanes Irma and Maria impacted a numberOctober 2022, we completed the formation of the Chile JV by contributing the Chile JV Entities into the Chile JV. Subsequent to the formation of the Chile JV, we began accounting for our markets50% interest in the Caribbean, resulting in varying degrees of damage to homes, businesses and infrastructure in these markets. The most extensive damage occurred in Puerto Rico and certain markets within our C&W reportable segment (collectively, the Impacted Markets). We continue to remain uncertainChile JV as an equity method investment. Prior to the extent and ultimate completion of our restoration and reconnection efforts in the Impacted Markets.
We maintain an integrated group property and business interruption insurance program covering all Impacted Markets up to a limit of $75 million per occurrence, which is generally subject to $15 million per occurrence of self-insurance. Although we are continuing to assess the alternatives under our insurance policy, we currently believe that the hurricanes will result in at least two occurrences. This policy is subject to the normal terms and conditions applicable to this type of insurance. We expect that the insurance recovery will only cover a portionformation of the incurred losses of each of our impacted businesses.
During the three months ended March 31, 2018, we receivedChile JV, VTR was a net advance payment from our third-party insurance provider of $30 million associated with the initial insurance claims filed in connection with damages sustained from the hurricanes. Untilwholly owned subsidiary. As such, claims are legally settled, the advance is included in other accrued and current liabilities in our condensed consolidated balance sheet.
Liberty Puerto Rico. In Puerto Rico, the damage caused by Hurricane Maria and, to a lesser extent Hurricane Irma, was extensive and widespread. Individuals and businesses across Puerto Rico continue to deal with significant challenges caused by the severe damage to essential infrastructure, including damage to Puerto Rico’s power supply and transmission system. Similarly, Liberty Puerto Rico’s broadband communications network suffered extensive damage. Asstatements of March 31, 2018, we have been able to restore service to approximately 560,000 RGUs of our total estimated 723,100 RGUs at Liberty Puerto Rico. Additionally, we estimate that approximately $130 millionof property and equipment additions will be required to restore nearly all of Liberty Puerto Rico’s broadband communications network, of which approximately $112 million has been incurred following the hurricanesthrough March 31, 2018.
While the negative impacts from the hurricanes are declining as the network is restored and customers are reconnected, we expect that the adverse impacts of the hurricanes on Liberty Puerto Rico’s revenue and Adjusted OIBDA will continue through 2018and beyond. The severity of the hurricanes’ impact on Liberty Puerto Rico’s future revenue and Adjusted OIBDA will be influenced in part by the following uncertainties:
the length of time that it will take to restore Puerto Rico’s power and transmission system and to fully restore our network;
the number of people that will choose to leave Puerto Rico for an extended period or permanently; and
the ability of the Puerto Rico and U.S. governments to effectively oversee the recovery process in Puerto Rico.
In terms of liquidity for Liberty Puerto Rico, the cash provided by its operations was a significant source of pre-hurricane liquidity. As a result of the hurricane impacts, we do not expect Liberty Puerto Rico will generate positive cash from operations, inclusive of capital expenditures, until at least the latter half of 2018. In this regard, Liberty Puerto Rico’s liquidity needs are being funded by the up to $60 million LCPR Equity Commitment from Liberty Latin America and Searchlight, $45 million of which has been provided during 2018, including $20 million subsequent to March 31, 2018, and an insurance advance of $35 million ($30 million through a third-party insurance provider and the remainder through a captive insurance subsidiary). Future liquidity sources are expected to include further insurance proceeds, the remaining portion of the LCPR Equity Commitment, as applicable, through December 31, 2018 of up to $15 million and cash from operations. For additional information regardingflows for the LCPR Equity Commitment, see Material Changes in Financial Condition below. While there are still uncertainties with respect to Liberty Puerto Rico’s recovery from the hurricanes, and no assurance can be given as to the ultimate amount or timing of liquidity to be received from cash from operations or insurance proceeds, we expect these existing and potential sources of liquidity will be sufficient to satisfy Liberty Puerto Rico’s liquidity requirements over the next twelve months.2022 periods include VTR.
C&W. C&W offers services over fixed and mobile networks, and portions of these networks in C&W’s Impacted Markets were significantly damaged as a result of the hurricanes. The most notable markets that continue to be impacted are the British Virgin Islands and Dominica. Services to most of our fixed-line customers in these markets have not yet been restored. While mobile services have been largely restored in C&W’s Impacted Markets, we are still in the process of completing the restoration of our mobile network infrastructure. In addition to network damage, these markets are also dealing with extensive damage to homes, businesses and essential infrastructure.
We currently estimate that approximately $50 million of property and equipment additions will be required to restorenearly all of the damaged networks in C&W’s Impacted Markets, of which approximately $21 millionhas been incurred following the hurricanesthrough March 31, 2018. The negative impacts of the hurricanes are declining as the networks are restored and customers are reconnected, and we do not expect there to be a material impact from hurricanes on C&W’s revenue and Adjusted OIBDA during 2018.
Material Changes in Results of Operations
The comparability of our operating results during the three and six months ended June 30, 2023 and 2022 is affected by an acquisition, a disposition and FX. As we use the term, “organic” changes exclude FX and the impacts of acquisitions and disposals, each as further discussed below.
In the following discussion, we quantify the estimated impact of acquisitions (the Acquisition Impact)impacts on our operating results. The Acquisition Impact represents our estimate of the difference between the operating results of the periods under comparison that isare attributable to an acquisition. Accordingly,acquisitions and disposals. We (i) acquired América Móvil’s operations in Panama during July 2022 and (ii) in connection with the following discussion, (i)formation of the Chile JV, disposed of the Chile JV Entities in October 2022. With respect to acquisitions, organic increaseschanges and the calculations of our organic change percentages exclude the operating results of an acquired entity during the first 12 months following the date of acquisitionacquisition. With respect to disposals, the prior-year operating results of disposed entities are excluded from organic changes and (ii) the calculationcalculations of our organic change percentages excludeto the Acquisition Impact of such entity.same extent that those operations are not included in the current year.
Changes in foreign currency exchange rates may have a significant impact on our operating results, as VTRLiberty Costa Rica and certain entities within C&W have functional currencies other than the U.S. dollar. Our primary exposure to foreign currency translation effects (FX) risk during 2018 was to the Chilean peso as 29.0% of our revenue during the three months ended March 31, 2018 was derived from VTR, whose functional currency is the Chilean peso. In addition, our operating results are impacted by changes in the exchange rates for other local currencies inLatin America and the Caribbean. The impacts to the various components of our results of operations that are attributable to changes in FX are highlighted below. For information concerning our foreign currency risks and applicable foreign currency exchange rates, see Item 3. Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Rates below.
The amounts presented and discussed below represent 100% of the revenue and Adjusted OIBDAexpenses of each reportable segment and our corporate operations, as further discussed in note 16 to our condensed consolidated financial statements.operations. As we have the ability to control Liberty Puerto Rico and certain subsidiaries of C&W that are not wholly-owned, we include 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of (i) certain subsidiaries of C&W and Liberty Puerto Rico, and certain subsidiaries of C&W(ii) Liberty Costa Rica are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations.
Prior toOn January 1, 2023, the Split-Off,B2B Costa Rican operations within our Liberty Global allocatedNetworks segment was acquired by our Liberty Costa Rica segment. This acquisition did not have a portion of their corporate function costs to us, based primarilysignificant impact on the estimated percentagefinancial results of time spent by corporate personnel providing services to us. Such costs were not intended to reflect the costs of operating as a standalone public company. Accordingly, our corporate-related SG&A costs have increased significantly during 2018, as compared with 2017, as a result of operating as a standalone company and incurring certain public company-related costs. These costs Liberty Networks or Liberty Costa Rica segments.
include executive employee and board of directors expenses; insurance; costs related to the compliance with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002); and costs for financial reporting, tax administration, human resources functions and centralization of certain other corporate functions. These increases in costs are inclusive of costs
that Liberty Global charges us in connection with certain of the Split-Off Agreements, as further described in note 11 to our condensed consolidated financial statements.
We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our reportable segments. Any cost increases that we are not able to pass on to our subscribers would result in increased pressure on our operating margins.
Operating Income or Loss
The following tables set forth the organic and non-organic changes in the components of operating income or loss during the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022.
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| | | | | | | Increase (decrease) from: |
| Three months ended June 30, | | Increase (decrease) | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Revenue | $ | 1,122.7 | | | $ | 1,216.2 | | | $ | (93.5) | | | $ | 25.0 | | $ | 25.0 | | $ | 34.8 | | | $ | (150.0) | | | $ | (3.3) | |
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below): | | | | | | | | | | | | | |
Programming and other direct costs of services | 233.4 | | | 300.8 | | | (67.4) | | | 5.2 | | | 8.9 | | | (45.5) | | | (36.0) | |
Other operating costs and expenses | 468.5 | | | 486.4 | | | (17.9) | | | 10.1 | | | 25.1 | | | (70.8) | | | 17.7 | |
Depreciation and amortization | 240.5 | | | 213.3 | | | 27.2 | | | 4.9 | | | 8.5 | | | — | | | 13.8 | |
Impairment, restructuring and other operating items, net | 40.8 | | | 568.6 | | | (527.8) | | | — | | | — | | | (2.7) | | | (525.1) | |
| 983.2 | | | 1,569.1 | | | (585.9) | | | 20.2 | | | 42.5 | | | (119.0) | | | (529.6) | |
Operating income (loss) | $ | 139.5 | | | $ | (352.9) | | | $ | 492.4 | | | $ | 4.8 | | | $ | (7.7) | | | $ | (31.0) | | | $ | 526.3 | |
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| | | | | | | Increase (decrease) from: |
| Six months ended June 30, | | Increase (decrease) | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Revenue | $ | 2,226.5 | | | $ | 2,432.4 | | | $ | (205.9) | | | $ | 39.0 | | | $ | 69.6 | | | $ | (320.8) | | | $ | 6.3 | |
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below): | | | | | | | | | | | | | |
Programming and other direct costs of services | 476.8 | | | 604.2 | | | (127.4) | | | 8.2 | | | 17.8 | | | (100.0) | | | (53.4) | |
Other operating costs and expenses | 951.6 | | | 992.7 | | | (41.1) | | | 15.5 | | | 50.2 | | | (143.8) | | | 37.0 | |
Depreciation and amortization | 475.1 | | | 427.4 | | | 47.7 | | | 7.6 | | | 17.0 | | | — | | | 23.1 | |
Impairment, restructuring and other operating items, net | 70.5 | | | 576.4 | | | (505.9) | | | 8.2 | | | — | | | (3.6) | | | (510.5) | |
| 1,974.0 | | | 2,600.7 | | | (626.7) | | | 39.5 | | | 85.0 | | | (247.4) | | | (503.8) | |
Operating income (loss) | $ | 252.5 | | | $ | (168.3) | | | $ | 420.8 | | | $ | (0.5) | | | $ | (15.4) | | | $ | (73.4) | | | $ | 510.1 | |
As set forth in the tables above, we reported operating income during the three and six months ended June 30, 2023, as compared to operating losses during the corresponding periods in 2022. These changes are primarily due to decreases associated with impairment, restructuring and other operating items, net, the disposition of the Chile JV Entities and organic changes. For further discussion and analysis of organic changes in revenue and costs, see Revenue, Programming and Other Direct Costs of Services, and Other Operating Costs sections below.
Consolidated Adjusted OIBDA
On a consolidated basis, Adjusted OIBDA is a non-U.S. GAAP measure. Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. Adjusted OIBDA is also a key factor that is used by our internal decision makers to determine how to allocate resources to segments. Our internal decision makers believe Adjusted OIBDA is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different countries in which we operate. We believe our Adjusted OIBDA measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measures may not be directly comparable to similar measures used by other public companies. Adjusted OIBDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income or loss.
A reconciliation of total operating income (loss), the nearest U.S. GAAP measure, to Adjusted OIBDA on a consolidated basis, is presented below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| in millions |
| | | | | | | |
Operating income (loss) | $ | 139.5 | | | $ | (352.9) | | | $ | 252.5 | | | $ | (168.3) | |
Share-based compensation expense | 24.5 | | | 31.8 | | | 53.7 | | | 61.8 | |
Depreciation and amortization | 240.5 | | | 213.3 | | | 475.1 | | | 427.4 | |
Impairment, restructuring and other operating items, net | 40.8 | | | 568.6 | | | 70.5 | | | 576.4 | |
Consolidated Adjusted OIBDA | $ | 445.3 | | | $ | 460.8 | | | $ | 851.8 | | | $ | 897.3 | |
The following tables set forth the organic and non-organic changes in Adjusted OIBDA during the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| C&W Caribbean | | C&W Panama | | Liberty Networks | | Liberty Puerto Rico | | Liberty Costa Rica | | VTR | | Corporate | | Intersegment eliminations | | Consolidated |
| in millions |
Adjusted OIBDA for the three months ending: | | | | | | | | | | | | | | | | | |
June 30, 2022 | $ | 134.5 | | | $ | 44.4 | | | $ | 75.1 | | | $ | 146.1 | | | $ | 35.6 | | | $ | 37.9 | | | $ | (12.8) | | | $ | — | | | $ | 460.8 | |
Organic changes related to: | | | | | | | | | | | | | | | | | |
Revenue | (0.1) | | | 4.4 | | | 4.4 | | | (10.8) | | | 0.8 | | | — | | | 0.1 | | | (2.1) | | | (3.3) | |
Programming and other direct costs | 12.9 | | | 2.0 | | | (2.5) | | | 18.9 | | | 5.1 | | | — | | | — | | | (0.4) | | | 36.0 | |
Other operating costs and expenses | (1.3) | | | 7.4 | | | (4.5) | | | (12.9) | | | (1.2) | | | — | | | (10.9) | | | 2.5 | | | (20.9) | |
Non-organic changes related to: | | | | | | | | | | | | | | | | | |
FX | 0.3 | | | — | | | (0.3) | | | — | | | 9.8 | | | — | | | — | | | — | | | 9.8 | |
Acquisition (disposition), net | — | | | 0.8 | | | — | | | — | | | — | | | (37.9) | | | — | | | — | | | (37.1) | |
June 30, 2023 | $ | 146.3 | | | $ | 59.0 | | | $ | 72.2 | | | $ | 141.3 | | | $ | 50.1 | | | $ | — | | | $ | (23.6) | | | $ | — | | | $ | 445.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| C&W Caribbean | | C&W Panama | | Liberty Networks | | Liberty Puerto Rico | | Liberty Costa Rica | | VTR | | Corporate | | Intersegment eliminations | | Consolidated |
| in millions |
Adjusted OIBDA for the six months ending: | | | | | | | | | | | | | | | | | |
June 30, 2022 | $ | 264.4 | | | $ | 84.9 | | | $ | 137.7 | | | $ | 286.7 | | | $ | 65.8 | | | $ | 84.4 | | | $ | (26.6) | | | $ | — | | | $ | 897.3 | |
Organic changes related to: | | | | | | | | | | | | | | | | | |
Revenue | (2.3) | | | 7.7 | | | 9.0 | | | (11.7) | | | 6.3 | | | — | | | 0.9 | | | (3.6) | | | 6.3 | |
Programming and other direct costs | 29.6 | | | (1.1) | | | (4.1) | | | 23.9 | | | 6.0 | | | — | | | — | | | (0.9) | | | 53.4 | |
Other operating costs and expenses | (6.0) | | | 9.4 | | | (5.9) | | | (23.2) | | | 1.7 | | | — | | | (18.3) | | | 4.5 | | | (37.8) | |
Non-organic changes related to: | | | | | | | | | | | | | | | | | |
FX | 0.8 | | | — | | | (0.9) | | | — | | | 15.5 | | | — | | | — | | | — | | | 15.4 | |
Acquisition (disposition), net | — | | | 1.6 | | | — | | | — | | | — | | | (84.4) | | | — | | | — | | | (82.8) | |
June 30, 2023 | $ | 286.5 | | | $ | 102.5 | | | $ | 135.8 | | | $ | 275.7 | | | $ | 95.3 | | | $ | — | | | $ | (44.0) | | | $ | — | | | $ | 851.8 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA Margin of each of our reportable segments:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| % |
| | | | | | | |
C&W Caribbean | 41.1 | | | 37.8 | | | 40.3 | | | 37.2 | |
C&W Panama | 32.6 | | | 31.4 | | | 29.6 | | | 31.6 | |
Liberty Networks | 60.9 | | | 64.5 | | | 59.7 | | | 61.5 | |
Liberty Puerto Rico | 40.1 | | | 40.3 | | | 38.4 | | | 39.3 | |
Liberty Costa Rica | 37.1 | | | 33.0 | | | 36.0 | | | 30.5 | |
Adjusted OIBDA Margin is impacted by organic changes in revenue, programming and other direct costs of services and other operating costs and expenses. Within our Liberty Puerto Rico, Liberty Costa Rica, and for the 2022 periods, C&W Panama segments, we incurred aggregate integration costs of $5 million and $10 million during the three and six months ended June 30, 2023, respectively, and $6 million and $11 million during the three and six months ended June 30, 2022, respectively.
