U.K. joint venture with Telefonica proceeding on
track1
Best result in over two years for customer and broadband
additions
Repurchased over $750 million of stock through the end of
July
Q2 loss from continuing operations increased 48% YoY to $504
million
Q2 Adjusted EBITDA of $1,189 million, effectively flat
YoY
Liberty Global plc today announced its Q2 2020 financial
results. Our former operations in Austria, Germany, Hungary,
Romania and the Czech Republic, along with our DTH business
(collectively, the "Discontinued Operations") are presented as
discontinued operations for the three and six months ended June 30,
2019. Unless otherwise indicated, the information in this release
relates only to our continuing operations. Effective with the
release of our second quarter earnings we have stopped using the
term Operating Cash Flow ("OCF") and now use the term "Adjusted
EBITDA" . As we define the term, Adjusted EBITDA has the same
meaning as OCF had previously, and therefore does not impact any
previously reported amounts.
CEO Mike Fries stated, "Against the backdrop of the COVID-19
pandemic, we continue to effectively navigate through these
unprecedented times. Our core focus will always be on ensuring the
health and safety of our employees, while delivering an
unparalleled connectivity experience for our customers. On that
front, our fiber-rich networks continue to perform extremely well
despite the surge in usage over the last several months. We
understand the importance of seamless connectivity and strive to
deliver the best possible products and services to our
customers.
Customer satisfaction, as measured by net promoter scores, has
been at record highs across the majority of our footprint, which
translated into our best net customer and broadband additions since
Q3 2017. This result was led by a strong performance at Virgin
Media, where we added 24,000 customers, our best Q2 result in four
years. Fixed-mobile convergence ("FMC") continues to drive good
mobile growth with over 100,000 post-paid additions, and FMC
penetrations reaching 23%, 46% and 22% at Virgin Media, Telenet and
UPC Switzerland, respectively.
We are making great progress with pre-merger planning for our
announced combination of Virgin Media and O2 U.K., and are working
closely with the European Commission and U.K. regulators to ensure
a smooth review of the transaction.
With respect to our financials, Q2 revenue declined by 4%
year-over-year and was impacted by approximately $110 million in
generally low margin COVID-19 related impacts. As such, our
Adjusted EBITDA performance was resilient, ending the quarter
effectively flat compared to the prior-year period. And with a
continued decline in our capital intensity, we delivered 14%
rebased2 OFCF growth year-over-year.
Despite uncertainty regarding the medium-term impact from the
COVID-19 crisis, we are reaffirming all of our original full-year
guidance metrics. From a balance sheet perspective, we have
refinanced over $10 billion of long-term debt YTD, extended our
average tenor3 to over 7 years and lowered our fully-swapped
borrowing cost to 4.0% for the Full Company4. As such, our balance
sheet remains in great shape with $9.8 billion of total liquidity5
for the Full Company, including $7.4 billion in cash6. During Q2 we
remained active on share buybacks, upping our total repurchases to
over $750 million spent from mid-February through July."
Q2 Highlights
- Q2 reported revenue declined 4.5%; rebased2 revenue decreased
4.3%
- Q2 loss from continuing operations increased 48% YoY to $503.8
million
- Q2 Adjusted EBITDA7 down 0.2% on a reported basis and 0.4% on a
rebased basis to $1,188.5 million
- Q2 property & equipment additions were 21.6% of revenue as
compared to 24.0% in Q2 2019
- Built 126,000 new premises during Q2, including 93,000 in the
U.K. & Ireland
- Solid balance sheet with $9.8 billion of liquidity5 for the
Full Company4
- Comprised of $4.4 billion of cash, $3.0 billion of investments
held under separately managed accounts (SMAs) and $2.4 billion of
unused borrowing capacity8
- Gross and net leverage9 of 5.3x and 3.8x, respectively, on a
Full Company basis
- Fully-swapped borrowing cost of 4.0% on debt balance of $27.7
billion for the Full Company
- Repurchased approximately $750 million of stock through July
31, 2020
- Making excellent progress on our announced transaction to
combine Virgin Media with O2, the U.K.'s largest mobile
operator
Liberty Global (continuing operations)
Q2 2020
Q2 2019
YoY
Change
(reported)
YoY
Change (rebased)
YTD 2020
YoY
Change
(reported)
Customers
Organic Customer Additions (Losses)
7,700
(28,600
)
126.9
%
(11,200
)
63.0
%
Financial (in
millions, except percentages)
Revenue
$
2,722.9
$
2,850.4
(4.5
%)
(4.3
%)
$
5,598.7
(2.1
%)
Earnings (loss) from continuing
operations
$
(503.8
)
$
(339.6
)
(48.4
)%
$
513.9
179.5
%
Adjusted EBITDA
$
1,188.5
$
1,190.7
(0.2
%)
(0.4
%)
$
2,338.8
(1.5
%)
P&E additions
$
588.0
$
682.7
(13.9
%)
$
1,242.4
(10.1
%)
OFCF
$
600.5
$
508.0
18.2
%
14.2
%
$
1,096.4
10.4
%
Cash provided by operating activities
$
1,142.1
$
1,322.2
(13.6
)%
$
1,591.9
Cash used by investing activities
$
(1,285.2
)
$
(315.0
)
(308.0
)%
$
(3,634.4
)
Cash used by financing activities
$
(938.1
)
$
(857.9
)
(9.3
)%
$
(1,721.3
)
Adjusted FCF(i)
$
455.7
$
591.8
(23.0
)%
(i) Adjusted FCF for the three months ended June 30, 2019 is
presented on a pro forma basis, which gives pro forma effect to
certain adjustments to our recurring cash flows that we have or
expect to realize following the disposition of the Discontinued
Operations. For additional details, see the information and
reconciliation included within the Glossary.
Customer Growth
Three months ended
Six months ended
June 30,
June 30,
2020
2019
2020
2019
Organic customer net additions (losses)
by market
U.K./Ireland
23,900
(5,600
)
22,800
19,900
Belgium
(2,900
)
(8,200
)
(10,400
)
(23,400
)
Switzerland
(16,400
)
(18,100
)
(32,800
)
(41,700
)
CEE (Poland and Slovakia)
3,100
3,300
9,200
14,900
Total
7,700
(28,600
)
(11,200
)
(30,300
)
- Customer Relationships: During Q2
we gained 8,000 customer relationships, as compared to a loss of
29,000 in the prior-year period
- U.K./Ireland: Virgin Media gained
24,000 customer relationships in Q2 as compared to a loss of 6,000
in Q2 2019, as our market leading broadband speeds and FMC bundles
led to increased customer satisfaction and contributed to our best
Q2 customer net adds since 2016
- Belgium: Telenet lost 3,000
customer relationships in Q2, which was an improvement compared to
a loss of 8,000 in Q2 2019, primarily driven by successful
quad-play bundles
- Switzerland: Customer attrition of
16,000 in Q2 was a year-over-year improvement compared to a loss of
18,000 in Q2 2019, as commercial momentum improved but was still
adversely impacted by competitive market conditions
- CEE (Poland and Slovakia): CEE
added 3,000 customer relationships in both Q2 2020 and Q2 2019,
driven by growth in new build areas
Revenue Highlights
The following table presents (i) revenue of each of our
consolidated reportable segments for the comparative periods and
(ii) the percentage change from period to period on both a reported
and rebased basis:
Three months ended
Increase/(decrease)
Six months ended
Increase/(decrease)
June 30,
June 30,
Revenue
2020
2019
Reported %
Rebased %
2020
2019
Reported %
Rebased %
in millions, except %
amounts
U.K./Ireland
$
1,531.8
$
1,644.0
(6.8
)
(3.6
)
$
3,152.4
$
3,305.3
(4.6
)
(2.1
)
Belgium
682.5
713.2
(4.3
)
(5.2
)
1,400.6
1,425.1
(1.7
)
(2.8
)
Switzerland
299.1
315.0
(5.0
)
(8.6
)
615.9
631.0
(2.4
)
(5.7
)
CEE
116.2
119.1
(2.4
)
4.2
235.3
238.2
(1.2
)
3.8
Central and Corporate
93.7
60.2
55.6
(4.2
)
194.9
120.9
61.2
2.0
Intersegment eliminations
(0.4
)
(1.1
)
N.M.
