Telecommunications giant Liberty Global's Latin American and Caribbean unit -- which it dubbed LiLAC Group, and which has its own tracking stock (NASDAQ:LILAK) -- should be riding a wave of growth as the region's emerging markets develop. And in some cases, there's plenty of growth to go around. 

But growth has been choppy, particularly in the markets LiLAC entered last year when Liberty bought Cable & Wireless Communications (CWC) -- a move that made it the top consumer and B2B communications company in the region. And that has delayed LiLAC on its path to strong free cash flow longer than investors may have anticipated, particularly as management invests in future growth. Here's the numbers and what to take away from the first quarter of 2017. 

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Image source: Getty Images.

LiLAC Group results: The raw numbers

Metric Q1 2017 Q1 2016 Year-Over-Year Change
Sales $910.9 million  $303.9 million  199.7% 
Operating cash flow $353.9 million  $121.9 million  190.3% 
Free cash flow ($58.0 million)  $19.9 million  n/a 

Source: LiLAC Group earnings release.

What happened this quarter? 

The numbers above show huge growth. That's in large part because of the acquisition of CWC, which took place in the middle of the second quarter a year ago. Looking deeper into the results, we see that there's growth in some markets, but CWC is struggling to show year-over-year growth. 

  • 41,900 organic revenue generating units were added in the quarter, nearly twice the number added a year ago. Broadband added 38,600 and video added 5,200, but there was a net loss of 1,900 voice customers. 
  • Chile accounted for most of the user growth with 25,400 additions; Puerto Rico had 6,600; and the CWC business had 9,900. 
  • The rebased growth rates in Chile and Puerto Rico were 7% and 3% respectively. 
  • On a rebased basis, CWC's top line contracted by 4%, and operating cash flow was down 19%, due partially to a tough year-over-year comparison.
  • $129.8 million was spent on investing activities, outpacing operating cash flow of $75.9 million in the quarter. 
  • Debt and capital lease obligations were $6.1 billion, offset by $527 million in cash at the end of the quarter. 

What management had to say

According to management, investors shouldn't expect 2017 to be highly profitable because management is focusing on investing for the future. In particular, there is work to be done integrating the CWC side of the business and and improving its margins. 

Looking forward

Management still expects around $1.5 billion in operating cash flow in 2017, consistent with previous guidance. But with 21% to 23% of revenue expected to be put back into the business in the form of capital expenditures, free cash flow for the year will be limited. 

We'll also slowly see Liberty Global's best practices and experience applied to its Latin America unit, especially as management is reassigned to this business. Long term, finances should improve as a result of these changes. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Liberty LiLAC Group. The Motley Fool has a disclosure policy.