Revenue
AllMost of our reportable segments derive their revenue primarily from (i) residential broadband communicationsfixed services, including video, broadband internet and fixed-line telephony, services, (ii) with the exception of Liberty Puerto Rico, residential mobile services and (iii) B2B communicationsenterprise services. For detailed information regarding the composition of our reportable segments, see note 16 to our condensed consolidated financial statements.Liberty Networks also provides wholesale services over its subsea and terrestrial fiber optic cable networks.
While not specifically discussed in the below explanations of the changes in the revenue, of our reportable segments, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our RGUs and/or average monthly subscription revenue per average fixed RGU or mobile subscriber, as applicable, (ARPU).
ARPU.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of RGUs or mobile subscribers during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (i) changes in prices, (ii) changes in bundling or promotional discounts, (iii) changes in the tier of services selected, (iv) variances in subscriber usage patterns and (v) the overall mix of fixed and mobile products within a segment during the period. In the following discussion, we discuss ARPU changes in terms of the net impact of the above factors on the ARPU that is derived from our video, broadband internet, fixed-line telephony and mobile products. At Liberty Puerto Rico, variances
The following tables set forth the organic and non-organic changes in revenue by reportable segment during the three and six months ended March 31, 2018,June 30, 2023, as compared to the corresponding periodperiods in 2017, were significantly impacted by Hurricanes Maria and Irma.2022.
The following table sets forth revenue by reportable segment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Acquisition (disposition), net | | Organic |
| in millions |
| | | | | | | | | | | |
C&W Caribbean | $ | 356.3 | | | $ | 355.6 | | | $ | 0.7 | | | $ | 0.8 | | | $ | — | | | $ | (0.1) | |
C&W Panama | 180.8 | | | 141.6 | | | 39.2 | | | — | | | 34.8 | | | 4.4 | |
Liberty Networks | 118.6 | | | 116.4 | | | 2.2 | | | (2.2) | | | — | | | 4.4 | |
Liberty Puerto Rico | 352.0 | | | 362.8 | | | (10.8) | | | — | | | — | | | (10.8) | |
Liberty Costa Rica | 135.2 | | | 108.0 | | | 27.2 | | | 26.4 | | | — | | | 0.8 | |
VTR | — | | | 150.0 | | | (150.0) | | | — | | | (150.0) | | | — | |
Corporate | 5.6 | | | 5.5 | | | 0.1 | | | — | | | — | | | 0.1 | |
Intersegment eliminations | (25.8) | | | (23.7) | | | (2.1) | | | — | | | — | | | (2.1) | |
Total | $ | 1,122.7 | | | $ | 1,216.2 | | | $ | (93.5) | | | $ | 25.0 | | | $ | (115.2) | | | $ | (3.3) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Acquisition (disposition), net | | Organic |
| in millions |
| | | | | | | | | | | |
C&W Caribbean | $ | 710.1 | | | $ | 710.4 | | | $ | (0.3) | | | $ | 2.0 | | | $ | — | | | $ | (2.3) | |
C&W Panama | 346.1 | | | 268.8 | | | 77.3 | | | — | | | 69.6 | | | 7.7 | |
Liberty Networks | 227.3 | | | 224.0 | | | 3.3 | | | (5.7) | | | — | | | 9.0 | |
Liberty Puerto Rico | 717.8 | | | 729.5 | | | (11.7) | | | — | | | — | | | (11.7) | |
Liberty Costa Rica | 264.4 | | | 215.4 | | | 49.0 | | | 42.7 | | | — | | | 6.3 | |
VTR | — | | | 320.8 | | | (320.8) | | | — | | | (320.8) | | | — | |
Corporate | 12.0 | | | 11.1 | | | 0.9 | | | — | | | — | | | 0.9 | |
Intersegment eliminations | (51.2) | | | (47.6) | | | (3.6) | | | — | | | — | | | (3.6) | |
Total | $ | 2,226.5 | | | $ | 2,432.4 | | | $ | (205.9) | | | $ | 39.0 | | | $ | (251.2) | | | $ | 6.3 | |
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 585.5 |
| | $ | 575.6 |
| | $ | 9.9 |
| | 1.7 |
|
VTR | 263.8 |
| | 229.3 |
| | 34.5 |
| | 15.0 |
|
Liberty Puerto Rico | 61.8 |
| | 106.7 |
| | (44.9 | ) | | (42.1 | ) |
Intersegment eliminations | (1.2 | ) | | (0.7 | ) | | (0.5 | ) | | N.M. |
|
Total | $ | 909.9 |
| | $ | 910.9 |
| | $ | (1.0 | ) | | (0.1 | ) |
N.M. — Not Meaningful.
Consolidated. The decreaseC&W Caribbean. during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes a decrease of $45 million at Liberty Puerto Rico primarily attributable to the hurricanes, and increases of $10 million and $23 million attributable to the impacts of the C&W Carve-out Acquisition and FX, respectively. Excluding the effects of the C&W Carve-out Acquisition and FX, revenue decreased $34 million or 3.7%. The organic decrease includes declines of $45 million and $1 million at Liberty Puerto Rico and C&W, respectively, and an increase of $13 million at VTR, as further discussed below.
As further described in notes 2 and 3 to our condensed consolidated financial statements, we adopted ASU 2014-09 effective January 1, 2018 using the cumulative effect transition method. The impact to revenue during three months ended March 31, 2018 was not material.
C&W. C&W’sCaribbean’s revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 121.4 | | | $ | 119.6 | | | $ | 1.8 | | | 2 | |
Non-subscription revenue | 7.7 | | | 8.5 | | | (0.8) | | | (9) | |
Total residential fixed revenue | 129.1 | | | 128.1 | | | 1.0 | | | 1 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 81.3 | | | 77.6 | | | 3.7 | | | 5 | |
Interconnect, inbound roaming, equipment sales and other | 18.6 | | | 16.3 | | | 2.3 | | | 14 | |
Total residential mobile revenue | 99.9 | | | 93.9 | | | 6.0 | | | 6 | |
Total residential revenue | 229.0 | | | 222.0 | | | 7.0 | | | 3 | |
| | | | | | | |
B2B revenue | 127.3 | | | 133.6 | | | (6.3) | | | (5) | |
| | | | | | | |
| | | | | | | |
Total | $ | 356.3 | | | $ | 355.6 | | | $ | 0.7 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 241.3 | | | $ | 241.3 | | | $ | — | | | — | |
Non-subscription revenue | 14.7 | | | 17.6 | | | (2.9) | | | (16) | |
Total residential fixed revenue | 256.0 | | | 258.9 | | | (2.9) | | | (1) | |
Residential mobile revenue: | | | | | | | |
Service revenue | 161.4 | | | 154.1 | | | 7.3 | | | 5 | |
Interconnect, inbound roaming, equipment sales and other | 39.3 | | | 30.8 | | | 8.5 | | | 28 | |
Total residential mobile revenue | 200.7 | | | 184.9 | | | 15.8 | | | 9 | |
Total residential revenue | 456.7 | | | 443.8 | | | 12.9 | | | 3 | |
| | | | | | | |
B2B revenue | 253.4 | | | 266.6 | | | (13.2) | | | (5) | |
| | | | | | | |
| | | | | | | |
Total | $ | 710.1 | | | $ | 710.4 | | | $ | (0.3) | | | — | |
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue: | | | | | | | |
Video | $ | 42.7 |
| | $ | 40.5 |
| | $ | 2.2 |
| | 5.4 |
|
Broadband internet | 53.7 |
| | 52.8 |
| | 0.9 |
| | 1.7 |
|
Fixed-line telephony | 26.9 |
| | 29.3 |
| | (2.4 | ) | | (8.2 | ) |
Total subscription revenue | 123.3 |
| | 122.6 |
| | 0.7 |
| | 0.6 |
|
Non-subscription revenue | 21.5 |
| | 23.5 |
| | (2.0 | ) | | (8.5 | ) |
Total residential fixed revenue | 144.8 |
| | 146.1 |
| | (1.3 | ) | | (0.9 | ) |
Residential mobile revenue: | | | | | | | |
Subscription revenue | 155.1 |
| | 161.8 |
| | (6.7 | ) | | (4.1 | ) |
Non-subscription revenue | 22.1 |
| | 19.9 |
| | 2.2 |
| | 11.1 |
|
Total residential mobile revenue | 177.2 |
| | 181.7 |
| | (4.5 | ) | | (2.5 | ) |
Total residential revenue | 322.0 |
| | 327.8 |
| | (5.8 | ) | | (1.8 | ) |
B2B revenue: | | | | | | | |
Non-subscription revenue | 203.9 |
| | 201.4 |
| | 2.5 |
| | 1.2 |
|
Sub-sea network revenue | 59.6 |
| | 46.4 |
| | 13.2 |
| | 28.4 |
|
Total B2B revenue | 263.5 |
| | 247.8 |
| | 15.7 |
| | 6.3 |
|
Total | $ | 585.5 |
| | $ | 575.6 |
| | $ | 9.9 |
| | 1.7 |
|
The details of the changes in C&W’s&W Caribbean’s revenue during the three and six months ended March 31, 2018,June 30, 2023, as compared to the corresponding periodperiods in 2017,2022, are set forth below:below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 1.2 | | | $ | 1.2 | |
ARPU (b) | 0.7 | | | (1.9) | |
Decrease in residential fixed non-subscription revenue (c) | (0.9) | | | (3.0) | |
Total increase (decrease) in residential fixed revenue | 1.0 | | | (3.7) | |
Increase in residential mobile service revenue (d) | 3.5 | | | 6.9 | |
Increase in residential mobile interconnect, inbound roaming, equipment sales and other revenue (e) | 2.3 | | | 8.5 | |
Decrease in B2B revenue (f) | (6.9) | | | (14.0) | |
| | | |
Total organic decrease | (0.1) | | | (2.3) | |
Impact of FX | 0.8 | | | 2.0 | |
Total | $ | 0.7 | | | $ | (0.3) | |
(a)The increases are primarily due to higher average broadband internet RGUs partially offset by lower average video RGUs.
(b)The changes during the comparison periods are primarily due to lower ARPU from fixed-line telephony services, due in part to fixed-mobile convergence efforts, and higher ARPU from broadband internet and video services. During the six-month comparison, lower ARPU from telephony services more than offset increases in ARPU from broadband internet and video services.
(c)The decreases are primarily attributable to the removal of certain programming rights.
(d)The increases are primarily attributable to higher average numbers of postpaid mobile subscribers, mostly due to growth from fixed-mobile convergence efforts, partially offset by a decrease in postpaid ARPU.
(e)The increases are primarily attributable to an increase in inbound roaming driven by higher traffic.
(f)The decreases are attributable to the net effect of(i) discontinuing an internet transit services arrangement at C&W Jamaica, which decrease will continue for the remainder of 2023, and (ii) higher fixed and managed services, primarily due to broadband internet services-related growth.
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 4.0 |
| | $ | — |
| | $ | 4.0 |
|
ARPU (b) | (3.7 | ) | | — |
| | (3.7 | ) |
Decrease in residential fixed non-subscription revenue (c) | — |
| | (2.0 | ) | | (2.0 | ) |
Total increase (decrease) in residential fixed revenue | 0.3 |
| | (2.0 | ) | | (1.7 | ) |
Increase (decrease) in residential mobile revenue (d) | (7.1 | ) | | 2.2 |
| | (4.9 | ) |
Increase in B2B revenue (e) | — |
| | 0.1 |
| | 0.1 |
|
Increase in B2B sub-sea network revenue (f) | — |
| | 5.1 |
| | 5.1 |
|
Total organic increase (decrease) | (6.8 | ) | | 5.4 |
| | (1.4 | ) |
Impact of the C&W Carve-out Acquisition | — |
| | 9.5 |
| | 9.5 |
|
Impact of FX | 0.8 |
| | 1.0 |
| | 1.8 |
|
Total | $ | (6.0 | ) | | $ | 15.9 |
| | $ | 9.9 |
|
| |
(a) | The increase is primarily attributable to higher broadband internet RGUs. |
| |
(b) | The decrease is primarily attributable to the net effect of (i) lower ARPU from fixed-line telephony and broadband internet services and (ii) higher ARPU from video services. |
| |
(c) | The decrease is primarily attributable to lower advertising revenue and late fees. |
| |
(d) | The decrease in mobile subscription revenue is primarily attributable to the net effect of (i) lower revenue in (a) the Bahamasassociated with a decrease in the average number of subscribers and lower ARPU, primarily driven by the commercial launch of mobile services by a competitor during the fourth quarter of 2016, and (b) Panama due primarily to a decrease in the average number of subscribers and (ii) higher revenue in Jamaica mostly due to higher ARPU. The increase in mobile non-subscription revenue is primarily attributable to an increase in revenue from handset sales.
|
| |
(e) | The increase is primarily attributable to (i) project-related revenue in managed services, driven by increases in Jamaica that were partially offset by decreases in Panama and (ii) individually insignificant changes across the markets of C&W. |
| |
(f) | The increase is primarily due to increased capacity sales on C&W’s sub-sea network to new and existing customers. |
VTR.C&W Panama. VTR’sC&W Panama’s revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 28.7 | | | $ | 24.1 | | | $ | 4.6 | | | 19 | |
Non-subscription revenue | 1.4 | | | 1.8 | | | (0.4) | | | (22) | |
Total residential fixed revenue | 30.1 | | | 25.9 | | | 4.2 | | | 16 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 65.8 | | | 43.9 | | | 21.9 | | | 50 | |
Interconnect, inbound roaming, equipment sales and other | 13.6 | | | 11.1 | | | 2.5 | | | 23 | |
Total residential mobile revenue | 79.4 | | | 55.0 | | | 24.4 | | | 44 | |
Total residential revenue | 109.5 | | | 80.9 | | | 28.6 | | | 35 | |
| | | | | | | |
B2B revenue | 71.3 | | | 60.7 | | | 10.6 | | | 17 | |
Total | $ | 180.8 | | | $ | 141.6 | | | $ | 39.2 | | | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 57.0 | | | $ | 47.8 | | | $ | 9.2 | | | 19 | |
Non-subscription revenue | 2.8 | | | 4.0 | | | (1.2) | | | (30) | |
Total residential fixed revenue | 59.8 | | | 51.8 | | | 8.0 | | | 15 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 130.8 | | | 86.9 | | | 43.9 | | | 51 | |
Interconnect, inbound roaming, equipment sales and other | 26.9 | | | 21.5 | | | 5.4 | | | 25 | |
Total residential mobile revenue | 157.7 | | | 108.4 | | | 49.3 | | | 45 | |
Total residential revenue | 217.5 | | | 160.2 | | | 57.3 | | | 36 | |
| | | | | | | |
B2B revenue | 128.6 | | | 108.6 | | | 20.0 | | | 18 | |
Total | $ | 346.1 | | | $ | 268.8 | | | $ | 77.3 | | | 29 | |
|
| | | | | | | | | | | | | |
| Three months ended March 31, | | Increase |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue: | | | | | | | |
Video | $ | 99.7 |
| | $ | 87.4 |
| | $ | 12.3 |
| | 14.1 |
Broadband internet | 96.6 |
| | 82.3 |
| | 14.3 |
| | 17.4 |
Fixed-line telephony | 34.6 |
| | 34.3 |
| | 0.3 |
| | 0.9 |
Total subscription revenue | 230.9 |
| | 204.0 |
| | 26.9 |
| | 13.2 |
Non-subscription revenue | 7.5 |
| | 7.4 |
| | 0.1 |
| | 1.4 |
Total residential fixed revenue | 238.4 |
| | 211.4 |
| | 27.0 |
| | 12.8 |
Residential mobile revenue: | | | | | | | |
Subscription revenue | 16.3 |
| | 12.6 |
| | 3.7 |
| | 29.4 |
Non-subscription revenue | 3.2 |
| | 2.3 |
| | 0.9 |
| | 39.1 |
Total residential mobile revenue | 19.5 |
| | 14.9 |
| | 4.6 |
| | 30.9 |
Total residential revenue | 257.9 |
| | 226.3 |
| | 31.6 |
| | 14.0 |
B2B revenue: | | | | | | | |
Subscription revenue | 5.6 |
| | 2.7 |
| | 2.9 |
| | 107.4 |
Non-subscription revenue | 0.3 |
| | 0.3 |
| | — |
| | — |
Total B2B revenue | 5.9 |
| | 3.0 |
| | 2.9 |
| | 96.7 |
Total | $ | 263.8 |
| | $ | 229.3 |
| | $ | 34.5 |
| | 15.0 |
The details of the changes in VTR’sC&W Panama’s revenue during the three and six months ended March 31, 2018,June 30, 2023, as compared to the corresponding periodperiods in 2017,2022, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 2.4 | | | $ | 5.5 | |
ARPU | (0.1) | | | (1.0) | |
Decrease in residential fixed non-subscription revenue | (0.6) | | | (1.5) | |
Total increase in residential fixed revenue | 1.7 | | | 3.0 | |
Increase in residential mobile service revenue (b) | 0.3 | | | 0.8 | |
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (c) | (2.4) | | | (4.5) | |
Increase in B2B revenue (d) | 4.8 | | | 8.4 | |
Total organic increase | 4.4 | | | 7.7 | |
Impact of an acquisition | 34.8 | | | 69.6 | |
Total | $ | 39.2 | | | $ | 77.3 | |
(a)Theincreases are primarily due to higher average broadband internet and video RGUs.