N.M.
(0.4
)
(2.1
)
N.M.
N.M.
Total
$
2,722.9
$
2,850.4
(4.5
)
(4.3
)
$
5,598.7
$
5,718.4
(2.1
)
(2.3
)
______________________________
N.M. - Not Meaningful
- Reported revenue for the three and six months ended June 30,
2020 decreased 4.5% and 2.1% YoY, respectively
- The decreases were primarily driven by the impact of (i)
organic revenue contraction and (ii) negative foreign exchange
("FX") movements, mainly related to the weakening of the British
Pound and Euro against the U.S. dollar
- Rebased revenue declined 4.3% in Q2 and 2.3% YTD, including:
- An unfavorable decrease of approximately $28 million in Q2 in
U.K./Ireland associated with the pausing or cancellation of certain
sporting events due to the COVID-19 pandemic, including (i) credits
that were given to certain customers and (ii) the estimated impact
of certain customers canceling their premium sports
subscriptions
- An unfavorable impact of $5.3 million in Q2 related to revenue
recognized by Virgin Media in the second quarter of 2019 in
connection with the sale of rights to future commission payments on
customer handset insurance arrangements
- An unfavorable decrease of $2.1 million in Q2 due to the
acceleration of revenue from our distribution partner in
Switzerland for the broadcast of ice hockey. Switzerland's ice
hockey league was cancelled as a result of the COVID-19 pandemic,
accordingly, the related revenue for the associated sports rights
that would have been recorded during the second quarter of 2020 was
recognized during the first quarter of 2020
Q2 2020 Rebased Revenue Growth - Segment
Highlights
- U.K./Ireland: Rebased revenue
decreased 3.6% YoY in Q2, with certain low-margin revenue streams
being impacted by the COVID-19 pandemic, including (i) lower cable
revenue associated with the aforementioned pausing or cancellation
of certain sporting events, (ii) lower handset sales due to retail
store closures, (iii) lower revenue from late fees due to the
temporary suspension of late payment charges during the lock-down
period and (iv) a reduction in revenue from business network
services. These decreases were only partially offset by an increase
in wholesale revenue related to long-term leases of a portion of
our network
- Belgium: Rebased revenue declined
5.2% YoY in Q2 driven by (i) lower interconnect revenue, (ii) lower
revenue from handset sales and (iii) a decline in advertising and
production revenue at De Vijver Media
- Switzerland: Rebased revenue
declined 8.6% YoY in Q2, primarily due to (i) lower consumer
subscription revenue as a result of customer volume losses and ARPU
pressure and (ii) lower mobile handset sales
- CEE (Poland and Slovakia): Rebased
revenue grew 4.2% YoY in Q2, primarily due to an increase in
residential cable subscription revenue driven by new build areas
and growth in B2B
- Central and Corporate: Rebased
revenue decreased 4.2% YoY in Q2, primarily due to a decrease in
CPE sales to the VodafoneZiggo JV
Earnings (loss) from Continuing Operations
- Earnings (loss) from continuing operations was ($503.8 million)
and ($339.6 million) for the three months ended June 30, 2020 and
2019, respectively, and $513.9 million and ($646.5 million) for the
six months ended June 30, 2020 and 2019, respectively
- The changes in our earnings (loss) from continuing operations
primarily resulted from the net effect of (i) changes in realized
and unrealized gains (losses) on derivative instruments, net, (ii)
decreases in depreciation and amortization, (iii) changes in
realized and unrealized gains (losses) due to changes in fair
values of certain investments and debt, net, (iv) changes in
foreign currency transactions gains (losses), net and (v) decreases
in Adjusted EBITDA, as further described below
Adjusted EBITDA Highlights
The following table presents (i) Adjusted EBITDA(*) of each of
our consolidated reportable segments for the comparative periods
and (ii) the percentage change from period to period on both a
reported and rebased basis:
Three months ended
Increase/(decrease)
Six months ended
Increase/(decrease)
June 30,
June 30,
Adjusted EBITDA
2020
2019
Reported %
Rebased %
2020
2019
Reported %
Rebased %
in millions, except %
amounts
U.K./Ireland
$
654.9
$
687.5
(4.7
)
(1.5
)
$
1,310.3
$
1,379.7
(5.0
)
(2.5
)
Belgium
354.1
349.4
1.3
3.7
685.7
688.4
(0.4
)
2.2
Switzerland
150.9
159.8
(5.6
)
(9.9
)
285.0
316.1
(9.8
)
(12.9
)
CEE
52.7
54.1
(2.6
)
4.2
107.0
107.8
(0.7
)
4.5
Central and Corporate
(24.1
)
(60.1
)
59.9
2.7
(49.2
)
(119.4
)
58.8
3.9
Intersegment eliminations
—
—
N.M.
N.M.
—
1.4
N.M.
N.M.
Total
$
1,188.5
$
1,190.7
(0.2
)
(0.4
)
$
2,338.8
$
2,374.0
(1.5
)
(2.0
)
______________________________
N.M. - Not Meaningful
(*) Consolidated Adjusted EBITDA is a non-GAAP measure, which we
believe 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 readily view
operating trends from a consolidated view. Investors should view
consolidated Adjusted EBITDA as a supplement to, and not a
substitute for, earnings or loss from continuing operations and
other U.S. GAAP measures of performance. For additional information
on our Adjusted EBITDA measure, including a reconciliation to
earnings (loss) from continuing operations, see the Glossary.