(b)The increases are primarily due to the net effect of (i) higher ARPU, mainly attributable to higher prepaid recharging activity, (ii) lower average numbers of prepaid mobile subscribers and (iii) higher average numbers of postpaid mobile subscribers.
(c)The decreases are mainly due to lower interconnect revenue driven by lower traffic.
(d)The increases are primarily due to (i) increases in revenue from government-related projects and (ii) higher revenue from data services. In addition, for the six-month comparison, the increase is due to higher revenue from mobile services.
Liberty Networks.Liberty Networks’ revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
B2B revenue: | | | | | | | |
Enterprise revenue | $ | 29.2 | | | $ | 28.5 | | | $ | 0.7 | | | 2 | |
Wholesale revenue | 89.4 | | | 87.9 | | | 1.5 | | | 2 | |
| | | | | | | |
Total | $ | 118.6 | | | $ | 116.4 | | | $ | 2.2 | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
B2B revenue: | | | | | | | |
Enterprise revenue | $ | 57.0 | | | $ | 56.9 | | | $ | 0.1 | | | — | |
Wholesale revenue | 170.3 | | | 167.1 | | | 3.2 | | | 2 | |
| | | | | | | |
Total | $ | 227.3 | | | $ | 224.0 | | | $ | 3.3 | | | 1 | |
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 4.1 |
| | $ | — |
| | $ | 4.1 |
|
ARPU (b) | 4.1 |
| | — |
| | 4.1 |
|
Decrease in residential fixed non-subscription revenue | — |
| | (0.5 | ) | | (0.5 | ) |
Total increase (decrease) in residential fixed revenue | 8.2 |
| | (0.5 | ) | | 7.7 |
|
Increase in residential mobile revenue (c) | 2.4 |
| | 0.6 |
| | 3.0 |
|
Increase in B2B revenue (d) | 2.4 |
| | 0.1 |
| | 2.5 |
|
Total organic increase | 13.0 |
| | 0.2 |
| | 13.2 |
|
Impact of FX | 20.5 |
| | 0.8 |
| | 21.3 |
|
Total | $ | 33.5 |
| | $ | 1.0 |
| | $ | 34.5 |
|
The details of the changes in Liberty Networks’ revenue during the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
| | | |
Increase in enterprise revenue (a) | $ | 2.1 | | | $ | 3.7 | |
Increase in wholesale revenue (b) | 2.3 | | | 5.3 | |
Total organic increase | 4.4 | | | 9.0 | |
Impact of FX | (2.2) | | | (5.7) | |
Total | $ | 2.2 | | | $ | 3.3 | |
(a)The increases are primarily attributable to (i) higher B2B connectivity revenue, (ii) growth in managed services and (iii) increases associated with sales-type leases on CPE installed on long-term customer solutions.
(b)The increases are primarily due to the net effect of (i) higher lease capacity revenue driven by an increase associated with revenue recognized on a cash basis for services provided to a significant customer, (ii) higher affiliate revenue and (iii) lower amortized prepaid capacity and operating and maintenance revenue driven by the cancellation of prepaid capacity contracts in prior periods.
| |
(a) | The increase is attributable to the net effect of (i) higher broadband internet and video RGUs and (ii) lower fixed-line telephony RGUs. |
| |
(b) | The increase is primarily due to higher ARPU from video services and an improvement in RGU mix. |
| |
(c) | The increase in mobile subscription revenue is primarily due to a higher average number of mobile subscribers. |
| |
(d) | The increase in B2B subscription revenue is primarily attributable to higher average numbers of broadband internet, video and fixed-line telephony SOHO RGUs. A portion of this increase is attributable to the conversion of certain residential subscribers to SOHO customers. |
Liberty Puerto Rico.Due to the significant impact of the hurricanes on the operations of our Liberty Puerto Rico segment, we have provided supplementary sequential information in order to provide a meaningful analysis of Liberty Puerto Rico’s business, including recovery after the hurricanes. Accordingly, Liberty Puerto Rico’s revenue by major category during each of the three months ended March 31, 2018, December 31, 2017 and March 31, 2017 is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential fixed revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 121.1 | | | $ | 115.5 | | | $ | 5.6 | | | 5 | |
Non-subscription revenue | 6.0 | | | 5.6 | | | 0.4 | | | 7 | |
Total residential fixed revenue | 127.1 | | | 121.1 | | | 6.0 | | | 5 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 102.8 | | | 114.3 | | | (11.5) | | | (10) | |
Interconnect, inbound roaming, equipment sales and other | 54.9 | | | 59.9 | | | (5.0) | | | (8) | |
Total residential mobile revenue | 157.7 | | | 174.2 | | | (16.5) | | | (9) | |
Total residential revenue | 284.8 | | | 295.3 | | | (10.5) | | | (4) | |
B2B revenue | 56.2 | | | 57.3 | | | (1.1) | | | (2) | |
Other revenue | 11.0 | | | 10.2 | | | 0.8 | | | 8 | |
Total | $ | 352.0 | | | $ | 362.8 | | | $ | (10.8) | | | (3) | |
|
| | | | | | | | | | | |
| Three months ended |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 |
| in millions |
Residential fixed revenue: | | | | | |
Subscription revenue: | | | | | |
Video | $ | 23.3 |
| | $ | 5.3 |
| | $ | 42.7 |
|
Broadband internet | 25.3 |
| | 7.8 |
| | 40.4 |
|
Fixed-line telephony | 3.5 |
| | 1.2 |
| | 6.4 |
|
Total subscription revenue | 52.1 |
| | 14.3 |
| | 89.5 |
|
Non-subscription revenue | 1.7 |
| | 0.5 |
| | 5.9 |
|
Total residential fixed revenue | 53.8 |
| | 14.8 |
| | 95.4 |
|
B2B revenue: | | | | | |
Subscription revenue | 4.3 |
| | 1.3 |
| | 6.7 |
|
Non-subscription revenue | 3.0 |
| | 0.7 |
| | 3.3 |
|
Total B2B revenue | 7.3 |
| | 2.0 |
| | 10.0 |
|
Other revenue | 0.7 |
| | 0.1 |
| | 1.3 |
|
Total | $ | 61.8 |
| | $ | 16.9 |
| | $ | 106.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 238.1 | | | $ | 231.3 | | | $ | 6.8 | | | 3 | |
Non-subscription revenue | 11.7 | | | 11.0 | | | 0.7 | | | 6 | |
Total residential fixed revenue | 249.8 | | | 242.3 | | | 7.5 | | | 3 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 206.5 | | | 231.3 | | | (24.8) | | | (11) | |
Interconnect, inbound roaming, equipment sales and other | 126.3 | | | 124.1 | | | 2.2 | | | 2 | |
Total residential mobile revenue | 332.8 | | | 355.4 | | | (22.6) | | | (6) | |
Total residential revenue | 582.6 | | | 597.7 | | | (15.1) | | | (3) | |
B2B revenue | 111.9 | | | 111.3 | | | 0.6 | | | 1 | |
Other revenue | 23.3 | | | 20.5 | | | 2.8 | | | 14 | |
Total | $ | 717.8 | | | $ | 729.5 | | | $ | (11.7) | | | (2) | |
The decreasedetails of the changes in Liberty Puerto Rico’s revenue during the three and six months ended March 31, 2018,June 30, 2023, as compared to the three months ended March 31, 2017, iscorresponding periods in 2022, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 4.4 | | | $ | 9.6 | |
ARPU (b) | 1.2 | | | (2.8) | |
Increase in residential fixed non-subscription revenue | 0.4 | | | 0.7 | |
Total increase in residential fixed revenue | 6.0 | | | 7.5 | |
Decrease in residential mobile service revenue (c) | (11.5) | | | (24.8) | |
Increase (decrease) in residential mobile interconnect, inbound roaming, equipment sales and other revenue (d) | (5.0) | | | 2.2 | |
Increase (decrease) in B2B revenue | (1.1) | | | 0.6 | |
Increase in other revenue (e) | 0.8 | | | 2.8 | |
Total | $ | (10.8) | | | $ | (11.7) | |
| | | |
| | | |
(a)The increases are primarily attributable to Hurricanes Mariahigher average broadband internet RGUs.
(b)The changes, which include the impact of credits issued to customers during the second quarter of 2022 as a result of power outages, are primarily attributable to the net effect of (i) lower ARPU from broadband internet services, driven by customer downgrades to low-tier plans, and Irma.(ii) higher ARPU from video services, as rate increases were only party offset by customer downgrades to lower ARPU plans.
(c)The table below presents changes in (i) residential fixed subscription revenuedecreases are primarily due to changes(i) lower ARPU from mobile services, primarily resulting from (a) a higher number of low-cost and discounted plans and (b) higher contract asset amortization driven by increases in handset sales and subsidy levels, and (ii) declines in the average number of RGUs and ARPU, (ii) residential fixed non-subscription revenue, (iii) B2Bprepaid mobile subscribers.
(d)The decrease for the three-month comparison is primarily due to lower inbound roaming revenue and (iv) otherlower volumes of handset sales. The increase for the six-month comparison is primarily due to the net effect of higher volumes of handset sales and lower inbound roaming revenue.
(e)The increases are primarily attributable to funds received from the FCC to continue to expand and improve our fixed network in Puerto Rico.
Liberty Costa Rica. Liberty Costa Rica’s revenue each reflectiveby major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue | $ | 39.4 | | | $ | 33.4 | | | $ | 6.0 | | | 18 | |
Non-subscription revenue | 2.6 | | | 0.8 | | | 1.8 | | | 225 | |
Total residential fixed revenue | 42.0 | | | 34.2 | | | 7.8 | | | 23 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 60.3 | | | 48.6 | | | 11.7 | | | 24 | |
Interconnect, inbound roaming, equipment sales and other | 19.1 | | | 15.6 | | | 3.5 | | | 22 | |
Total residential mobile revenue | 79.4 | | | 64.2 | | | 15.2 | | | 24 | |
Total residential revenue | 121.4 | | | 98.4 | | | 23.0 | | | 23 | |
B2B revenue | 13.8 | | | 9.6 | | | 4.2 | | | 44 | |
Total | $ | 135.2 | | | $ | 108.0 | | | $ | 27.2 | | | 25 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase |
| 2023 | | 2022 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue | $ | 77.2 | | | $ | 68.1 | | | $ | 9.1 | | | 13 | |
Non-subscription revenue | 5.1 | | | 1.6 | | | 3.5 | | | 219 | |
Total residential fixed revenue | 82.3 | | | 69.7 | | | 12.6 | | | 18 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 118.1 | | | 94.8 | | | 23.3 | | | 25 | |
Interconnect, inbound roaming, equipment sales and other | 37.1 | | | 32.1 | | | 5.0 | | | 16 | |
Total residential mobile revenue | 155.2 | | | 126.9 | | | 28.3 | | | 22 | |
Total residential revenue | 237.5 | | | 196.6 | | | 40.9 | | | 21 | |
B2B revenue | 26.9 | | | 18.8 | | | 8.1 | | | 43 | |
Total | $ | 264.4 | | | $ | 215.4 | | | $ | 49.0 | | | 23 | |
The details of the changes in Liberty Costa Rica’s revenue during the three and six months ended March 31, 2018,June 30, 2023, as compared to the three months ended December 31, 2017.corresponding periods in 2022, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | — | | | $ | 1.4 | |
ARPU (b) | (1.9) | | | (4.9) | |
Increase in residential fixed non-subscription revenue (c) | 1.4 | | | 2.8 | |
Total decrease in residential fixed revenue | (0.5) | | | (0.7) | |
Increase (decrease) in residential mobile service revenue (d) | (0.3) | | | 3.9 | |
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue | (0.3) | | | (1.2) | |
Increase in B2B revenue (e) | 1.9 | | | 4.3 | |
Total organic increase | 0.8 | | | 6.3 | |
Impact of FX | 26.4 | | | 42.7 | |
Total | $ | 27.2 | | | $ | 49.0 | |
(a)During the three-month comparison, the increase from higher average broadband internet and fixed-line telephony RGUs was fully offset by a decrease associated with lower average video subscribers. The increase for the six-month comparison is due to the net effect of (i) higher average broadband internet and fixed-line telephony subscribers and (ii) lower average video subscribers.
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 35.5 |
| | $ | — |
| | $ | 35.5 |
|
ARPU (b) | 2.3 |
| | — |
| | 2.3 |
|
Increase in residential fixed non-subscription revenue (c) | — |
| | 1.2 |
| | 1.2 |
|
Total increase in residential fixed revenue | 37.8 |
| | 1.2 |
| | 39.0 |
|
Increase in B2B revenue (d) | 3.0 |
| | 2.3 |
| | 5.3 |
|
Increase in other revenue | — |
| | 0.6 |
| | 0.6 |
|
Total | $ | 40.8 |
| | $ | 4.1 |
| | $ | 44.9 |
|
(b)The decreases are primarily attributable to lower ARPU from video and broadband internet services, in part due to (i) higher retention discounts and (ii) declines in higher ARPU plans.
| |
(a) | The increase is attributable to increases in broadband internet, video and fixed-line telephony RGUs, primarily due to the reconnection of subscribers associated with the recovery in Puerto Rico following the hurricanes. |
| |
(b) | The increase is primarily attributable to reconnecting higher ARPU customers during the first quarter of 2018. |
| |
(c) | The increase is primarily due to higher late fees, advertising revenue and reconnect fees resulting from Liberty Puerto Rico’s ongoing recovery from the hurricanes. |
| |
(d) | The increase in subscription revenue is primarily attributable to increases in broadband internet, fixed-line telephony and video SOHO RGUs, primarily due to the reconnection of subscribers associated with the recovery in Puerto Rico following the hurricanes. The increase in non-subscription revenue is primarily attributable to higher revenue from broadband internet services, resulting from the restoration of fiber circuits to Liberty Puerto Rico’s B2B customers. |
(c)The increases are primarily attributable to higher volumes of CPE sales.
(d)The changes for the comparison periods are primarily due to (i) higher average postpaid mobile subscribers and (ii) lower prepaid and postpaid mobile ARPU. For the six-month comparison, the impact of higher average mobile subscribers more than offset the decreases in mobile ARPU. (e)The increases are primarily attributable to the B2B operations within our Liberty Networks segment that was acquired by the Liberty Costa Rica segment in January 2023.
Programming and Other Direct Costsother direct costs of Servicesservices
General.Programming and other direct costs of services include programming and copyright costs, mobileinterconnect and access and interconnect costs, equipment costs, which primarily relate to costs of mobile handsets and other devices, and other direct costs related to our operations. Notwithstanding the impact of the hurricanes, programmingProgramming and copyright costs, which represent a significant portion of our operating costs, are expected to risemay increase in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases andor (iii) growth in the number of our enhanced video subscribers.
Consolidated. The following table setstables set forth programmingthe organic and other direct costs of services by reportable segment:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 130.2 |
| | $ | 133.4 |
| | $ | (3.2 | ) | | (2.4 | ) |
VTR | 70.5 |
| | 61.6 |
| | 8.9 |
| | 14.4 |
|
Liberty Puerto Rico | 16.5 |
| | 27.6 |
| | (11.1 | ) | | (40.2 | ) |
Intersegment eliminations | (1.4 | ) | | (0.7 | ) | | (0.7 | ) | | N.M. |
|
Total | $ | 215.8 |
| | $ | 221.9 |
| | $ | (6.1 | ) | | (2.7 | ) |
N.M. — Not Meaningful.
Consolidated. The decreasenon-organic changes in programming and other direct costs of services duringon a consolidated basis.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Decrease | | Increase (decrease) from: |
| | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Programming and copyright | $ | 59.4 | | | $ | 101.2 | | | $ | (41.8) | | | $ | 1.7 | | | $ | 0.5 | | | $ | (36.9) | | | $ | (7.1) | |
Interconnect | 74.8 | | | 88.4 | | | (13.6) | | | 1.5 | | | 3.8 | | | (7.4) | | | (11.5) | |
Equipment and other | 99.2 | | | 111.2 | | | (12.0) | | | 2.0 | | | 4.6 | | | (1.2) | | | (17.4) | |
Total programming and other direct costs of services | $ | 233.4 | | | $ | 300.8 | | | $ | (67.4) | | | $ | 5.2 | | | $ | 8.9 | | | $ | (45.5) | | | $ | (36.0) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Decrease | | Increase (decrease) from: |
| | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Programming and copyright | $ | 120.1 | | | $ | 210.5 | | | $ | (90.4) | | | $ | 2.8 | | | $ | 1.0 | | | $ | (82.6) | | | $ | (11.6) | |
Interconnect | 149.1 | | | 174.1 | | | (25.0) | | | 2.4 | | | 7.6 | | | (15.1) | | | (19.9) | |
Equipment and other | 207.6 | | | 219.6 | | | (12.0) | | | 3.0 | | | 9.2 | | | (2.3) | | | (21.9) | |
Total programming and other direct costs of services | $ | 476.8 | | | $ | 604.2 | | | $ | (127.4) | | | $ | 8.2 | | | $ | 17.8 | | | $ | (100.0) | | | $ | (53.4) | |
C&W Caribbean. The following tables set forth the three months ended March 31, 2018, as compared to the corresponding periodorganic and non-organic changes in 2017, includes a decrease of $11 million at Liberty Puerto Rico primarily attributable to the hurricanes, an increase of $4 million attributable to the impact of the C&W Carve-out Acquisition and an increase of $6 million due to FX. Excluding the effects of the C&W Carve-out Acquisition and FX, our programming and other direct costs of services decreased $17 million or 7.5%. for our C&W Caribbean segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 18.0 | | | $ | 22.5 | | | $ | (4.5) | | | $ | — | | | $ | (4.5) | |
Interconnect | 19.2 | | | 29.2 | | | (10.0) | | | 0.2 | | | (10.2) | |
Equipment and other | 21.2 | | | 19.4 | | | 1.8 | | | — | | | 1.8 | |
Total programming and other direct costs of services | $ | 58.4 | | | $ | 71.1 | | | $ | (12.7) | | | $ | 0.2 | | | $ | (12.9) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Decrease | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 37.2 | | | $ | 45.9 | | | $ | (8.7) | | | $ | 0.1 | | | $ | (8.8) | |
Interconnect | 37.9 | | | 58.2 | | | (20.3) | | | 0.3 | | | (20.6) | |
Equipment and other | 40.4 | | | 40.5 | | | (0.1) | | | 0.1 | | | (0.2) | |
Total programming and other direct costs of services | $ | 115.5 | | | $ | 144.6 | | | $ | (29.1) | | | $ | 0.5 | | | $ | (29.6) | |
•Programming and copyright: The organic decrease includes declinesdecreases are primarily due to (i) the removal of $8 millioncertain programming rights and $11 million(ii) the renegotiation of certain content agreements.
•Interconnect: The organic decreases are primarily due to discontinuing an internet transit services arrangement at C&W and Liberty Puerto Rico, respectively, and an increaseJamaica as of $3 million at VTR, as further discussed below.January 1, 2023.
C&W. &W Panama.The decreasefollowing tables set forth the organic and non-organic changes in C&W’s programming and other direct costs of services includes an increase of $4 millionfor our C&W Panama segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase | | Increase (decrease) from: |
| 2023 | | 2022 | | | An acquisition | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 5.1 | | | $ | 4.3 | | | $ | 0.8 | | | $ | 0.5 | | | $ | 0.3 | |
Interconnect | 16.9 | | | 15.2 | | | 1.7 | | | 3.8 | | | (2.1) | |
Equipment and other | 33.1 | | | 28.7 | | | 4.4 | | | 4.6 | | | (0.2) | |
Total programming and other direct costs of services | $ | 55.1 | | | $ | 48.2 | | | $ | 6.9 | | | $ | 8.9 | | | $ | (2.0) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase | | Increase (decrease) from: |
| 2023 | | 2022 | | | An acquisition | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 10.1 | | | $ | 8.3 | | | $ | 1.8 | | | $ | 1.0 | | | $ | 0.8 | |
Interconnect | 35.4 | | | 30.4 | | | 5.0 | | | 7.6 | | | (2.6) | |
Equipment and other | 58.4 | | | 46.3 | | | 12.1 | | | 9.2 | | | 2.9 | |
Total programming and other direct costs of services | $ | 103.9 | | | $ | 85.0 | | | $ | 18.9 | | | $ | 17.8 | | | $ | 1.1 | |
•Interconnect: The organic decreases are primarily attributable to a reduction in traffic.
•Equipment and other: The organic increase for the impact of the C&W Carve-out Acquisition and an increase of $1 millionsix-month comparison is primarily due to FX. Excludinghigher costs associated with certain government-related projects.
Liberty Networks. The following tables set forth the effects of the C&W Carve-out Acquisitionorganic and FX, C&W’snon-organic changes in programming and other direct costs of services decreased $8 million or 6.0%. This decrease includes the following factors:for our Liberty Networks segment.
A decrease in mobile handset costs of $5 million or 20.7%,
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
| | | | | | | | | |
Interconnect | $ | 11.6 | | | $ | 11.0 | | | $ | 0.6 | | | $ | (0.4) | | | $ | 1.0 | |
Equipment and other | 4.7 | | | 3.4 | | | 1.3 | | | (0.2) | | | 1.5 | |
Total programming and other direct costs of services | $ | 16.3 | | | $ | 14.4 | | | $ | 1.9 | | | $ | (0.6) | | | $ | 2.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
| | | | | | | | | |
Interconnect | $ | 22.7 | | | $ | 22.9 | | | $ | (0.2) | | | $ | (0.6) | | | $ | 0.4 | |
Equipment and other | 9.3 | | | 6.4 | | | 2.9 | | | (0.8) | | | 3.7 | |
Total programming and other direct costs of services | $ | 32.0 | | | $ | 29.3 | | | $ | 2.7 | | | $ | (1.4) | | | $ | 4.1 | |
•Equipment and other: The organic increases are primarily due to (i) lower mobile handset sales;amounts of capitalizable costs associated with licenses, as part of a migration into contracts with shorter terms and more cloud-based arrangements, (ii) increases in costs associated with software licenses and (iii) higher costs associated with sales-type leases on CPE installed on long-term customer solutions.
A decrease in mobile access and interconnect costs of $1 million or 2.0%, primarily due to lower call volumes; and
A net decrease resulting from other individually insignificantLiberty Puerto Rico. The following tables set forth the changes in other direct cost categories.
VTR. The increase in VTR’s programming and other direct costs of services for our Liberty Puerto Rico segment.
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | | | |
| 2023 | | 2022 | | | |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 28.3 | | | $ | 28.3 | | | $ | — | | | | | |
Interconnect | 23.0 | | | 21.9 | | | 1.1 | | | | | |
Equipment and other | 32.8 | | | 52.8 | | | (20.0) | | | | | |
Total programming and other direct costs of services | $ | 84.1 | | | $ | 103.0 | | | $ | (18.9) | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | | | |
| 2023 | | 2022 | | | |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 56.6 | | | $ | 55.9 | | | $ | 0.7 | | | | | |
Interconnect | 45.1 | | | 41.3 | | | 3.8 | | | | | |
Equipment and other | 84.8 | | | 113.2 | | | (28.4) | | | | | |
Total programming and other direct costs of services | $ | 186.5 | | | $ | 210.4 | | | $ | (23.9) | | | | | |
•Programming and copyright: The changes are primarily due to the net effect of higher programming rates and lower average subscribers.
•Interconnect: The increases are primarily due to higher roaming costs.
•Equipment and other: The decreases are primarily associated with (i) equipment credits received during the first and second quarters of 2023 for historical handset purchases, (ii) lower handset sales, (iii) lower equipment-related integration costs associated with the AT&T Acquisition includes an increaseand (iv) decreases related to a lower of $6 millioncost or market adjustment on equipment-related inventory recognized during the second quarter of 2022.
Liberty Costa Ricadue to FX. Excluding. The following tables set forth the effect of FX, VTR’sorganic and non-organic changes in programming and other direct costs of services for our Liberty Costa Rica segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | | | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 8.3 | | | $ | 8.9 | | | $ | (0.6) | | | $ | 1.7 | | | | | $ | (2.3) | |
Interconnect | 8.3 | | | 9.1 | | | (0.8) | | | 1.7 | | | | | (2.5) | |
Equipment and other | 11.5 | | | 9.6 | | | 1.9 | | | 2.2 | | | | | (0.3) | |
Total programming and other direct costs of services | $ | 28.1 | | | $ | 27.6 | | | $ | 0.5 | | | $ | 5.6 | | | | | $ | (5.1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | | | | | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 16.8 | | | $ | 17.8 | | | $ | (1.0) | | | $ | 2.7 | | | | | $ | (3.7) | |
Interconnect | 16.5 | | | 16.3 | | | 0.2 | | | 2.7 | | | | | (2.5) | |
Equipment and other | 22.8 | | | 18.9 | | | 3.9 | | | 3.7 | | | | | 0.2 | |
Total programming and other direct costs of services | $ | 56.1 | | | $ | 53.0 | | | $ | 3.1 | | | $ | 9.1 | | | | | $ | (6.0) | |
•Programming and copyright: The organic decreases are primarily due to (i) the positive impact of FX associated with non-CRC denominated contracts and (ii) lower programming costs associated with declines in video RGUs.
•Interconnect: The organic decreases are primarily due to lower volumes of local and international traffic.
•Equipment and other: The organic changes are primarily due to the net effect of (i) the positive impact of FX associated with non-CRC denominated handset costs and (ii) higher CPE costs associated with sales growth.
Other operating costs and expenses
Other operating costs and expenses set forth in the tables below comprise the following cost categories:
•Personnel and contract labor-related costs, which primarily include salary-related and cash bonus expenses, net of capitalizable labor costs, and temporary contract labor costs;
•Network-related expenses, which primarily include costs related to network access, system power, core network, and CPE repair, maintenance and test costs;
•Service-related costs, which primarily include professional services, information technology-related services, audit, legal and other services;
•Commercial, which primarily includes sales and marketing costs, such as advertising, commissions and other sales and marketing-related costs, and customer care costs related to outsourced call centers;
•Facility, provision, franchise and other, which primarily includes facility-related costs, provision for bad debt expense, operating lease rent expense, franchise-related fees, bank fees, insurance, vehicle-related, travel and entertainment and other operating-related costs; and
•Share-based compensation expense that relates to (i) equity awards issued to our employees and Directors and (ii) certain bonus-related expenses that are paid in the form of equity.
Consolidated.The following tables set forth the organic and non-organic changes in other operating costs and expenses on a consolidated basis.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Personnel and contract labor | $ | 140.2 | | | $ | 145.1 | | | $ | (4.9) | | | $ | 1.1 | | | $ | 3.0 | | | $ | (13.2) | | | $ | 4.2 | |
Network-related | 61.6 | | | 78.9 | | | (17.3) | | | 1.6 | | | 4.5 | | | (19.7) | | | (3.7) | |
Service-related | 58.3 | | | 54.6 | | | 3.7 | | | 1.2 | | | 0.7 | | | (9.1) | | | 10.9 | |
Commercial | 44.6 | | | 58.1 | | | (13.5) | | | 2.8 | | | 4.9 | | | (16.9) | | | (4.3) | |
Facility, provision, franchise and other | 139.3 | | | 117.9 | | | 21.4 | | | 3.3 | | | 12.0 | | | (7.7) | | | 13.8 | |
Share-based compensation expense | 24.5 | | | 31.8 | | | (7.3) | | | 0.1 | | | — | | | (4.2) | | | (3.2) | |
Total other operating costs and expenses | $ | 468.5 | | | $ | 486.4 | | | $ | (17.9) | | | $ | 10.1 | | | $ | 25.1 | | | $ | (70.8) | | | $ | 17.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | An acquisition | | A disposition | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | | | |
Personnel and contract labor | $ | 287.3 | | | $ | 298.3 | | | $ | (11.0) | | | $ | 1.3 | | | $ | 6.0 | | | $ | (27.2) | | | $ | 8.9 | |
Network-related | 128.4 | | | 161.5 | | | (33.1) | | | 2.4 | | | 9.0 | | | (38.2) | | | (6.3) | |
Service-related | 108.9 | | | 105.8 | | | 3.1 | | | 2.0 | | | 1.4 | | | (16.5) | | | 16.2 | |
Commercial | 89.1 | | | 123.6 | | | (34.5) | | | 4.7 | | | 9.8 | | | (39.5) | | | (9.5) | |
Facility, provision, franchise and other | 284.2 | | | 241.7 | | | 42.5 | | | 5.0 | | | 24.0 | | | (15.0) | | | 28.5 | |
Share-based compensation expense | 53.7 | | | 61.8 | | | (8.1) | | | 0.1 | | | — | | | (7.4) | | | (0.8) | |
Total other operating costs and expenses | $ | 951.6 | | | $ | 992.7 | | | $ | (41.1) | | | $ | 15.5 | | | $ | 50.2 | | | $ | (143.8) | | | $ | 37.0 | |
C&W Caribbean. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our C&W Caribbean segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 53.0 | | | $ | 52.2 | | | $ | 0.8 | | | $ | 0.1 | | | $ | 0.7 | |
Network-related | 30.3 | | | 34.2 | | | (3.9) | | | — | | | (3.9) | |
Service-related | 18.3 | | | 16.6 | | | 1.7 | | | — | | | 1.7 | |
Commercial | 12.0 | | | 10.8 | | | 1.2 | | | — | | | 1.2 | |
Facility, provision, franchise and other | 38.0 | | | 36.2 | | | 1.8 | | | 0.2 | | | 1.6 | |
Share-based compensation expense | 4.5 | | | 6.1 | | | (1.6) | | | — | | | (1.6) | |
Total other operating costs and expenses | $ | 156.1 | | | $ | 156.1 | | | $ | — | | | $ | 0.3 | | | $ | (0.3) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 106.1 | | | $ | 103.6 | | | $ | 2.5 | | | $ | 0.2 | | | $ | 2.3 | |
Network-related | 66.0 | | | 71.6 | | | (5.6) | | | 0.1 | | | (5.7) | |
Service-related | 37.5 | | | 34.0 | | | 3.5 | | | 0.1 | | | 3.4 | |
Commercial | 22.2 | | | 21.7 | | | 0.5 | | | 0.1 | | | 0.4 | |
Facility, provision, franchise and other | 76.3 | | | 70.5 | | | 5.8 | | | 0.2 | | | 5.6 | |
Share-based compensation expense | 9.4 | | | 12.3 | | | (2.9) | | | — | | | (2.9) | |
Total other operating costs and expenses | $ | 317.5 | | | $ | 313.7 | | | $ | 3.8 | | | $ | 0.7 | | | $ | 3.1 | |
•Personnel and contract labor: The organic increases are primarily due to the net effect of (i) higher bonus-related expenses, (ii) higher salaries and related personnel costs, (iii) lower headcount and (iv) increases in capitalized labor.
•Network-related: The organic decreases are primarily due to the net effect of (i) lower leased line costs resulting from the renegotiation of pole rental contracts,(ii) higher capacity charges associated with the use of Liberty Networks’ subsea network, (iii) lower truck rolls, and(iv) lower professional service costs due to the decision to transition certain third-party services to internal resources.
•Service-related: The organic increases are primarily due to higher professional services associated with the launch of new customer value propositions.
•Facility, provision, franchise and other: The organic increases are primarily due to the net effect of (i) lower bad debt provisions and (ii) higher travel-related expenses. In addition, the increase for the six-month comparison includes the negative impact of an accrual release during the first quarter of 2022 related to a favorable court ruling associated with an industry levy on franchise fees.