- Reported Adjusted EBITDA for the three and six months ended
June 30, 2020 decreased 0.2% and 1.5% YoY, respectively
- These decreases were primarily driven by (i) the aforementioned
negative impact of FX movements and (ii) an organic Adjusted EBITDA
decline
- Rebased Adjusted EBITDA declined 0.4% and 2.0% for the three
and six months ended June 30, 2020, respectively, including:
- The aforementioned unfavorable impacts of certain revenue
items, as discussed in the "Revenue Highlights" section above
- The following current year impacts:
- Lower costs of $28.9 million in U.K./Ireland related to credits
received during the second quarter of 2020 in connection with the
pausing or cancellation of certain sporting events due to the
COVID-19 pandemic, which offset the aforementioned revenue
declines
- A $12.1 million net favorable impact in Q2 related to certain
revenue and costs for sports rights that were accelerated as a
result of the COVID-19 pandemic. In this respect, certain sports
leagues in Belgium and Switzerland were cancelled and, accordingly,
$14.2 million of aggregate prepaid amounts for the associated
sports rights that were previously scheduled to be expensed during
the second quarter of 2020 were recognized during the first quarter
of 2020. This decrease in costs was only partially offset by the
aforementioned associated $2.1 million decrease in revenue in
Switzerland
- Unfavorable network tax increases of $4.4 million and $14.4
million for Q2 and YTD, respectively, following an increase in the
rateable value of our U.K. networks, which is being phased in over
a six-year period ending in 2022
- Lower call center costs in U.K./Ireland primarily due to
lockdowns during the second quarter of 2020 associated with the
COVID-19 pandemic, which prevented certain outsourced contract
services from being performed
- The following 2019 impacts:
- Lower severance costs in U.K./Ireland of $6.3 million
associated with revisions to our operating model and a decrease in
FTEs
- A favorable decrease in personnel costs in Central and
Corporate related to a $5.0 million cash bonus in Q2 2019
associated with the renewal of an existing executive employment
contract on similar terms
Q2 2020 Rebased Adjusted EBITDA - Segment
Highlights
- U.K./Ireland: Rebased Adjusted
EBITDA declined 1.5% YoY in Q2 due to the aforementioned revenue
performance offset by a decrease in our cost base due to various
COVID-19 impacts, including (i) lower programming costs due to the
aforementioned credits received during Q2 associated with the
pausing or cancellation of certain sporting events, (ii) a
reduction in customer care costs due to the temporary closure of
offshore call centers, (iii) lower marketing costs and (iv) lower
handset sales costs due to store closures. These cost reductions
were only partially offset by a $4.4 million net increase in
network taxes
- Belgium: Rebased Adjusted EBITDA
increased 3.7% YoY in Q2, primarily due to (i) lower programming,
sales and marketing expenses as a result of the COVID-19 pandemic
and (ii) lower costs related to outsourced labor and professional
services, including staff-related expenses and other indirect costs
as a result of the continued focus on tight control
- Switzerland: Rebased Adjusted
EBITDA declined 9.9% YoY in Q2, mainly due to the loss of
residential cable subscription revenue, partially offset by lower
programming and handset costs
- CEE (Poland and Slovakia): Rebased
Segment Adjusted EBITDA growth of 4.2% YoY in Q2, largely driven by
the increase in residential cable subscription revenue
OFCF Highlights
The following table presents (i) OFCF of each of our
consolidated reportable segments for the comparative periods and
(ii) the percentage change from period to period on both a reported
and rebased basis:
Three months ended
Increase/(decrease)
Six months ended
Increase/(decrease)
June 30,
June 30,
OFCF
2020
2019
Reported %
Rebased %
2020
2019
Reported %
Rebased %
in millions, except %
amounts
U.K./Ireland
$
332.1
$
316.1
5.1
8.7
$
640.9
$
613.0
4.6
7.3
Belgium
243.8
216.0
12.9
15.4
433.8
413.3
5.0
7.4
Switzerland
96.3
82.5
16.7
10.4
161.2
180.2
(10.5
)
(13.6
)
CEE
31.8
34.4
(7.6
)
(1.4
)
67.2
66.4
1.2
6.7
Central and Corporate
(103.5
)
(141.0
)
26.6
0.6
(206.7
)
(281.6
)
26.6
1.3
Intersegment eliminations
—
—
N.M.
N.M.
—
1.4
N.M.
N.M.
Total
$
600.5
$
508.0
18.2
14.2
$
1,096.4
$
992.7
10.4
6.0
______________________________
N.M. - Not Meaningful
Net Earnings (Loss) Attributable to Liberty Global
Shareholders
- Net earnings (loss) attributable to Liberty Global shareholders
was ($524.2 million) and $53.0 million for the three months ended
June 30, 2020 and 2019, respectively, and $425.6 million and $60.0
million for the six months ended June 30, 2020 and 2019,
respectively
Leverage and Liquidity
- Total principal amount of debt and
finance leases: $27.7 billion for the Full Company
- Leverage ratios9: At June 30,
2020, our adjusted gross and net leverage ratios were 5.3x and
3.8x, respectively, on a Full Company basis
- Average debt tenor3: Over 7 years,
with ~77% not due until 2026 or thereafter on a Full Company
basis
- Borrowing costs: Blended,
fully-swapped cost of debt was 4.0% for the Full Company
- Liquidity5: $9.8 billion on a Full
Company basis, including (i) $4.4 billion of cash at June 30, 2020,
(ii) $3.0 billion of investments held under SMAs and (iii) $2.4
billion of aggregate unused borrowing capacity8 under our credit
facilities
Forward-Looking Statements and Disclaimer
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements with respect to our strategies, future
growth prospects and opportunities; expectations with respect to
progress on the announced U.K. joint venture with Telefonica to
combine Virgin Media with O2, including related regulatory matters;
expectations with respect to continued network resiliency amidst
the COVID-19 usage surge; expectations regarding our financial
performance and related full year guidance metrics; expectations
with respect to our share repurchase plan; the strength of our
balance sheet, tenor of our third-party debt and anticipated
borrowing capacity; and other information and statements that are
not historical fact. These forward-looking statements involve
certain risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by these
statements. These risks and uncertainties include events that are
outside of our control, such as the continued use by subscribers
and potential subscribers of our and our affiliates’ services and
their willingness to upgrade to our more advanced offerings; our
and our affiliates’ ability to meet challenges from competition, to
manage rapid technological change or to maintain or increase rates
to subscribers or to pass through increased costs to subscribers;
the potential impact of the outbreak of COVID-19 on our company;
the effects of changes in laws or regulation; the effects of the
U.K.'s exit from the E.U.; general economic factors; our and our
affiliates’ ability to obtain regulatory approval and satisfy
regulatory conditions associated with acquisitions and
dispositions; our and affiliates’ ability to successfully acquire
and integrate new businesses and realize anticipated efficiencies
from acquired businesses; the availability of attractive
programming for our and our affiliates’ video services and the
costs associated with such programming; our and our affiliates’
ability to achieve forecasted financial and operating targets; the
outcome of any pending or threatened litigation; the ability of our
operating companies and affiliates to access cash of their
respective subsidiaries; the impact of our operating companies' and
affiliates’ future financial performance, or market conditions
generally, on the availability, terms and deployment of capital;
fluctuations in currency exchange and interest rates; the ability
of suppliers, vendors and contractors to timely deliver quality
products, equipment, software, services and access; our and our
affiliates’ ability to adequately forecast and plan future network
requirements including the costs and benefits associated with
network expansions; and other factors detailed from time to time in
our filings with the Securities and Exchange Commission, including
our most recently filed Form 10-Q and Form 10-K/A. These
forward-looking statements speak only as of the date of this
release. 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 change in events,
conditions or circumstances on which any such statement is
based.