C&W Panama. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our C&W Panama segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | An acquisition | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 21.6 | | | $ | 17.4 | | | $ | 4.2 | | | $ | 3.0 | | | $ | 1.2 | |
Network-related | 14.0 | | | 10.3 | | | 3.7 | | | 4.5 | | | (0.8) | |
Service-related | 4.2 | | | 3.6 | | | 0.6 | | | 0.7 | | | (0.1) | |
Commercial | 6.0 | | | 4.9 | | | 1.1 | | | 4.9 | | | (3.8) | |
Facility, provision, franchise and other | 20.9 | | | 12.8 | | | 8.1 | | | 12.0 | | | (3.9) | |
Share-based compensation expense | 1.7 | | | 2.1 | | | (0.4) | | | — | | | (0.4) | |
Total other operating costs and expenses | $ | 68.4 | | | $ | 51.1 | | | $ | 17.3 | | | $ | 25.1 | | | $ | (7.8) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | An acquisition | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 43.2 | | | $ | 36.3 | | | $ | 6.9 | | | $ | 6.0 | | | $ | 0.9 | |
Network-related | 26.9 | | | 20.2 | | | 6.7 | | | 9.0 | | | (2.3) | |
Service-related | 8.6 | | | 8.2 | | | 0.4 | | | 1.4 | | | (1.0) | |
Commercial | 14.5 | | | 10.8 | | | 3.7 | | | 9.8 | | | (6.1) | |
Facility, provision, franchise and other | 46.5 | | | 23.4 | | | 23.1 | | | 24.0 | | | (0.9) | |
Share-based compensation expense | 2.3 | | | 3.4 | | | (1.1) | | | — | | | (1.1) | |
Total other operating costs and expenses | $ | 142.0 | | | $ | 102.3 | | | $ | 39.7 | | | $ | 50.2 | | | $ | (10.5) | |
•Network-related: The organic decreases are primarily due to lower maintenance-related costs, mainly driven by the transition to a lower-cost vendor.
•Commercial: The organic decreases are primarily due to (i)lower third-party sales commissions and (ii) lower marketing costs.
•Facility, provision, franchise and other: The organic decreases are primarily due to the net effect of (i) lower bad debt expense, (ii) lower office and facility-related costs, (iii) lower franchise fees, (iv) higher integration-related costs and (v) higher facilities maintenance expense. In addition, the three-month comparison includes a decrease associated with operating lease expense resulting from decommissioned towers.
Liberty Networks. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our Liberty Networks segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 11.7 | | | $ | 9.8 | | | $ | 1.9 | | | $ | (0.7) | | | $ | 2.6 | |
Network-related | 10.7 | | | 10.4 | | | 0.3 | | | (0.2) | | | 0.5 | |
Service-related | 1.3 | | | 1.1 | | | 0.2 | | | (0.1) | | | 0.3 | |
Commercial | 0.8 | | | 0.3 | | | 0.5 | | | — | | | 0.5 | |
Facility, provision, franchise and other | 5.6 | | | 5.3 | | | 0.3 | | | (0.3) | | | 0.6 | |
Share-based compensation expense | 1.5 | | | 1.7 | | | (0.2) | | | — | | | (0.2) | |
Total other operating costs and expenses | $ | 31.6 | | | $ | 28.6 | | | $ | 3.0 | | | $ | (1.3) | | | $ | 4.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2023 | | 2022 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 22.4 | | | $ | 22.0 | | | $ | 0.4 | | | $ | (1.7) | | | $ | 2.1 | |
Network-related | 21.4 | | | 22.1 | | | (0.7) | | | (0.7) | | | — | |
Service-related | 2.3 | | | 2.1 | | | 0.2 | | | (0.1) | | | 0.3 | |
Commercial | 1.1 | | | 0.6 | | | 0.5 | | | — | | | 0.5 | |
Facility, provision, franchise and other | 12.3 | | | 10.2 | | | 2.1 | | | (0.9) | | | 3.0 | |
Share-based compensation expense | 2.2 | | | 2.7 | | | (0.5) | | | — | | | (0.5) | |
Total other operating costs and expenses | $ | 61.7 | | | $ | 59.7 | | | $ | 2.0 | | | $ | (3.4) | | | $ | 5.4 | |
•Personnel and contract labor: The organic increases are primarily due to higher bonus and salary-related expenses.
•Facility, provision, franchise and other: The organic increases are primarily due to bad debt provisions and other insignificant changes across numerous cost categories.
Liberty Puerto Rico. The following tables set forth the changes in other operating costs and expenses for our Liberty Puerto Rico segment.
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | |
| | Increase (decrease) | | | | |
| 2023 | | 2022 | | | |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 33.1 | | | $ | 38.3 | | | $ | (5.2) | | | | | |
Network-related | 13.4 | | | 10.7 | | | 2.7 | | | | | |
Service-related | 20.4 | | | 13.8 | | | 6.6 | | | | | |
Commercial | 11.4 | | | 12.2 | | | (0.8) | | | | | |
Facility, provision, franchise and other | 48.3 | | | 38.7 | | | 9.6 | | | | | |
Share-based compensation expense | 1.7 | | | 1.6 | | | 0.1 | | | | | |
Total other operating costs and expenses | $ | 128.3 | | | $ | 115.3 | | | $ | 13.0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | | | |
| | Increase (decrease) | | | | |
| 2023 | | 2022 | | | |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 74.3 | | | $ | 78.9 | | | $ | (4.6) | | | | | |
Network-related | 25.6 | | | 21.6 | | | 4.0 | | | | | |
Service-related | 35.3 | | | 25.3 | | | 10.0 | | | | | |
Commercial | 22.9 | | | 24.3 | | | (1.4) | | | | | |
Facility, provision, franchise and other | 97.5 | | | 82.3 | | | 15.2 | | | | | |
Share-based compensation expense | 3.5 | | | 4.8 | | | (1.3) | | | | | |
Total other operating costs and expenses | $ | 259.1 | | | $ | 237.2 | | | $ | 21.9 | | | | | |
•Personnel and contract labor: The decreases are primarily due to the receipt of a payroll tax credit during the first and second quarters of 2023 awarded to businesses that continued to pay employees or that experienced significant declines in gross receipts during the COVID-19 pandemic. The decrease for the six-month comparison is partially offset by higher salaries and related personnel costs, including the impact of higher amortization of deferred commissions in connection with the AT&T Acquisition.
•Network-related: The increases are primarily due to higher maintenance costs and fees related to the migration of customers to our mobile network. In addition, the increase for the six-month comparison includes highernetwork-related integration costs associated with the AT&T Acquisition and network outages.
•Service-related: The increases are primarily due to higher (i) professional services charges, (ii) service-related integration costs associated with the AT&T Acquisition and (iii) regulatory fees.
•Facility, provision, franchise and other: The increases are primarily due to the net effect of (i) higher (a) bad debt expense, primarily resulting from lower expected credit loss rates established during the second quarter of 2022, (b) bank-related fees associated with certain services being provided under a transition service agreement and (c) utility costs, and (ii) decreases due to business interruption insurance claim benefits recognized during the second quarter of 2023 related to the power outages experienced during the second quarter of 2022.
Liberty Costa Rica. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our Liberty Costa Rica segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | | | | | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 8.9 | | | $ | 6.4 | | | $ | 2.5 | | | $ | 1.7 | | | | | $ | 0.8 | |
Network-related | 10.0 | | | 8.1 | | | 1.9 | | | 1.8 | | | | | 0.1 | |
Service-related | 5.9 | | | 6.0 | | | (0.1) | | | 1.3 | | | | | (1.4) | |
Commercial | 14.4 | | | 13.0 | | | 1.4 | | | 2.8 | | | | | (1.4) | |
Facility, provision, franchise and other | 17.8 | | | 11.3 | | | 6.5 | | | 3.4 | | | | | 3.1 | |
Share-based compensation expense | 0.3 | | | 0.5 | | | (0.2) | | | 0.1 | | | | | (0.3) | |
Total other operating costs and expenses | $ | 57.3 | | | $ | 45.3 | | | $ | 12.0 | | | $ | 11.1 | | | | | $ | 0.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| | | | | | | | | | |
| 2023 | | 2022 | | | FX | | | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 17.4 | | | $ | 13.8 | | | $ | 3.6 | | | $ | 2.8 | | | | | $ | 0.8 | |
Network-related | 19.9 | | | 16.8 | | | 3.1 | | | 3.0 | | | | | 0.1 | |
Service-related | 12.0 | | | 11.4 | | | 0.6 | | | 2.0 | | | | | (1.4) | |
Commercial | 28.4 | | | 26.7 | | | 1.7 | | | 4.6 | | | | | (2.9) | |
Facility, provision, franchise and other | 35.3 | | | 27.9 | | | 7.4 | | | 5.7 | | | | | 1.7 | |
Share-based compensation expense | 0.5 | | | 1.4 | | | (0.9) | | | 0.1 | | | | | (1.0) | |
Total other operating costs and expenses | $ | 113.5 | | | $ | 98.0 | | | $ | 15.5 | | | $ | 18.2 | | | | | $ | (2.7) | |
•Service-related: The organic decreases are primarily due to professional services incurred during 2022 related to a software implementation.
•Commercial: The organic decreases are primarily due to integration costs incurred during 2022 related to rebranding associated with the Liberty Telecomunicaciones Acquisition.
•Facility, provision, franchise and other: The organic increases are primarily due to the negative impact of purchase accounting adjustments associated with the Liberty Telecomunicaciones Acquisition that decreased rent expense during the second quarter of 2022.
Corporate. The following tables set forth the changes in other operating costs and expenses for our corporate operations.
| | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2023 | | 2022 | |
| in millions |
| | | | | |
Personnel and contract labor | $ | 11.8 | | | $ | 7.4 | | | $ | 4.4 | |
Service-related | 8.1 | | | 4.7 | | | 3.4 | |
Facility, provision, franchise and other | 9.3 | | | 6.2 | | | 3.1 | |
Share-based compensation expense | 14.8 | | | 15.4 | | | (0.6) | |
Total other operating costs and expenses | $ | 44.0 | | | $ | 33.7 | | | $ | 10.3 | |
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase |
| 2023 | | 2022 | |
| in millions |
| | | | | |
Personnel and contract labor | $ | 23.9 | | | $ | 16.5 | | | $ | 7.4 | |
| | | | | |
Service-related | 13.2 | | | 8.3 | | | 4.9 | |
Facility, provision, franchise and other | 18.9 | | | 12.9 | | | 6.0 | |
Share-based compensation expense | 35.8 | | | 29.8 | | | 6.0 | |
Total other operating costs and expenses | $ | 91.8 | | | $ | 67.5 | | | $ | 24.3 | |
•Personnel and contract labor: The increases are primarily attributable to (i) higher bonus costs due to a shift in bonus payments in the form of equity to cash and (ii) higher salaries and related personnel costs, mainly resulting from higher staffing levels in our operations center in Panama.
•Service-related: The increases are primarily due to increases in professional services costs.
•Facility, provision, franchise and other: The increases are primarily due to insurance costs related to (i) claims associated with cable breaks that occurred during the first half of 2023, and (ii) business interruption claims submitted by our Liberty Puerto Rico business during 2022.
Results of Operations (below Adjusted OIBDA)
Depreciation and amortization
Our depreciation and amortization expense increased $3$27 million or 5.2%. This increase includes the following factors:
An increase in programming13% and copyright costs of $1$48 million or 3.5%,11% during the three and six months ended June 30, 2023, respectively, as compared to the corresponding periods in 2022, primarily due to the net effect of (i) an increase in certain premium and basic content costs due to rate increases, (ii) a decrease in the foreign currency impact of programming contracts denominated in U.S. dollars and (ii) higher costs associated with video-on-demand;
An increase in mobile access and interconnect costs of $1 million or 8.2%, primarily due to (i) higher MVNO charges and (ii) a net increase in interconnect costs from higher call volumes and lower interconnect rates.
Liberty Puerto Rico. The decrease in Liberty Puerto Rico’s programming and other direct costs of services is primarily due to a decline in programming and copyright costs of $10 million or 42.7% mostly attributable to (i) $7 million of credits from vendors stemming from Hurricanes Irma and Maria and (ii) lower costs of $4 million resulting from disconnects of enhanced video subscribers due to the impact of the hurricanes.
Other Operating Expenses
General. Other operating expenses include network operations, customer operations, customer care, share-based compensation and other costs related to our operations.
The following table sets forth other operating expenses by reportable segment:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 109.0 |
| | $ | 117.8 |
| | $ | (8.8 | ) | | (7.5 | ) |
VTR | 42.9 |
| | 36.9 |
| | 6.0 |
| | 16.3 |
|
Liberty Puerto Rico | 14.6 |
| | 15.4 |
| | (0.8 | ) | | (5.2 | ) |
Intersegment eliminations | (0.1 | ) | | (0.1 | ) | | — |
| | N.M. |
|
Total other operating expenses excluding share-based compensation expense | 166.4 |
| | 170.0 |
| | (3.6 | ) | | (2.1 | ) |
Share-based compensation expense | 0.1 |
| | 0.5 |
| | (0.4 | ) | | (80.0 | ) |
Total | $ | 166.5 |
| | $ | 170.5 |
| | $ | (4.0 | ) | | (2.3 | ) |
N.M. — Not Meaningful.
Consolidated. The decrease in other operating expenses during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes increases of $3 million and $4 million attributable to the impact of the C&W Carve-out Acquisition and FX, respectively. Our other operating expenses include share-based compensation expense. For additional information, see the discussion under Share-based compensation expense (included in other operating and SG&A expenses) below. Excluding the effects of the C&W Carve-out Acquisition, FX and share-based compensation expense, our other operating expenses decreased $10 million or 5.8%. The organic decrease includes declines of $12 million and $1 million at C&W and Liberty Puerto Rico, respectively, and an increase of $3 million at VTR, as further discussed below.
C&W. The decrease in C&W’s other operating expenses includes an increase of $3 million attributable to the impact of the C&W Carve-out Acquisition. Excluding the effect of the C&W Carve-out Acquisition, C&W’s other operating expenses (exclusive of share-based compensation expense) decreased $12 million or 9.8%. This decrease includes the following factors:
A decrease in bad debt and collection expenses of $7 million or 50.5%, primarily due to (i) better than expected collections in 2018, including a $3 million recovery related to provisions established following the impacts of Hurricanes Irma and Maria, and (ii) a decrease resulting from provisions recorded during the first quarter of 2017 in connection with Hurricane Matthew; and
| |
• | A decrease in network-related expenses of$6 million or 14.0%, primarily due to network restoration costs incurred in the first quarter of 2017 associated with sustained damages from Hurricane Matthew.
|
VTR. The increase in VTR’s other operating expenses includes an increase of $4 million due to FX. Excluding the effect of FX, VTR’s other operating expenses (exclusive of share-based compensation expenses) increased $3 million or 6.8%. This change is primarily the result of an increase in network-related expenses of $3 million or 21.1% due to higher maintenance costs.
Liberty Puerto Rico. The decrease in Liberty Puerto Rico’s other operating expenses is primarily due to lower various indirect expenses of approximately $2 million, predominantly related to bad debt and franchise fees that decreased as a result of the hurricanes. This decrease was partially offset by higher personnel costs of $1 million resulting from hurricane recovery efforts.
SG&A Expenses
General. SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, share-based compensation and other general expenses.
The following table sets forth SG&A by reportable segment and our corporatecategory:
|
| | | | | | | | | | | | | |
| Three months ended March 31, | | Increase |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 117.2 |
| | $ | 114.5 |
| | $ | 2.7 |
| | 2.4 |
VTR | 45.4 |
| | 39.2 |
| | 6.2 |
| | 15.8 |
Liberty Puerto Rico | 12.7 |
| | 12.4 |
| | 0.3 |
| | 2.4 |
Corporate | 11.3 |
| | 5.1 |
| | 6.2 |
| | 121.6 |
Intersegment eliminations | 0.3 |
| | 0.1 |
| | 0.2 |
| | N.M. |
Total SG&A expenses excluding share-based compensation expense | 186.9 |
| | 171.3 |
| | 15.6 |
| | 9.1 |
Share-based compensation expense | 6.4 |
| | 5.1 |
| | 1.3 |
| | 25.5 |
Total | $ | 193.3 |
| | $ | 176.4 |
| | $ | 16.9 |
| | 9.6 |
N.M. — Not Meaningful.
Consolidated. The increase in SG&A expenses during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes increases of $1 million and $4 million attributable to the impacts of the C&W Carve-out Acquisition and FX, respectively. Our SG&A expenses include share-based compensation expense. For additional information, see the discussion under Share-based compensation expense (included in other operating and SG&A expenses) below. Excluding the effects of the C&W Carve-out Acquisition, FX and share-based compensation expense, our SG&A expenses increased $11
million or 6.2%. The organic increase primarily includes increases of $6 million, $3 million and $1 million at Corporate, VTR and C&W, respectively, as further discussed below.
C&W. The increasein C&W’s SG&A expenses includes an increase of $1 million attributable to the impact of the C&W Carve-out Acquisition. Excluding the effect of the C&W Carve-out Acquisition, C&W’s SG&A expenses (exclusive of share-based compensation expense) increased $1 million or 1.2%. This increase includes the following factors:
A decrease in outsourced labor and professional fees of $3 million or 28.6%, primarily due to higher contract costs in 2017;
An increase in personnel costs of $3 million or 5.0%, primarily due to higher incentive compensation costs; and
A net increase resulting from other individually insignificant changes in other SG&A expense categories.
VTR. The increase in VTR’s SG&A expenses includes an increase of $4 million due to FX. Excluding the effect of FX, VTR’s SG&A expenses (exclusive of share-based compensation expense) increased $3 million or 6.4%. This change is primarily the result of an increase in sales, marketing and advertising expenses of $3 million or 19.3%, due to higher (i) sales commissions to third-party dealers and (ii) costs associated with advertising campaigns.
Liberty Puerto Rico. Liberty Puerto Rico’s SG&A expenses (exclusive of share-based compensation expense) remained relatively unchanged during the three months ended March 31, 2018, as compared to the corresponding period in 2017.
Corporate. The increase is primarily attributable to added costs associated with being a separate public company, including increases in personnel costs and professional services. The increase in costs is inclusive of costs that Liberty Global charges us in connection with certain of the Split-Off Agreements, as further described in note 11 to our condensed consolidated financial statements.
Adjusted OIBDA
Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. For the definition of this performance measure and for a reconciliation of total Adjusted OIBDA to our earnings (loss) before income taxes, see note 16 to our condensed consolidated financial statements.
The following table sets forth Adjusted OIBDA by reportable segment and our corporatecategory:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 229.1 |
| | $ | 209.9 |
| | $ | 19.2 |
| | 9.1 |
|
VTR | 105.0 |
| | 91.6 |
| | 13.4 |
| | 14.6 |
|
Liberty Puerto Rico | 18.0 |
| | 51.3 |
| | (33.3 | ) | | (64.9 | ) |
Corporate | (11.3 | ) | | (5.1 | ) | | (6.2 | ) | | 121.6 |
|
Total | $ | 340.8 |
| | $ | 347.7 |
| | $ | (6.9 | ) | | (2.0 | ) |
Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA margins (Adjusted OIBDA divided by revenue) of each of our reportable segments:
|
| | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| % |
| | | |
C&W | 39.1 | | 36.5 |
VTR | 39.8 | | 39.9 |
Liberty Puerto Rico | 29.1 | | 48.1 |
Adjusted OIBDA margin is impacted by organic changes in revenue, programming and other direct costs of services, other operating expenses and SG&A expenses as further discussed above. During the three months ended March 31, 2018, the Adjusted OIBDA of Liberty Puerto Rico was adversely impacted by Hurricanes Irma and Maria, as more fully described in Overview above. With regards to Puerto Rico, Adjusted OIBDA margin during the first quarter of 2018 improved significantly from (71.6)% during the three months ended December 31, 2017 as we recover from Hurricanes Maria and Irma.
Share-based compensation expense (included in other operating and SG&A expenses)
We recognized share-based compensation expense of $7 million and $6 million during the three months ended March 31, 2018 and 2017, respectively.This increase is primarily due to equity awards granted during 2018.
For additional information regarding our share-based compensation, see note 13 to our condensed consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense increased $8 million or 4.3% during the three months ended March 31, 2018, as compared to the corresponding period in 2017. Excluding the effect of FX, depreciation and amortization expense increased $6 million or 3.0% during the three months ended March 31, 2018, as compared to the corresponding period in 2017. This increase is primarily due to the net effect of (i) an increase associated with property and equipment additions, primarily associated with baseline related toadditions, the installation of customer premises equipment,CPE and the expansion and upgrade of our networks and other capital initiatives, and(ii) a decrease associated with certaincustomer relationship assets becoming fully depreciated primarily at VTR andin Liberty Puerto Rico.Rico and (iii) an increase at C&W Panama resulting from the Claro Panama Acquisition.
Impairment, restructuring and other operating items, net
We recognizedThe details of our impairment, restructuring and other operating items, net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| in millions |
| | | | | | | |
Impairment charges (a) | $ | 26.4 | | | $ | 556.6 | | | $ | 47.6 | | | $ | 558.5 | |
Restructuring charges (b) | 14.4 | | | 2.9 | | | 27.5 | | | 5.6 | |
Other operating items, net (c) | — | | | 9.1 | | | (4.6) | | | 12.3 | |
Total | $ | 40.8 | | | $ | 568.6 | | | $ | 70.5 | | | $ | 576.4 | |
(a)The 2023 amounts primarily relate to the impairment of $34 million and $13 million duringcertain operating lease right-of-use assets, predominantly related to decommissioned tower leases at C&W Panama. The 2022 amounts primarily consist of goodwill impairment charges associated with certain reporting units within the three months ended March 31, 2018 and 2017, respectively. During 2018, we incurred $26 million of restructuring charges, whichC&W Caribbean segment.
(b)The 2023 amounts include $24 million of employee severance and termination costs related to certain reorganization activities, primarily at (i) C&W. During 2017, we incurred $11 million of restructuring charges, which&W Caribbean (ii) C&W Panama and (iii) Liberty Costa Rica.
(c)The 2023 amount primarily relates to gains on asset dispositions. The 2022 amounts primarily include $9 million of employee severance and termination costs related to certain reorganization activities, primarily at C&W.direct acquisition costs.
For additional information regarding our restructuring charges, see note 12 to our condensed consolidated financial statements.
Interest expense
Our interest expense increased $8$12 million and $29 million during 2018,the three and six months ended June 30, 2023, respectively, as compared to 2017. This increase isthe corresponding periods in 2022. The increases are primarily attributable to the net effect of (i) an increasehigher weighted-average interest rates and (ii) lower average outstanding debt balances, primarily resulting from the adoptiondisposition of ASU 2014-09, as further describedthe Chile JV Entities in notes 2 and 3 to our condensed consolidated financial statements, and (ii) a net decrease of accretion expense associated with premiums and discounts.October 2022.
For additional information regarding our outstanding indebtedness, see note 8 to our condensed consolidated financial statements.
It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 5 to our condensed consolidated financial statements, we use derivative instruments to manage our interest rate risks.
Realized and unrealized gains or losses on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments primarily include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized lossesgains on derivative instruments, net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| in millions |
| | | | | | | |
Interest rate and cross-currency derivative contracts (a) | $ | 75.2 | | | $ | 276.1 | | | $ | 39.7 | | | $ | 258.5 | |
Foreign currency forward contracts and other | (3.1) | | | 15.0 | | | (18.9) | | | 6.7 | |
Weather Derivatives (b) | (7.7) | | | (7.8) | | | (15.5) | | | (15.6) | |
Total | $ | 64.4 | | | $ | 283.3 | | | $ | 5.3 | | | $ | 249.6 | |
|
| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| in millions |
| | | |
Cross-currency and interest rate derivative contracts (a) | $ | (38.9 | ) | | $ | (25.5 | ) |
Foreign currency forward contracts | (2.6 | ) | | (1.8 | ) |
Total | $ | (41.5 | ) | | $ | (27.3 | ) |
(a)The gains during the three and six months ended June 30, 2023 and 2022 are primarily attributable to the net effect of (i) changes in interest rates and (ii) for the 2022 periods, changes in FX rates predominantly due to changes in the value of the CLP relative to the U.S. dollar prior to the disposition of the Chile JV Entities. | |
(a) | The loss during 2018 is attributable to the net effect of (i) losses from changes in FX rates, primarily resulting from an increase in the value of the Chilean peso relative to the U.S. dollar, and (ii) gains resulting from changes in interest rates. In addition, the loss during 2018 includes a net loss of $12 million resulting from changes in our credit risk valuation adjustments. The loss during 2017 is primarily attributable to the net effect of (i) gains resulting from changes in interest rates and (ii) losses from changes in FX rates, primarily resulting from an increase in the value of the Chilean peso relative to the U.S. dollar. In addition, the loss during 2017 includes a net gain of $7 million resulting from changes in our credit risk valuation adjustments. |
(b)Amounts represent the amortization of premiums associated with our Weather Derivatives.
For additional information concerning our derivative instruments, see notes 5 and 6 to our condensed consolidated financial statements and Item 3. QualitativeQuantitative and QuantitativeQualitative Disclosures about Market Risk below.
Foreign currency transaction gains or losses, net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| in millions |
| | | | | | | |
U.S. dollar-denominated debt issued by non-U.S. dollar functional currency entities (a) | $ | (3.3) | | | $ | (246.3) | | | $ | 32.7 | | | $ | (139.1) | |
Intercompany payables and receivables denominated in a currency other than the entity’s functional currency | (4.4) | | | 2.6 | | | 6.2 | | | 10.7 | |
Other (b) | 1.0 | | | (18.3) | | | 3.6 | | | (37.0) | |
Total | $ | (6.7) | | | $ | (262.0) | | | $ | 42.5 | | | $ | (165.4) | |
|
| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| in millions |
| | | |
U.S. dollar-denominated debt issued by a Chilean peso functional currency entity | $ | 26.8 |
| | $ | 20.5 |
|
British pound sterling-denominated debt issued by a U.S. dollar functional currency entity | (10.5 | ) | | (3.7 | ) |
Other | (0.4 | ) | | (2.3 | ) |
Total | $ | 15.9 |
| | $ | 14.5 |
|
Loss on debt modification and extinguishment
We recognized a loss on debt modification and extinguishment of $13 million and nil(a) The changes during the three and six months ended March 31, 2018June 30, 2023 are primarily related to a CRC functional currency entity. The losses during the three and 2017, respectively. The 2018 amount representssix months ended June 30, 2022 are primarily related to a CLP functional currency entity.
(b) Primarily includes (i) third-party receivables and payables denominated in a currency other than an entity’s functional currency and (ii) cash denominated in a currency other than an entity’s functional currency.
Gains or losses on debt extinguishment, net
Our gains or losses on debt extinguishment generally include (i) premiums or discounts associated with redemptions and/or repurchases of debt, (ii) the write-off of unamortized discounts and deferred financing costs, premiums and/or discounts and/or (iii) breakage fees.
We recognized gains (losses) on debt extinguishment, net, of nil and ($4 million) during the three and six months ended June 30, 2023, respectively, and nil during each of the three and six months ended June 30, 2022. The net loss during the six months ended June 30, 2023 is primarily associated with the repayment of the C&W Term Loan B-3 Facility.refinancing activity at Liberty Costa Rica.
For additional information concerning our loss on debt modificationrepurchases and extinguishment,repayments, see note 8 to our condensed consolidated financial statements.
Other income, netIncome tax benefit or expense
We recognized other income net of $5tax expense $31 million and $6$40 million during the three months ended March 31, 2018June 30, 2023 and 2017, respectively. The amount for each period includes $3 million of interest2022, respectively, and dividend income and $3 million in pension-related credits following the adoption of ASU 2017-07.
For additional information regarding the adoption of ASU 2017-07, see note 2 to our condensed consolidated financial statements.
Income tax expense
We recognized income tax expense of $17$44 million and $23$63 million during the threesix months ended March 31, 2018June 30, 2023 and 2017,2022, respectively.
For the three and six months ended March 31, 2018,June 30, 2023, the income tax expense attributable to our lossearnings (loss) before income taxes differs from the amountamounts computed using the statutory tax rate, primarily due to the detrimental effects of international rate differences,net increases in the valuation allowance, andallowances, negative effects of permanent tax differences, such as non-deductible expenses.expenses and inclusion of withholding taxes on cross-border payments. These negative impacts to our effective tax rate were partially offset by the beneficial effects of international rate differences and permanent tax differences, such as non-taxable income and price level restatements.income. For the three months ended March 31, 2017,June 30, 2023, income tax expense reflects net increases in uncertain tax positions, while for the six months ended June 30, 2023, income tax expense reflects net releases in uncertain tax positions.
For the three and six months ended June 30, 2022, the income tax expense attributable to our earnings before income taxes differs from the amountamounts computed using the statutory tax rate, primarily due to the detrimental effects of international ratenon-deductible goodwill impairment, negative effects of permanent tax differences, such as non-deductible expenses and changes in valuation allowances,inclusion of withholding taxes on cross-border payments. These negative impacts to our effective tax rate were partially offset by the beneficial effects of enactedinternational rate differences, permanent tax lawdifferences, such as non-taxable income, and rate changes.net decreases in valuation allowances.
For additional information regarding our income taxes, see note 913 to our condensed consolidated financial statements.
Net earnings (loss)or loss
During the three months ended March 31, 2018 and 2017, we reportedThe following table sets forth selected summary financial information of our net earnings (loss) of ($54 million) and $11 million, respectively, including (i) operating income of $98 million and $135 million, respectively, (ii) net non-operating expenses of $136 million and $101 million, respectively, and (iii) income taxexpense of $17 million and $23 million, respectively.:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| in millions |
| | | | | | | |
Operating income (loss) | $ | 139.5 | | | $ | (352.9) | | | $ | 252.5 | | | $ | (168.3) | |
Net non-operating expenses | $ | (89.7) | | | $ | (116.0) | | | $ | (252.5) | | | $ | (187.6) | |
Income tax expense | $ | (30.6) | | | $ | (39.7) | | | $ | (43.8) | | | $ | (62.5) | |
Net earnings (loss) | $ | 19.2 | | | $ | (508.6) | | | $ | (43.8) | | | $ | (418.4) | |
Gains or losses associated with (i) changes in the fair values of derivative instruments and (ii) movements in foreign currency exchange rates are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate Adjusted OIBDA to a level that more than offsets the aggregate amount of our (i) share-based compensation expense, (ii) depreciation and amortization, (iii) impairment, restructuring and other operating items, (iv) interest expense, (v) other non-operating expenses and (vi) income tax expenses.
Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed under Material Changes in Financial Condition—Capitalization below, we expect that we will continue to report significant levels of interest expense for the foreseeable future. For information concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see the discussion under Overview above.
Net earnings (loss) attributable to noncontrolling interests
During the three months ended March 31, 2018 and 2017, we reported net earnings (loss) attributable to noncontrolling interests of ($10 million) and $16 million, respectively.The 2018 period primarily includes losses attributable to our noncontrolling interests in certain C&W entities, as compared to the 2017 period, which primarily comprises earnings attributable to noncontrolling interests in certain C&W entities.
During the first quarter of 2018, we increased our ownership in C&W Jamaica from 82.0% to 91.7%. For additional information, see note 10 to our condensed consolidated financial statements.
Material Changes in Financial Condition
Sources and Uses of Cash
EachAs of our reportable segments is separately financed within one of ourJune 30, 2023, we have three primary “borrowing groups.groups,” These borrowing groupswhich include the respective restricted parent and subsidiary entities withinof C&W, VTR FinanceLiberty Puerto Rico and Liberty Puerto Rico.Costa Rica. Our borrowing groups, which typically generate cash from operating activities, accounted forheld a significant portion of our consolidated cash and cash equivalents at March 31, 2018.June 30, 2023. Our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests, foreign currency exchange restrictions with respect to certain C&W subsidiaries and other factors. For details of the restrictions on our subsidiaries to make payments to us through dividends, loans or other distributions see note 8 to our condensed consolidated financial statements.
Cash and cash equivalents
The details of the U.S. dollar equivalent balances of our cash and cash equivalents at March 31, 2018June 30, 2023 are set forth in the following table (in millions):
|
| | | |
Cash and cash equivalents held by: | |
Liberty Latin America and unrestricted subsidiaries: | |
Liberty Latin America (a) | $ | 70.6 |
|
Unrestricted subsidiaries (b) | 38.9 |
|
Total Liberty Latin America and unrestricted subsidiaries | 109.5 |
|
Borrowing groups (c): | |
C&W (d) | 291.6 |
|
VTR Finance | 69.0 |
|
Liberty Puerto Rico | 40.5 |
|
Total borrowing groups | 401.1 |
|
Total cash and cash equivalents | $ | 510.6 |
|
| | | | | |
(a)Cash and cash equivalents held by: | Represents the amount held by |
Liberty Latin America on a standalone basis. |
and unrestricted subsidiaries: | |
(b) | Represents the aggregate amount held by subsidiaries of Liberty Latin America that are outside of our borrowing groups.(a)
| $ | All of these companies rely on funds provided by our borrowing groups to satisfy their liquidity needs.28.4 |
| |
(c)Unrestricted subsidiaries (b) | Represents the aggregate amounts held by the parent entity of the applicable borrowing group and their restricted subsidiaries. |
81.5 | |
(d)Total Liberty Latin America and unrestricted subsidiaries | C&W’s subsidiaries hold the majority of C&W’s consolidated cash. Due to the restrictions as noted above, a significant portion of the cash held by 109.9 | |
Borrowing groups (c): | |
C&W subsidiaries is not considered to be an immediate source of corporate liquidity for C&W.(d) | 474.6 | |
Liberty Puerto Rico | 13.5 | |
Liberty Costa Rica | 34.9 | |
Total borrowing groups | 523.0 | |
Total cash and cash equivalents | $ | 632.9 | |
(a)Represents the amount held by Liberty Latin America on a standalone basis.