About Liberty Global
Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK) is one of the
world’s leading converged video, broadband and communications
companies, with operations in six European countries under the
consumer brands Virgin Media, Telenet and UPC. We invest in the
infrastructure and digital platforms that empower our customers to
make the most of the digital revolution. Our substantial scale and
commitment to innovation enable us to develop market-leading
products delivered through next-generation networks that connect 11
million customers subscribing to 25 million TV, broadband internet
and telephony services. We also serve 6 million mobile subscribers
and offer WiFi service through millions of access points across our
footprint.
In addition, Liberty Global owns 50% of VodafoneZiggo, a joint
venture in the Netherlands with 4 million customers subscribing to
10 million fixed-line and 5 million mobile services, as well as
significant investments in ITV, All3Media, ITI Neovision,
Lionsgate, the Formula E racing series and several regional sports
networks. For more information, please visit www.libertyglobal.com
or contact:
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The condensed consolidated balance sheets, statements of
operations and statements of cash flows of Liberty Global are in
our 10-Q.
Rebase Information
Rebase growth percentages, which are non-GAAP measures, are
presented as a basis for assessing growth rates on a comparable
basis. For purposes of calculating rebased growth rates on a
comparable basis for all businesses that we owned during 2020, we
have adjusted our historical revenue, Adjusted EBITDA and OFCF for
the three and six months ended June 30, 2019 to (i) include the
pre-acquisition revenue, Adjusted EBITDA and P&E additions of
entities acquired during 2019 in our rebased amounts for the three
and six months ended June 30, 2019 to the same extent that the
revenue, Adjusted EBITDA and P&E additions of these entities
are included in our results for the three and six months ended June
30, 2020, (ii) exclude the revenue, Adjusted EBITDA and P&E
additions in our rebased amounts for the three and six months ended
June 30, 2019 for entities disposed of during 2020, (iii) include
revenue and costs for the temporary elements of transitional and
other services provided to the VodafoneZiggo JV, Vodafone, Deutsche
Telekom (the buyer of UPC Austria), Liberty Latin America and M7
Group (the buyer of UPC DTH), to reflect amounts related to these
services equal to those included in our results for the three and
six months ended June 30, 2020 and (iv) reflect the translation of
our rebased amounts for the three and six months ended June 30,
2019 at the applicable average foreign currency exchange rates that
were used to translate our results for the three and six months
ended June 30, 2020. We have reflected the revenue, Adjusted EBITDA
and P&E additions of these acquired entities in our 2019
rebased amounts based on what we believe to be the most reliable
information that is currently available to us (generally
pre-acquisition financial statements), as adjusted for the
estimated effects of (a) any significant differences between U.S.
GAAP and local generally accepted accounting principles, (b) any
significant effects of acquisition accounting adjustments, (c) any
significant differences between our accounting policies and those
of the acquired entities and (d) other items we deem appropriate.
We do not adjust pre-acquisition periods to eliminate nonrecurring
items or to give retroactive effect to any changes in estimates
that might be implemented during post-acquisition periods. As we
did not own or operate the acquired businesses during the
pre-acquisition periods, no assurance can be given that we have
identified all adjustments necessary to present the revenue,
Adjusted EBITDA and OFCF of these entities on a basis that is
comparable to the corresponding post-acquisition amounts that are
included in our historical results or that the pre-acquisition
financial statements we have relied upon do not contain undetected
errors. In addition, the rebased growth percentages are not
necessarily indicative of the revenue, Adjusted EBITDA and OFCF
that would have occurred if these transactions had occurred on the
dates assumed for purposes of calculating our rebased amounts or
the revenue, Adjusted EBITDA and OFCF that will occur in the
future. Investors should view rebased growth as a supplement to,
and not a substitute for, U.S. GAAP measures of performance
included in our condensed consolidated statements of
operations.
The following table provides adjustments made to the 2019
amounts to derive our rebased growth rates:
Three months ended June 30,
2019
Six months ended June 30,
2019
Revenue
Adjusted EBITDA
OFCF
Revenue
Adjusted EBITDA
OFCF
in millions
Acquisitions
$
23.9
$
—
$
—
$
55.2
$
0.9
$
0.9
Dispositions(i)
37.0
34.2
35.0
72.5
67.3
68.1
Foreign Currency
(67.1
)
(31.1
)
(17.0
)
(118.5
)
(54.5
)
(26.9
)
Total increase (decrease)
$
(6.2
)
$
3.1
$
18.0
$
9.2
$
13.7
$
42.1
______________________
(i) Relates primarily to rebase adjustments for agreements to
provide transitional and other services to the VodafoneZiggo JV,
Vodafone, Liberty Latin America, Deutsche Telekom and M7 Group.
These adjustments result in an equal amount of fees in both the
2020 and 2019 periods for those services that are deemed to be
temporary in nature.
Liquidity
The following table details the U.S. dollar equivalent balances
of our liquidity position(i) at June 30, 2020, which includes our
(i) cash and cash equivalents, (ii) investments held under SMAs and
(iii) unused borrowing capacity at June 30, 2020:
Cash
Unused
and Cash
Borrowing
Total
Equivalents
SMAs (ii)
Capacity (iii)
Liquidity
in millions
Liberty Global and unrestricted
subsidiaries
$
4,221.6
$
2,986.5
$
—
$
7,208.1
Virgin Media(iv)
31.8
—
1,238.0
1,269.8
UPC Holding
26.8
—
562.2
589.0
Telenet
80.4
—
624.0
704.4
Total
$
4,360.6
$
2,986.5
$
2,424.2
$
9,771.3
______________________
(i) Except as otherwise indicated, the amounts reported in the
table include the named entity and its subsidiaries. (ii)
Represents investments held under SMAs which are maintained by
investment managers acting as agents on our behalf. (iii) Our
aggregate unused borrowing capacity of $2.4 billion for the Full
Company represents the maximum undrawn commitments under the
applicable facilities without regard to covenant compliance
calculations or other conditions precedent to borrowing. (iv) Cash
and cash equivalents of Virgin Media includes (i) certain
subsidiaries of Virgin Media, but excludes the parent entity,
Virgin Media Inc., and (ii) the cash and cash equivalents of the
U.K. JV Entities, as such cash and cash equivalents will be
retained by Liberty Global upon the formation of the U.K. JV and
are therefore not classified as held for sale at June 30, 2020.
Unused borrowing capacity of Virgin Media represents unused
capacity under a multi-currency revolving credit facility of the
U.K. JV Entities. The outstanding third-party debt of the U.K. JV
Entities is classified as held for sale in at June 30, 2020.
Summary of Debt & Finance Lease Obligations
The following table(i) details the U.S. dollar equivalent
balances of the outstanding principal amount of our debt and
finance lease obligations at June 30, 2020:
Finance
Debt & Finance
Lease
Lease
Debt(ii)
Obligations
Obligations
in millions
Virgin Media(iii)
$
15,392.9
$
62.3
$
15,455.2
UPC Holding
4,243.4
21.5
4,264.9
Telenet
5,709.7
450.1
6,159.8
Other
1,824.4
42.8
1,867.2
Total
$
27,170.4
$
576.7
$
27,747.1
______________________
(i) Except as otherwise indicated, the amounts reported in the
table include the named entity and its subsidiaries. (ii) Debt
amounts for UPC Holding include notes issued by special purpose
entities that are consolidated by UPC Holding. (iii) Virgin Media
represents the debt and finance lease obligations of the U.K. JV
entities, which are classified as held for sale on our June 30,
2020 condensed consolidated balance sheet.
Property and Equipment Additions and Capital
Expenditures
The table below highlights the categories of the property and
equipment additions of our continuing operations for the indicated
periods and reconciles those additions to the capital expenditures
of our continuing operations that are presented in the condensed
consolidated statements of cash flows in our 10-Q.
Three months ended
Six months ended
June 30,
June 30,
2020
2019
2020
2019
in millions, except %
amounts
Customer premises equipment
$
109.4
$
157.7
$
256.9
$
386.3
New build & upgrade
134.3
162.2
293.8
304.6
Capacity
53.5
77.2
123.2
149.8
Baseline
127.4
154.8
265.0
283.2
Product & enablers
163.4
130.8
303.5
257.4
Total P&E additions
588.0
682.7
1,242.4
1,381.3
Reconciliation of P&E additions to
capital expenditures:
Assets acquired under capital-related
vendor financing arrangements(i)
(332.0
)
(417.4
)
(702.9
)
(926.3
)
Assets acquired under capital leases
(6.1
)
(20.4
)
(17.2
)
(32.6
)
Changes in current liabilities related to
capital expenditures
51.9
56.7
127.3
210.5
Total capital expenditures, net(ii)
$
301.8
$
301.6
$
649.6
$
632.9
Capital expenditures, net:
Third-party payments
$
302.6
$
319.6
$
650.9
$
691.2
Proceeds received for transfers to related
parties(iii)
(0.8
)
(18.0
)
(1.3
)
(58.3
)
Total capital expenditures, net
$
301.8
$
301.6
$
649.6
$
632.9
P&E additions as % of revenue
21.6
%
24.0
%
22.2
%
24.2
%
______________________________
(i) Amounts exclude related VAT of $55.1 million and $63.9
million for the three months ended June 30, 2020 and 2019,
respectively, and $118.7 million and $148.7 million for the six
months ended June 30, 2020 and 2019, respectively, that were also
financed under these arrangements. (ii) The capital expenditures
that we report in our condensed consolidated statements of cash
flows do not include amounts that are financed under vendor
financing or finance lease arrangements. Instead, these
expenditures are reflected as non-cash additions to our property
and equipment when the underlying assets are delivered, and as
repayments of debt when the related principal is repaid. (iii)
nPrimarily relates to transfers of centrally-procured property and
equipment to the VodafoneZiggo JV and, for the 2019 periods, our
Discontinued Operations.
ARPU per Cable Customer Relationship
The following table provides ARPU per cable customer
relationship and percentage change from period to period on both a
reported and rebased basis for the indicated periods:
ARPU per Cable Customer
Relationship
Three months ended June
30,
Increase/(decrease)
2020
2019
Reported %
Rebased %
Liberty Global
$
57.35
$
59.50
(3.6
%)
(1.3
%)
U.K. & Ireland (Virgin Media)
£
50.46
£
51.35
(1.7
%)
(1.8
%)
Belgium (Telenet)
€
58.49
€
57.18
2.3
%
2.4
%
UPC
€
36.57
€
37.13
(1.5
%)
(4.0
%)
Mobile ARPU
The following tables provide ARPU per mobile subscriber and
percentage change from period to period on both a reported and
rebased basis for the indicated periods:
ARPU per Mobile
Subscriber
Three months ended June
30,
Decrease
2020
2019
Reported %
Rebased %
Liberty Global:
Including interconnect revenue
$
15.65
$
16.49
(5.1
%)
(8.4
%)
Excluding interconnect revenue
$
13.16
$
14.15
(7.0
%)
(4.8
%)
Consolidated Operating Data —
June 30, 2020
Video
Homes
Passed
Fixed-Line Customer
Relationships
Internet
Subscribers(i)
Basic Video
Subscribers(ii)
Enhanced Video
Subscribers
Total
Video
Telephony
Subscribers(iii)
Total
RGUs
Total Mobile
Subscribers(iv)
U.K.
15,072,600
5,546,000
5,318,400
—
3,589,300
3,589,300
4,553,800
13,461,500
3,268,100
Belgium
3,355,200
2,052,200
1,676,500
139,900
1,695,700
1,835,600
1,195,400
4,707,500
2,795,800
Switzerland(v)
2,390,300
995,500
646,300
382,000
588,700
970,700
500,000
2,117,000
223,200
Ireland
941,100
436,900
382,300
—
296,200
296,200
319,800
998,300
103,800
Poland
3,583,400
1,494,300
1,250,200
217,200
1,070,100
1,287,300
660,700
3,198,200
22,200
Slovakia
621,400
191,700
142,300
30,000
141,000
171,000
88,000
401,300
—
Total
25,964,000
10,716,600
9,416,000
769,100
7,381,000
8,150,100
7,317,700
24,883,800
6,413,100
Subscriber Variance Table —
June 30, 2020 vs. March 31, 2020
Video
Homes
Passed
Fixed-Line Customer
Relationships
Internet
Subscribers(ii)
Basic Video
Subscribers(i)
Enhanced Video
Subscribers
Total
Video
Telephony
Subscribers(iii)
Total
RGUs
Total Mobile
Subscribers(iv)
Organic Change Summary:
U.K.
91,100
22,900
33,200
—
(32,500
)
(32,500
)
(27,000
)
(26,300
)
47,700
Belgium
8,700
(2,900
)
9,500
(7,500
)
300
(7,200
)
(7,100
)
(4,800
)
(19,000
)
Switzerland(v)
8,100
(16,400
)
(5,600
)
(17,300
)
2,000
(15,300
)
(2,300
)
(23,200
)
10,000
Ireland
2,500
1,000
1,800
—
6,900
6,900
(5,700
)
3,000
5,800
Poland
20,900
4,300
8,900
9,900
1,300
11,200
(6,500
)
13,600
6,000
Slovakia
1,300
(1,200
)
500
500
(1,100
)
(600
)
100
—
—
Total organic change
132,600
7,700
48,300
(14,400
)
(23,100
)
(37,500
)
(48,500
)
(37,700
)
50,500
Q2 2020 Adjustments:
Belgium
(47,700
)
(9,500
)
(5,500
)
—
(9,200
)
(9,200
)
(3,800
)
(18,500
)
—
U.K.