(b)Represents the aggregate amount held by subsidiaries of Liberty Latin America that are outside of our borrowing groups.All of these companies rely on funds provided by our borrowing groups to satisfy their liquidity needs.
(c)Represents the aggregate amounts held by the parent entity of the applicable borrowing group and their restricted subsidiaries.
(d)Includes $23 million and $35 million of cash held by operations in C&W Panama and C&W Bahamas, respectively.
Liquidity and capital resources of Liberty Latin America and its unrestricted subsidiaries
Our current sources of corporate liquidity include (i) cash and cash equivalents held by Liberty Latin America and, subject to certain tax and legal considerations, Liberty Latin America’s unrestricted subsidiaries, and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments. From time to time, Liberty Latin America and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments from Liberty Latin America’s borrowing groups or affiliates, upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets of Liberty Latin America and its unrestricted subsidiaries and (iii) proceeds in connection with the incurrence of debt by Liberty Latin America or its unrestricted subsidiaries or the issuance of equity securities by Liberty Latin America. No assurance can be given that any external funding would be available to Liberty Latin America or its unrestricted subsidiaries on favorable terms, or at all. As noted above, various factors may limit our ability to access the cash of our borrowing groups.
Our corporate liquidity requirements include (i) corporate general and administrative expenses and (ii) other liquidity needs that may arise from time to time. In addition, Liberty Latin America and its unrestricted subsidiaries may require cash in connection with (i) the repayment of third-party and intercompany debt, (ii) the satisfaction of contingent liabilities, (iii) acquisitions and other investment opportunities, (iv) the repurchase of debt securities, (v) tax payments or (vi) any funding requirements of our consolidated subsidiaries, includingsubsidiaries.
During the six months ended June 30, 2023, the aggregate value of our commitmentshare repurchases was $82 million. For additional information regarding our Share Repurchase Program, see note 15 to fund our portioncondensed consolidated financial statements and Part II—Item 2 Unregistered Sales of any potential liquidity shortfallsEquity Securities and Use of Liberty Puerto Rico through December 31, 2018, as further describedProceeds below.
Liquidity and capital resources of borrowing groups
The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments and, with respect to Liberty Puerto Rico, the remaining portion of the LCPR Equity Commitment (as described below) and insurance proceeds.instruments. For the details of the borrowing availability of such subsidiariesour borrowing groups at March 31, 2018,June 30, 2023, see note 8to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from Liberty Latin America and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund property and equipment additions,capital expenditures, debt service requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to Liberty Latin America, (iii) capital distributions to Liberty Latin America and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all. For information regarding our borrowing groups’ commitments and contingencies, see note 15 to our condensed consolidated financial statements.
On December 20, 2017, in connection with challenging circumstances that Liberty Puerto Rico continues to experience as a result of the damage caused by Hurricanes Irma and Maria, the LPR Credit Agreements were amended to (i) provide Liberty Puerto Rico with relief from complying with leverage covenants through December 31, 2018, (ii) increase the consolidated first lien net leverage ratio covenant from 4.5:1 to 5.0:1 beginning with the March 31, 2019 quarterly test date, (iii) restrict Liberty Puerto Rico’s ability to make certain types of payments to its shareholders through December 31, 2018 and (iv) include an equity commitment of up to $60 million from Liberty Puerto Rico’s shareholders through December 31, 2018 to fund any potential liquidity shortfalls. Based on our 60% ownership in Liberty Puerto Rico, we are obligated for up to $36 million of the LCPR Equity Commitment. During the first quarter of 2018, a $25 million capital contribution was provided to Liberty Puerto Rico consisting of $15 million from us and $10 million from Searchlight. Subsequent to March 31, 2018, an additional $20 million was contributed to Liberty Puerto Rico, consisting of $12 million from us and $8 million from Searchlight. Accordingly, Liberty Puerto Rico has up to an additional $15 million available under the LCPR Equity Commitment, of which we are obligated for up to $9 million.
Hurricanes Irma and Maria are expected to continue to have an adverse impact on Liberty Puerto Rico’s cash flows and liquidity. For additional information, see the discussion under Overview above.
For additional information regarding our cash flows, see the discussion under Condensed Consolidated Statements of Cash Flows below.
Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a debt balance (measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is typically between four and five times our consolidated Adjusted OIBDA, although the timing of our acquisitions and financing transactions and the interplay of foreign currency average and spot rates may impact this ratio. The ratio of our March 31, 2018 consolidated debt to our annualized consolidated Adjusted OIBDA for the quarter ended March 31, 2018 was 4.8x. In addition, the ratio of our March 31, 2018 consolidated net debt (debt, as defined above, less cash and cash equivalents) to our annualized consolidated Adjusted OIBDA for the quarter ended March 31, 2018 was4.5x. Beginning in the fourth quarter of 2017, these ratios increased due to the adverse impacts of the hurricanes on our Adjusted OIBDA. However, assuming our debt levels remain relatively consistent, we expect these ratios to decrease in future periods as we continue to recover from the adverse impacts of the hurricanes.
When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that support the respective borrowings. As further discussed under Item 3. Quantitative and Qualitative Disclosures about Market Risk and in note 5 to our condensed consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risks associated with our debt instruments.
Our ability to service or refinance our debt and, where applicable, to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase covenant EBITDA of our operating subsidiaries, as specified by our subsidiaries’ debt agreements (Covenant EBITDA), and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited
by incurrence-based and/or maintenance-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Covenant EBITDA of C&Wone of our borrowing groups were to decline, our ability to support or obtain additional debt in that borrowing group could be limited. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. At March 31, 2018,June 30, 2023, each of our borrowing groups was in compliance with its debt covenants. We do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months.
At March 31, 2018,June 30, 2023, the outstanding principal amount of our debt, together with our capitalfinance lease obligations, aggregated $6,440$8,042 million, including $212$316 million that is classified as current in our condensed consolidated balance sheet and $5,803$7,362 million that is not due until 20222027 or thereafter. AllAt June 30, 2023, $7,738 million of our debt and capitalfinance lease obligations have been borrowed or incurred by our subsidiariessubsidiaries. Included in the outstanding principal amount of our debt at March 31, 2018.June 30, 2023 is $294 million of vendor financing, which we use to finance certain of our operating expenses and property and equipment additions. These obligations are generally due within one year, other than for certain licensing arrangements that generally are due over the term of the related license. For additional information concerning our debt, and capital lease obligations, including our debt maturities, see note 8 to our condensed consolidated financial statements.
NotwithstandingThe weighted average interest rate in effect at June 30, 2023 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin, was 6.9%. The interest rate is based on stated rates and does not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our negative working capital positionoverall cost of borrowing. The weighted average impact of the derivative instruments on our borrowing costs at June 30, 2023 was as follows:
| | | | | | | | |
Borrowing group | | Decrease to borrowing costs |
| | |
C&W | (1.6) | % |
Liberty Puerto Rico | (0.7) | % |
Liberty Costa Rica | — | % |
Liberty Latin America borrowing groups | (1.2) | % |
Including the effects of derivative instruments, original issue premiums or discounts, including the discount on the Convertible Notes associated with the instrument’s conversion option, and commitment fees, but excluding the impact of financing costs, the weighted average interest rate on our indebtedness was 5.9% at June 30, 2023.
March 31, 2018, wWe believe that we have sufficient resources to repay or refinance the current portion of our debt and capitalfinance lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our debt maturities grow in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete refinancing transactions or otherwise extend our debt maturities. In this regard, it is difficult to predict how political, economic and economicsocial conditions, sovereign debt concerns or any adverse regulatory developments will impact the credit and equity markets we access and our future financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution, and (ii) tightening of the credit markets and (iii) in the case of Liberty Puerto Rico, by the adverse impacts of the hurricanes on its operations. For additional information regarding the impacts of the hurricanes, see the related discussion under Overview above.markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
Condensed Consolidated Statements of Cash Flows
General. Our cash flows are subject to variations due to FX.
Summary. Our condensed consolidated statements of cash flows for the threesix months ended March 31, 2018June 30, 2023 and 20172022 are summarized as follows:
| | | Three months ended March 31, | | | | | Six months ended June 30, | |
| 2018 | | 2017 | | Change | | 2023 | | 2022 | | Change |
| in millions | | in millions |
| | | | | | |
Net cash provided by operating activities | $ | 163.2 |
| | $ | 75.0 |
| | $ | 88.2 |
| Net cash provided by operating activities | $ | 288.0 | | | $ | 347.1 | | | $ | (59.1) | |
Net cash used by investing activities | (187.8 | ) | | (127.0 | ) | | (60.8 | ) | Net cash used by investing activities | (291.1) | | | (342.9) | | | 51.8 | |
Net cash provided (used) by financing activities | (11.8 | ) | | 34.5 |
| | (46.3 | ) | Net cash provided (used) by financing activities | (132.7) | | | 31.1 | | | (163.8) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 0.1 |
| | (0.5 | ) | | 0.6 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4.2) | | | (2.4) | | | (1.8) | |
Net decrease in cash, cash equivalents and restricted cash | $ | (36.3 | ) | | $ | (18.0 | ) | | $ | (18.3 | ) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (140.0) | | | $ | 32.9 | | | $ | (172.9) | |
Operating Activities.The increasedecrease in net cash provided by our operating activities is primarily attributabledue to the net effect of (i) an increase froma decline in Adjusted OIBDA and related working capital items inclusive of a net advance payment received from our third-party insurance provider of $30 millionand (ii) an increase associated with the initial insurance claims filed in connection with damages sustained from the hurricanes, and (ii) lower interest payments.derivative instruments.
Investing Activities. The increase in net cash used by our investing activities isduring 2023 primarily attributablerelates to higher(i) capital expenditures, as further discussed below.below, and (ii) the purchase of additional investments made during the year.The cash used by investing activities during 2022 primarily relates to (i) capital expenditures and (ii) acquisitions. The cash used for acquisitions during the 2022 period comprises cash paid for the BBVI Acquisition, partially offset by cash received in connection with finalizing the purchase price of the Liberty Telecomunicaciones Acquisition. For additional information regarding our acquisitions, see note 4 to our condensed consolidated financial statements.
The capital expenditures, net, that we report in our condensed consolidated statements of cash flows, which relates to cash paid for property and equipment, do not include amounts that are financed under capital-related vendor financing or capitalfinance lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal is repaid. In this discussion, we refer to (i) our capital expenditures, net, as reported in our condensed consolidated statements of cash flows, which exclude amounts financed under capital-related vendor financing or capital lease arrangements, and (ii) our total property and equipment additions, which include our capital expenditures, net, on an accrual basis and amounts financed under capital-related vendor financing or capitalfinance lease arrangements. For further details regarding our property and equipment additions, see note 16 to our condensed consolidated financial statements.
A reconciliation of our property and equipment additions to our capital expenditures, net, as reported in our condensed consolidated statements of cash flows, is set forth below:
| | | | | | | | | | | |
| Six months ended June 30, |
| 2023 | | 2022 |
| in millions |
| | | |
Property and equipment additions | $ | 337.1 | | | $ | 367.1 | |
Assets acquired under capital-related vendor financing arrangements | (71.9) | | | (67.5) | |
Changes in current liabilities related to capital expenditures and other | 7.9 | | | 19.5 | |
Capital expenditures, net | $ | 273.1 | | | $ | 319.1 | |
|
| | | | | | | |
| Three months ended March 31, | |
| 2018 | | 2017 |
| in millions |
| | | |
Property and equipment additions | $ | 194.0 |
| | $ | 139.2 |
|
Assets acquired under capital-related vendor financing arrangements | (20.7 | ) | | (14.1 | ) |
Assets acquired under capital leases | (0.6 | ) | | (0.9 | ) |
Changes in current liabilities related to capital expenditures | 15.5 |
| | 0.2 |
|
Capital expenditures | $ | 188.2 |
| | $ | 124.4 |
|
OurThe decrease in our property and equipment additions increased during the threesix months ended March 31, 2018, June 30, 2023,as compared to the corresponding period in 2017, largely2022,is primarily due to thenet effect of (i) a decrease associated with the disposition of the Chile JV Entities in October 2022, and(ii) an increase related to baseline additions and new build activity. During the six months ended June 30, 2023 and 2022, our property and equipment additions represented15.1% and 15.1% of revenue, respectively.
Financing Activities. During the six months ended June 30, 2023, we used$133 million of cash from financing activities, primarily due to(i) $80 million of cash outflow associated with the repurchase of Liberty Latin America common shares, (ii) $41 million in payments related to distributions to noncontrolling interest owners in C&W Panama and C&W Bahamas, and
(iii) $15 million of payments for financing costs and debt premiums, primarily associated with refinancing activity at Liberty Costa Rica. During the six months ended June 30, 2022, we generated $31 million of cash from financing activities, primarily due to the net effect of (i) an increase in expenditures by Liberty Puerto Rico and C&W, primarily related to $62$153 million and $8 million, respectively, in connection with network restoration activities following Hurricanes Irma and Maria, and (ii) a decrease due to FX. During the three months ended March 31, 2018 and 2017, our property and equipment additions represented 21.3% and 15.3% of revenue, respectively. This increase in property and equipment additions as a percentage of revenue is primarily a function of the significant increase in property and equipment additions during the first quarter of 2018 as a result of the restoration activities at Liberty Puerto Rico and, to a lesser extent at C&W, following the hurricanes.
Financing Activities. During the three months ended March 31, 2018, we used $12 million in net cash from financing activities, primarily relating to $19 million of cash used in connection with the C&W Jamaica NCI Acquisition, which was partially offset by a $10 million capital contribution from Searchlight indirectly to Liberty Puerto Rico for purposes of funding liquidity shortfalls following the impact of the hurricanes. For additional information see note 10 to our condensed consolidated financial statements. During the three months ended March 31, 2017, we received $35 million in net cash from financing activities, which includes $63 million in net borrowings of debt, partially offset by distributions to(ii) $119 million associated with the repurchase of Liberty GlobalLatin America common shares and noncontrolling interest owners(iii) $12 million of $19 million and $15 million, respectively.
Adjusted Free Cash Flow
We define adjusted free cash flow as net cash provided by our operating activities, plus (i) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions and (ii) expenses financed by an intermediary, less (a) capital expenditures, (b) distributionsreceived related to noncontrolling interest owners, (c) principal payments on amounts financed by vendors and intermediaries and (d) principal payments on capital leases. We changedderivative instruments, primarily related to the way we define adjusted free cash flow effective December 31, 2017settlement of certain cross currency swaps at VTR prior to deduct distributions to noncontrolling interest owners. This change was given effect for all periods presented. Additionally, on January 1, 2018, we retroactively adopted ASU 2016-18, which resulted in an immaterial decrease in cash from operating activities for the three months ended March 31, 2017. For additional information regardingdisposition of the impact of adopting ASU 2016-18, see note 2 to our condensed consolidated financial statements. We believe that our presentation of adjusted free cash flow provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Adjusted free cash flow should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view adjusted free cash flow as a supplement to, and not a substitute for, U.S. GAAP measures of liquidity included in our condensed consolidated statements of cash flows.Chile JV Entities.
The following table provides the details of our adjusted free cash flow:
|
| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| in millions |
| | | |
Net cash provided by operating activities | $ | 163.2 |
| | $ | 75.0 |
|
Cash payments for direct acquisition and disposition costs | 0.1 |
| | 0.9 |
|
Expenses financed by an intermediary (a) | 32.3 |
| | 10.3 |
|
Capital expenditures | (188.2 | ) | | (124.4 | ) |
Distribution to noncontrolling interest owners | — |
| | (14.6 | ) |
Principal payments on amounts financed by vendors and intermediaries | (51.1 | ) | | (18.8 | ) |
Principal payments on capital leases | (2.0 | ) | | (1.9 | ) |
Adjusted free cash flow | $ | (45.7 | ) | | $ | (73.5 | ) |
| |
(a) | For purposes of our condensed consolidated statements of cash flows, expenses, including VAT, financed by an intermediary are treated as hypothetical operating cash outflows and hypothetical financing cash inflows. When we pay the financing intermediary, we record financing cash outflows in our condensed consolidated statements of cash flows. For purposes of our adjusted free cash flow definition, we add back the hypothetical operating cash outflow when these financed expenses are incurred and deduct the financing cash outflows when we pay the financing intermediary. |
Off Balance Sheet Arrangements
In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties and (ii) performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future.