—
6,600
6,000
—
—
—
1,700
7,700
—
Total adjustments
(47,700
)
(2,900
)
500
—
(9,200
)
(9,200
)
(2,100
)
(10,800
)
—
Footnotes for Consolidated Operating Data and Subscriber
Variance Tables
(i) In Switzerland, we offer a 2 Mbps internet service to our
Basic and Enhanced Video Subscribers without an incremental
recurring fee. Our Internet Subscribers in Switzerland include
67,600 subscribers who have requested and received this service.
(ii) We have approximately 29,200 “lifeline” customers that are
counted on a per connection basis, representing the least expensive
regulated tier of video cable service, with only a few channels.
(iii) In Switzerland, we offer a basic phone service to our Basic
and Enhanced Video Subscribers without an incremental recurring
fee. Our Telephony Subscribers in Switzerland include 193,100
subscribers who have requested and received this service. (iv) In a
number of countries, our mobile subscribers receive mobile services
pursuant to prepaid contracts. As of June 30, 2020, our mobile
subscriber count included 400,900 and 202,200 prepaid mobile
subscribers in Belgium and the U.K., respectively. (v) Pursuant to
service agreements, Switzerland offers broadband internet, video
and telephony services over networks owned by third-party cable
operators (“partner networks”). A partner network RGU is only
recognized if there is a direct billing relationship with the
customer. At June 30, 2020, Switzerland’s partner networks
accounted for 116,900 Fixed-Line Customer Relationships, 296,200
RGUs, which include 108,700 Internet Subscribers, 102,700 Video
Subscribers and 84,800 Telephony Subscribers. Subscribers to our
enhanced video services provided over partner networks largely
receive basic video services from the partner networks as opposed
to our operations. Due to the fact that we do not own these partner
networks, we do not include the 653,000 homes passed by
Switzerland’s partner networks at June 30, 2020.
Additional General Notes to
Tables:
Most of our broadband communications subsidiaries provide
telephony, broadband internet, data, video or other B2B services.
Certain of our B2B revenue is derived from SOHO subscribers that
pay a premium price to receive enhanced service levels along with
video, internet or telephony services that are the same or similar
to the mass marketed products offered to our residential
subscribers. All mass marketed products provided to SOHOs, whether
or not accompanied by enhanced service levels and/or premium
prices, are included in the respective RGU and customer counts of
our broadband communications operations, with only those services
provided at premium prices considered to be “SOHO RGUs” or “SOHO
customers.” To the extent our existing customers upgrade from a
residential product offering to a SOHO product offering, the number
of SOHO RGUs or SOHO customers will increase, but there is no
impact to our total RGU or customer counts. With the exception of
our B2B SOHO subscribers, we generally do not count customers of
B2B services as customers or RGUs for external reporting
purposes.
In Belgium, Telenet leases a portion of its network under a
long-term finance lease arrangement. These tables include operating
statistics for Telenet's owned and leased networks.
While we take appropriate steps to ensure that subscriber
statistics are presented on a consistent and accurate basis at any
given balance sheet date, the variability from country to country
in (i) the nature and pricing of products and services, (ii) the
distribution platform, (iii) billing systems, (iv) bad debt
collection experience and (v) other factors add complexity to the
subscriber counting process. We periodically review our subscriber
counting policies and underlying systems to improve the accuracy
and consistency of the data reported on a prospective basis.
Accordingly, we may from time to time make appropriate adjustments
to our subscriber statistics based on those reviews.
Subscriber information for acquired entities is preliminary and
subject to adjustment until we have completed our review of such
information and determined that it is presented in accordance with
our policies.
Footnotes
- On May 7, 2020, we entered into an agreement with, among
others, Telefonica SA (Telefonica). Pursuant to which, Liberty
Global and Telefonica agreed to form a 50:50 joint venture (the
U.K. JV), which will combine Virgin Media’s operations in the U.K.
(the U.K. JV Entities) with Telefonica’s mobile business in the
U.K. to create a nationwide integrated communications
provider.
- The indicated growth rates are rebased for acquisitions,
dispositions, FX and other items that impact the comparability of
our year-over-year results. Please see Rebase Information for
information on rebased growth.
- For purposes of calculating our average tenor, total
third-party debt excludes vendor financing.
- The term "Full Company" includes certain amounts related to the
U.K. JV Entities, which are presented as held for sale in our June
30, 2020 condensed consolidated balance sheet. For purposes of
presenting certain debt and liquidity metrics consistent with how
we calculate our leverage ratios under our debt agreements, we have
included the debt and finance lease obligations of the U.K. JV
Entities in our Full Company metrics.
- Liquidity refers to cash and cash equivalents and investments
held under separately managed accounts plus the maximum undrawn
commitments under subsidiary borrowing facilities for the Full
Company, without regard to covenant compliance calculations or
other conditions precedent to borrowing.
- Includes investments held in Separately Managed Accounts
("SMAs")
- During the fourth quarter of 2019, we changed the presentation
of our consolidated reportable segments with respect to certain
operating costs related to our centrally-managed technology and
innovation function. For additional information and detail of the
impact to our consolidated reportable segments, see the
Appendix.
- Our aggregate unused borrowing capacity of $2.4 billion for the
Full Company represents the maximum undrawn commitments under the
applicable facilities without regard to covenant compliance
calculations or other conditions precedent to borrowing. Upon
completion of the relevant June 30, 2020 compliance reporting
requirements for our credit facilities, and assuming no further
changes from quarter-end borrowing levels, we anticipate that the
full unused borrowing capacity will continue to be available, with
the exception of the VM Credit Facilities, which will have
borrowing capacity limited to £276.7 million ($311.1 million), with
no additional restriction to loan or distribute. Our above
expectations do not consider any actual or potential changes to our
borrowing levels or any amounts loaned or distributed subsequent to
June 30, 2020.
- Our debt and net debt ratios, which are non-GAAP metrics, are
defined as total debt and net debt, respectively, divided by
Adjusted EBITDA for the last twelve months (LTM Adjusted EBITDA).
Net debt is defined as total debt less cash and cash equivalents
and investments under separately managed accounts. Consistent with
how we calculate our leverage ratios under our debt agreements,
these ratios are presented on a Full Company basis that includes
the debt and Adjusted EBITDA of the U.K. JV entities that are
classified as held for sale on our June 30, 2020 condensed
consolidated balance sheet. For purposes of these calculations,
debt is measured using swapped foreign currency rates, consistent
with the covenant calculation requirements of our subsidiary debt
agreements, and excludes the loans backed or secured by the shares
we hold in ITV plc and Lions Gate Entertainment Corp. For
additional information on our investments, see note 7 to the
condensed consolidated financial statements included in our 10-Q.
The following table details the calculation of our debt and net
debt to LTM Adjusted EBITDA ratios as of and for the twelve months
ended June 30, 2020 (in millions, except ratios):
Reconciliation of LTM loss from
continuing operations to LTM Adjusted EBITDA:
LTM loss from continuing operations
$
(248.6
)
Income tax expense
120.5
Other income, net
(137.3
)
Share of results of affiliates, net
130.3
Losses on debt extinguishment, net
388.0
Realized and unrealized losses due to
changes in fair values of certain investments and debt, net
158.6
Foreign currency transaction losses,
net
292.7
Realized and unrealized gains on
derivative instruments, net
(655.5
)
Interest expense
1,250.0
Operating income
1,298.7
Impairment, restructuring and other
operating items, net
115.1
Depreciation and amortization
3,120.0
Share-based compensation expense
290.5
LTM Adjusted EBITDA
$
4,824.3
Debt to LTM Adjusted EBITDA:
Debt and finance lease obligations before
deferred financing costs, discounts and premiums
$
27,747.1
Principal related projected derivative
cash payments
(766.4
)
ITV Collar Loan
(1,339.9
)
Lionsgate Collar Loan
(55.3
)
Adjusted debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
25,585.5
LTM Adjusted EBITDA
$
4,824.3
Debt to LTM Adjusted EBITDA ratio
5.3
Net Debt to LTM Adjusted
EBITDA:
Adjusted debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
25,585.5
Cash and cash equivalents and investments
held under separately managed accounts
(7,347.1
)
Adjusted net debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
18,238.4
LTM Adjusted EBITDA
$
4,824.3
Net debt to LTM Adjusted EBITDA ratio
3.8
Glossary
10-Q or 10-K: As used herein, the
terms 10-Q and 10-K refer to our most recent quarterly or annual
report as filed with the Securities and Exchange Commission on Form
10-Q or Form 10-K, as applicable.
Adjusted EBITDA: Adjusted EBITDA is
the primary measure used by our chief operating decision maker to
evaluate segment operating performance and is also a key factor
that is used by our internal decision makers to (i) determine how
to allocate resources to segments and (ii) evaluate the
effectiveness of our management for purposes of annual and other
incentive compensation plans. As we use the term, Adjusted EBITDA
is defined as earnings (loss) from continuing operations before net
income tax benefit (expense), other non-operating income or
expenses, net share of results of affiliates, net gains (losses) on
debt extinguishment, net realized and unrealized gains (losses) due
to changes in fair value of certain investments and debt, net
foreign currency gains (losses), net gains (losses) on derivative
instruments, net interest expense, depreciation and amortization,
share-based compensation, provisions and provision releases related
to significant litigation and impairment, restructuring and other
operating items. Other operating items include (a) gains and losses
on the disposition of long-lived assets, (b) third-party costs
directly associated with successful and unsuccessful acquisitions
and dispositions, including legal, advisory and due diligence fees,
as applicable, and (c) other acquisition-related items, such as
gains and losses on the settlement of contingent consideration. Our
internal decision makers believe Adjusted EBITDA 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 (1) readily view operating trends, (2)
perform analytical comparisons and benchmarking between segments
and (3) identify strategies to improve operating performance in the
different countries in which we operate. We believe our
consolidated Adjusted EBITDA measure, which is a non-GAAP 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 measure may not be directly
comparable to similar measures used by other public companies.
Consolidated Adjusted EBITDA should be viewed as a measure of
operating performance that is a supplement to, and not a substitute
for U.S. GAAP measures of income included in our condensed
consolidated statements of operations.
A reconciliation of earnings (loss) from continuing operations
to Adjusted EBITDA is presented in the following table:
Three months ended
Six months ended
June 30,
June 30,
2020
2019
2020
2019
in millions
Earnings (loss) from continuing
operations
$
(503.8
)
$
(339.6
)
$
513.9
$
(646.5
)
Income tax expense (benefit)
(158.0
)
26.8
(77.9
)
54.6
Other income, net
(9.5
)
(32.5
)
(61.9
)
(39.0
)
Share of results of affiliates, net
105.4
69.3
72.0
140.2
Losses on debt extinguishment, net
165.6
48.3
220.1
48.8
Realized and unrealized losses (gains) due
to changes in fair values of certain investments and debt, net
(152.3
)
138.7
377.5
146.9
Foreign currency transactions losses
(gains), net
478.0
27.0
86.3
(111.6
)
Realized and unrealized losses (gains) on
derivative instruments, net.
319.7
(152.9
)
(917.6
)
(70.1
)
Interest expense
281.7
363.6
595.0
730.9
Operating income
526.8
148.7
807.4
254.2
Impairment, restructuring and other
operating items, net
32.2
33.2
63.2
104.1
Depreciation and amortization
545.7
921.8
1,329.2
1,861.4
Share-based compensation expense
83.8
87.0
139.0
154.3
Adjusted EBITDA
$
1,188.5
$
1,190.7
$
2,338.8
$
2,374.0
Adjusted Free Cash Flow (FCF): 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, as
reported in our condensed consolidated statements of cash flows,
(b) principal payments on amounts financed by vendors and
intermediaries and (c) principal payments on finance leases
(exclusive of the portions of the network lease in Belgium that we
assumed in connection with certain acquisitions), with each item
excluding any cash provided or used by our Discontinued Operations,
as applicable. We believe that our presentation of Adjusted Free
Cash Flow, which is a non-GAAP measure, 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.
The following table provides a reconciliation of our net cash
provided by operating activities from continuing operations to
Adjusted Free Cash Flow for the indicated periods. In addition, in
order to provide information regarding our Adjusted Free Cash Flow
that excludes the Discontinued Operations, we also present Adjusted
Free Cash Flow on a pro forma basis for the three and six months
ended June 30, 2019 as if the sale of the Discontinued Operations
had been completed on January 1, 2019.
Three months ended
Six months ended
June 30,
June 30,
2020
2019
2020
2019
in millions
Continuing operations:
Net cash provided by operating
activities
$
1,142.1
$
1,322.2
$
1,591.9
$
1,628.5
Cash payments for direct acquisition and
disposition costs
9.9
5.6
10.4
18.0
Expenses financed by an
intermediary(i)
551.7
522.1
1,274.5
1,086.1
Capital expenditures, net
(301.8
)
(301.6
)
(649.6
)
(632.9
)
Principal payments on amounts financed by
vendors and intermediaries
(933.0
)
(977.6
)
(2,054.0
)
(2,140.4
)
Principal payments on certain finance
leases
(13.2
)
(18.7
)
(34.5
)
(31.8
)
Adjusted FCF
$
455.7
552.0
$
138.7
(72.5
)
Pro forma adjustments related to the sale
of the Discontinued Operations:
Interest and derivative payments(ii)
1.7
28.6
Transitional services agreements(iii)
38.1
77.0
Pro forma Adjusted FCF(iv)
$
591.8
$
33.1
_______________
(i) For purposes of our condensed consolidated statements of
cash flows, expenses financed by an intermediary are treated as
hypothetical operating cash outflows and hypothetical financing
cash inflows when the expenses are incurred. 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. (ii) Represents the estimated interest and
related derivative payments made by UPC Holding associated with our
discontinued UPC Holding operations in Hungary, Romania and the
Czech Republic during the applicable periods. These estimated
payments are calculated based on Hungary, Romania and the Czech
Republic’s pro rata share of UPC Holding's Adjusted EBITDA and UPC
Holding's aggregate interest and derivative payments during the
applicable period. Although we believe this adjustment to interest
and related derivative payments results in a reasonable estimate of
the annual ongoing interest and related derivative payments that
will occur in relation to the continuing UPC Holding operations, no
assurance can be given that the actual interest and derivative
payments will be equivalent to the amounts presented. No pro forma
adjustments were required with respect to Unitymedia's interest and
derivative payments as substantially all of Unitymedia’s debt and
related derivative instruments were direct obligations of the
entities being disposed. As a result, the interest and related
derivative payments associated with such debt and derivative
instruments of Unitymedia are included in discontinued operations.