Contractual Commitments
For information concerning certain indemnifications provided by C&W,our debt and operating lease obligations, see note 15notes 8 and 9, respectively, to our condensed consolidated financial statements.
Contractual Commitments
The following table sets forth the U.S. dollar equivalents of our commitments as of March 31, 2018:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments due during | | Total |
| Remainder of 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | Thereafter | |
| in millions |
| | | | | | | | | | | | | | | |
Debt (excluding interest) | $ | 173.2 |
| | $ | 257.8 |
| | $ | 64.9 |
| | $ | 125.0 |
| | $ | 1,615.2 |
| | $ | 206.3 |
| | $ | 3,981.0 |
| | $ | 6,423.4 |
|
Capital leases (excluding interest) | 11.9 |
| | 3.3 |
| | 1.5 |
| | 0.1 |
| | — |
| | — |
| | — |
| | 16.8 |
|
Programming commitments | 120.3 |
| | 58.3 |
| | 24.4 |
| | 18.0 |
| | 2.2 |
| | 1.5 |
| | 0.7 |
| | 225.4 |
|
Network and connectivity commitments | 82.2 |
| | 74.2 |
| | 25.9 |
| | 18.5 |
| | 14.6 |
| | 13.9 |
| | 24.3 |
| | 253.6 |
|
Purchase commitments | 110.7 |
| | 27.6 |
| | 9.6 |
| | 1.1 |
| | 1.1 |
| | 0.6 |
| | — |
| | 150.7 |
|
Operating leases | 22.5 |
| | 20.6 |
| | 16.9 |
| | 13.4 |
| | 11.4 |
| | 9.1 |
| | 17.3 |
| | 111.2 |
|
Other commitments | 8.9 |
| | 2.8 |
| | 1.6 |
| | 1.4 |
| | 1.3 |
| | 1.3 |
| | 10.0 |
| | 27.3 |
|
Total (a) | $ | 529.7 |
| | $ | 444.6 |
| | $ | 144.8 |
| | $ | 177.5 |
| | $ | 1,645.8 |
| | $ | 232.7 |
| | $ | 4,033.3 |
| | $ | 7,208.4 |
|
Projected cash interest payments on debt and capital lease obligations (b) | $ | 218.9 |
| | $ | 373.7 |
| | $ | 352.8 |
| | $ | 349.1 |
| | $ | 300.0 |
| | $ | 237.6 |
| | $ | 411.7 |
| | $ | 2,243.8 |
|
| |
(a) | The commitments included in this table do not reflect any liabilities that are included in our March 31, 2018 condensed consolidated balance sheet other than debt and capital lease obligations. Our liability for uncertain tax positions in the various jurisdictions in which we operate ($318 millionat March 31, 2018) has been excluded from the table as the amount and timing of any related payments are not subject to reasonable estimation.
|
| |
(b) | Amounts are based on interest rates, interest payment dates, commitment fees and contractual maturities in effect as of March 31, 2018. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. In addition, the amounts presented do not include the impact of our derivative contracts. |
For information concerning our debt and capital lease obligations, see note 8 to our condensed consolidated financial statements. For information concerning our commitments, see note 15 to our condensed consolidated financial statements.
In addition to the commitments set forth in the table above, we have commitments under (i) derivative instruments and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For information regarding projected cash flows associated with our derivative instruments, see Item 3. Quantitative and Qualitative Disclosures About Market Risk—Projected Cash Flows Associated with Derivative Instruments below. For information regarding our derivative instruments, including the net cash paid or received in connection with these instruments during the threesix months ended March 31, 2018June 30, 2023 and 2017,2022, see note 5 to our condensed consolidated financial statements.
| |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information in this section should be read in conjunction with the more complete discussion that appears under Quantitative and Qualitative Disclosures About Market Risk in our 20172022 Form 10-K. The following discussion updates selected numerical information to March 31, 2018.
We are exposed to market risk in the normal course of our business operations due to our investments in various countries and ongoing investing and financing activities. Market risk refers to the risk of loss arising from adverse changes in foreign currency exchange rates, interest rates and stock prices. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. As further described below, we have established policies, procedures and processes governing our management of market risks and the use of derivative instruments to manage our exposure to such risks.
Cash and Investments
We invest our cash in highly liquid instruments that meet high credit quality standards. We are exposed to exchange rate risk to the extent that the denominations of our cash and cash equivalent balances, revolving lines of credit and other short-term sources of liquidity do not correspond to the denominations of Liberty Latin America’s short-term liquidity requirements. In order to mitigate this risk, we actively manage the denominations of our cash balances in consideration of Liberty Latin America’s forecasted liquidity requirements. At March 31, 2018, a significant proportion of our cash balance was denominated in U.S. dollars or denominated in a currency that is indexed to the U.S. dollar.
Foreign Currency Exchange Rates
The relationshiprelationships between the (i) the British pound sterling, the Chilean pesoJMD and the Jamaican dollarCRC and (ii) the U.S. dollar, which is our reporting currency, isare shown below, per one U.S. dollar:
|
| | | | | |
| March 31, 2018 | | December 31, 2017 |
Spot rates: | | | |
British pound sterling | 0.71 |
| | 0.74 |
|
Chilean peso | 603.90 |
| | 615.40 |
|
Jamaican dollar | 126.22 |
| | 124.58 |
|
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Spot rates: | | | |
JMD | 153.51 | | | 151.92 | |
CRC | 546.43 | | | 591.80 | |
|
| | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
Average rates: | | | |
British pound sterling | 0.72 |
| | 0.81 |
|
Chilean peso | 602.37 |
| | 655.13 |
|
Jamaican dollar | 125.80 |
| | 128.58 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Average rates: | | | | | | | |
JMD | 152.87 | | | 153.91 | | | 152.93 | | | 154.39 | |
CRC | 540.45 | | | 674.27 | | | 551.61 | | | 659.60 | |
Interest Rate Risks
In general, we seek to enter into derivative instruments to protect against increases in the interest rates on our variable-rate debt. Accordingly, we have entered into various derivative transactions to reduce exposure to increases in interest rates. We use interest rate derivative contracts to exchange, at specified intervals, the difference between fixed and variable interest rates calculated by reference to an agreed-upon notional principal amount. We also use interest rate cap agreements that lock in a maximum interest rate if variable rates rise, but also allow our company to benefit from declines in market rates. At March 31, 2018,June 30, 2023, we effectively paid a fixed or capped rate of interest rate on 97%96% of our total debt.debt, which includes the impact of our interest rate derivative contracts. The final maturity dates of our various portfolios of interest rate derivative instruments generally fall short ofmatch the respective maturities of the underlying variable-rate debt. In this regard, we use judgment to determine the appropriate maturity dates of our portfolios of interest rate derivative instruments, taking into account the relative costs and benefits of different maturity profiles in light of current and expected future market conditions, liquidity issues and other factors. For additional information concerning the impacts of these interest rate derivative instruments, see note 5 to our condensed consolidated financial statements.
Sensitivity Information
Information concerning the sensitivity of the fair value of certain of our more significant derivative instruments to changes in market conditions is set forth below. The potential changes in fair value set forth below do not include any amounts associated with the remeasurement of the derivative asset or liability into the applicable functional currency. For additional information, see notes 5 and 6 to our condensed consolidated financial statements.
VTR Cross-currency Derivative Contracts
Holding all other factors constant, at March 31, 2018, an instantaneous increase (decrease) of 10% in the value of the Chilean peso relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the VTR cross-currency derivative contracts by approximately CLP 107.5 billion ($178 million).
C&W Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at March 31, 2018:June 30, 2023, an instantaneous increase (decrease) in the relevant base rate of 100 basis points (1.0%) would have increased (decreased) the aggregate fair value of the C&W interest rate derivative contracts by approximately $89 million ($90 million).
| |
i. | an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the C&W cross-currency and interest rate derivative contracts by approximately $58 million; and |
| |
ii. | an instantaneous increase (decrease) of 10% in the value of the British pound sterling relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the C&W cross-currency and interest rate derivative contracts by approximately £16 million ($22 million). |
Liberty Puerto Rico Interest Rate Derivative Contracts
Holding all other factors constant, at June 30, 2023, an instantaneous increase (decrease) in the relevant base rate of 100 basis points (1.0%) would have increased (decreased) the aggregate fair value of the Liberty Puerto Rico interest rate derivative contracts by approximately $27 million ($25 million).
Projected Cash Flows Associated with Derivative Instruments
The following table provides information regarding the projected cash flows associated with our derivative instruments. The U.S. dollar equivalents presented below are based on interest rates and exchange rates that were in effect as of March 31, 2018.June 30, 2023. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. For additional information regarding our derivative instruments, including our counterparty credit risk, see note 5 to our condensed consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments (receipts) due during: | | Total |
| Remainder of 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | |
| in millions |
Projected derivative cash payments (receipts), net: | | | | | | | | | | | | | | | |
Interest-related (a) | $ | (48.5) | | | $ | (98.3) | | | $ | (62.5) | | | $ | (101.0) | | | $ | (101.0) | | | $ | (61.1) | | | $ | (23.9) | | | $ | (496.3) | |
Other (b) | 13.9 | | | 6.6 | | | — | | | — | | | — | | | — | | | — | | | 20.5 | |
Total | $ | (34.6) | | | $ | (91.7) | | | $ | (62.5) | | | $ | (101.0) | | | $ | (101.0) | | | $ | (61.1) | | | $ | (23.9) | | | $ | (475.8) | |
(a)Includes the interest-related cash flows of our interest rate derivative contracts.
(b)Includes amounts related to our foreign currency forward contracts.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments (receipts) due during: | | Total |
| Remainder of 2018 | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | Thereafter | |
| | | in millions |
Projected derivative cash payments, net: | | | | | | | | | | | | | | | |
Interest-related (a) | $ | 20.4 |
| | $ | 16.2 |
| | $ | 9.3 |
| | $ | 9.3 |
| | $ | 11.9 |
| | $ | 13.5 |
| | $ | 7.5 |
| | $ | 88.1 |
|
Principal-related (b) | — |
| | (11.6 | ) | | — |
| | — |
| | 150.9 |
| | — |
| | 28.5 |
| | 167.8 |
|
Other (c) | 13.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 13.4 |
|
Total | $ | 33.8 |
| | $ | 4.6 |
| | $ | 9.3 |
| | $ | 9.3 |
| | $ | 162.8 |
| | $ | 13.5 |
| | $ | 36.0 |
| | $ | 269.3 |
|
| |
(a) | Includes interest-related cash flows of our cross-currency and interest rate swap contracts. |
| |
(b) | Includes the principal-related cash flows of our cross-currency swap contracts. |
| |
(c) | Includes amounts related to our foreign currency forward contracts. |
| |
Item 4. | CONTROLS AND PROCEDURES |
Item 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principle Executive Officer and our Principal Financial Officer (the Executives,), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Executives recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating the cost-benefit relationship of possible controls and objectives.
As disclosed in our 2022 Form 10-K, we identified material weaknesses in our internal control over financial reporting. The material weaknesses will not be considered remediated until the applicable new or enhanced controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Our management, with the participation of the Executives, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2018. Based on that evaluation,June 30, 2023. As remediation is not completed, the Executives concluded that our disclosure controls and procedures are effective at the reasonable assurance levelcontinue to be ineffective as of March 31, 2018.June 30, 2023.
Management’s Remediation Plans
Management, with oversight from the Audit Committee of the Board of Directors, is continuing to implement the remediation plans as disclosed in our 2022 Form 10-K. We believe that these actions and the improvements we expect to achieve, when fully implemented, will strengthen our internal control over financial reporting and remediate the material weaknesses identified.
Changes in Internal Control over Financial Reporting
ThereExcept as listed below, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
During the quarter, we made the following changes in our internal control over financial reporting: •designed and implemented additional manual procedures and controls to enhance our internal control process through a combination of preventative and detective controls;
•a human resource and payroll technology solution was implemented for certain of our segments to standardize and enhance the related processes and controls; and
•held trainings to reinforce control concepts and responsibilities for control performers.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time to time, our subsidiaries and affiliates have become involved in litigation relating to claims arising out of their operations in the normal course of business. For additional information, see note 16 to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c)Issuer Purchases of Equity Securities
On February 22, 2022, our Directors approved the Share Repurchase Program. This program authorizes us to repurchase from time to time up to $200 million of our Class A common shares and/or Class C common shares through December 2024. On May 8, 2023, our Directors approved an additional $200 million for the repurchase of our Class A common shares and/or Class C common shares under the Share Repurchase Program through December 2025 through open market purchases at prevailing market prices, in privately negotiated transactions, in block trades, derivative transactions and/or through other legally permissible means. The Share Repurchase Program does not obligate us to repurchase any of our Class A or C common shares.
The following table sets forth information concerning our company’s purchase of its own equity securities during the three months ended June 30, 2023 (in millions, except per share amounts). Due to rounding, the total number of shares purchased during the quarter may not recalculate.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total number of shares purchased | | Average price paid per share (a) | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs |
| | | | | | | | | |
April 1, 2023 through April 30, 2023: | | | | | | | | |
Class A | | 0.4 | | | $ | 8.43 | | | 0.4 | | | (b) |
Class C | | 1.3 | | | $ | 8.47 | | | 1.3 | | | |
May 1, 2023 through May 31, 2023: | | | | | | | | |
Class A | | 0.7 | | | $ | 8.08 | | | 0.7 | | | (b) |
Class C | | 1.9 | | | $ | 7.88 | | | 1.9 | | | |
June 1, 2023 through June 30, 2023: | | | | | | | | |
Class A | | — | | | $ | — | | | — | | | (b) |
Class C | | 2.6 | | | $ | 8.21 | | | 2.6 | | | |
Total – April 1, 2023 through June 30, 2023: | | | | | | | | |
Class A | | 1.1 | | | $ | 8.20 | | | 1.1 | | | (b) |
Class C | | 5.9 | | | $ | 8.16 | | | 5.9 | | | |
| | | | | | | | | |
(a)Average price paid per share includes direct acquisition costs.
(b)At June 30, 2023, the remaining amount authorized for repurchases under the Share Repurchase Program was $175 million.
Item 5. OTHER INFORMATION
(c) Insider Trading Arrangements and Policies
During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Listed below are the exhibits filed as part of this Quarterly Report on Form 10-Q (according to the number assigned to them in Item 601 of Regulation S-K):
|
| | | | |
10.1 |
| |
10.2 |
| Amended and Restated Credit Agreement, dated March 7, 2018,as of January 24, 2020 (as amended by the 2021 Extension Amendment dated as of September 23, 2021, the Term B-6 Joinder dated as of September 23, 2021, and the 2023 Amendment dated as of May 22, 2023) and entered into between, among others, Sable International Finance Limited, Coral-US Co-Borrower LLC and The Bank of Nova Scotia.*# |
10.3 |
10.2 | |
10.4 |
10.3 | |
10.5 |
31.1 | |
31.1 |
| |
31.2 |
| |
32.1 |
32 | |
101.SCH | |
101.INS |
| XBRL Instance Document.* |
101.SCH |
| XBRLInline Taxonomy Extension Schema Document.* |
101.CAL |
| XBRL Inline Taxonomy Extension Calculation Linkbase Document.* |
101.DEF |
| XBRL Inline Taxonomy Extension Definition Linkbase.* |
101.LAB |
| XBRL Inline Taxonomy Extension Label Linkbase Document.* |
101.PRE |
| XBRL Inline Taxonomy Extension Presentation Linkbase Document.* |
104 | Cover Page Interactive Data File.* (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
# Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Liberty Latin America hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any exhibit so furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | | | | | | | |
| | | LIBERTY LATIN AMERICA LTD. |
| | |
Dated: | MayAugust 8, 20182023 | | /s/ BALAN NAIR |
| | | Balan Nair President and Chief Executive Officer |
| | | |
Dated: | MayAugust 8, 20182023 | | /s/ CHRISTOPHER NOYES |
| | | Christopher Noyes Senior Vice President and Chief Financial Officer |