(iii) Represents our preliminary estimate of the net cash flows
that we would have received from transitional services agreements
if the sale of the Discontinued Operations had occurred on January
1, 2019. The estimated net cash flows are based on the estimated
revenue that we expect to recognize from our transitional services
agreements during the first 12 months following the completion of
the sale of the Discontinued Operations, less the estimated
incremental costs that we expect to incur to provide such
transitional services. As a result, the pro forma adjustments
during the three and six months ended June 30, 2019 include $37.8
million and $76.0 million related to our discontinued operations in
Germany, Hungary, Romania and the Czech Republic, respectively, and
$0.3 million and $1.0 million related to our discontinued DTH
business, respectively. (iv) Represents the Adjusted FCF that we
estimate would have resulted if the sale of the Discontinued
Operations had been completed on January 1, 2019. Actual amounts
may differ from the amounts assumed for purposes of this pro forma
calculation. For example, our Pro forma Adjusted FCF does not
include any future benefits related to reductions in our corporate
costs as a result of our operating model rationalization or any
other potential future operating or capital cost reductions
attributable to our continuing or discontinued operations.
ARPU: Average Revenue Per Unit is
the average monthly subscription revenue per average cable customer
relationship or mobile subscriber, as applicable. ARPU per average
fixed-line customer relationship is calculated by dividing the
average monthly subscription revenue from residential cable and
SOHO services by the average number of fixed-line customer
relationships for the period. ARPU per average mobile subscriber is
calculated by dividing residential mobile and SOHO revenue for the
indicated period by the average number of mobile subscribers for
the period. Unless otherwise indicated, ARPU per cable customer
relationship or mobile subscriber is not adjusted for currency
impacts. ARPU per RGU refers to average monthly revenue per average
RGU, which is calculated by dividing the average monthly
subscription revenue from residential and SOHO services for the
indicated period, by the average number of the applicable RGUs for
the period. Unless otherwise noted, ARPU in this release is
considered to be ARPU per average cable customer relationship or
mobile subscriber, as applicable. Fixed-line customer
relationships, mobile subscribers and RGUs of entities acquired
during the period are normalized. In addition, for purposes of
calculating the percentage change in ARPU on a rebased basis, which
is a non-GAAP measure, we adjust the prior-year subscription
revenue, fixed-line customer relationships, mobile subscribers and
RGUs, as applicable, to reflect acquisitions, dispositions and FX
on a comparable basis with the current year, consistent with how we
calculate our rebased growth for revenue and Adjusted EBITDA, as
further described in the body of this release.
ARPU per Mobile Subscriber: Our
ARPU per mobile subscriber calculation that excludes interconnect
revenue refers to the average monthly mobile subscription revenue
per average mobile subscriber and is calculated by dividing the
average monthly mobile subscription revenue (excluding handset
sales and late fees) for the indicated period, by the average of
the opening and closing balances of mobile subscribers in service
for the period. Our ARPU per mobile subscriber calculation that
includes interconnect revenue increases the numerator in the
above-described calculation by the amount of mobile interconnect
revenue during the period.
Basic Video Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
our video service over our broadband network or through a partner
network either via an analog video signal or via a digital video
signal without subscribing to any recurring monthly service that
requires the use of encryption-enabling technology.
Encryption-enabling technology includes smart cards, or other
integrated or virtual technologies that we use to provide our
enhanced service offerings. We count RGUs on a unique premises
basis. In other words, a subscriber with multiple outlets in one
premises is counted as one RGU and a subscriber with two homes and
a subscription to our video service at each home is counted as two
RGUs.
Blended fully-swapped debt borrowing
cost: the weighted average interest rate on our aggregate
variable- and fixed-rate indebtedness (excluding finance leases and
including vendor financing obligations), including the effects of
derivative instruments, original issue premiums or discounts and
commitment fees, but excluding the impact of financing costs.
B2B: Business-to-Business.
Customer Churn: the rate at which
customers relinquish their subscriptions. The annual rolling
average basis is calculated by dividing the number of disconnects
during the preceding 12 months by the average number of customer
relationships. For the purpose of computing churn, a disconnect is
deemed to have occurred if the customer no longer receives any
level of service from us and is required to return our equipment. A
partial product downgrade, typically used to encourage customers to
pay an outstanding bill and avoid complete service disconnection,
is not considered to be disconnected for purposes of our churn
calculations. Customers who move within our cable footprint and
upgrades and downgrades between services are also excluded from the
disconnect figures used in the churn calculation.
Enhanced Video Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
our video service over our broadband network or through a partner
network via a digital video signal while subscribing to any
recurring monthly service that requires the use of
encryption-enabling technology. Enhanced Video Subscribers are
counted on a unique premises basis. For example, a subscriber with
one or more set-top boxes that receives our video service in one
premises is generally counted as just one subscriber. An Enhanced
Video Subscriber is not counted as a Basic Video Subscriber. As we
migrate customers from basic to enhanced video services, we report
a decrease in our Basic Video Subscribers equal to the increase in
our Enhanced Video Subscribers.
Fixed-Line Customer Relationships:
the number of customers who receive at least one of our internet,
video or telephony services that we count as RGUs, without regard
to which or to how many services they subscribe. Fixed-Line
Customer Relationships generally are counted on a unique premises
basis. Accordingly, if an individual receives our services in two
premises (e.g., a primary home and a vacation home), that
individual generally will count as two Fixed-Line Customer
Relationships. We exclude mobile-only customers from Fixed-Line
Customer Relationships.
Fixed-Mobile Convergence (FMC):
Fixed-mobile convergence penetration represents the number of
customers who subscribe to both a fixed broadband internet service
and postpaid mobile telephony service, divided by the total number
of customers who subscribe to our fixed broadband internet
service.
Homes Passed: homes, residential
multiple dwelling units or commercial units that can be connected
to our networks without materially extending the distribution
plant. Certain of our Homes Passed counts are based on census data
that can change based on either revisions to the data or from new
census results.
Internet Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
internet services over our networks, or that we service through a
partner network.
Lightning premises: includes homes,
residential multiple dwelling units and commercial premises that
potentially could subscribe to our residential or SOHO services,
which have been connected to our networks as a part of our Project
Lightning network extension program in the U.K. and Ireland.
Project Lightning infill build relates to construction in areas
adjacent to our existing network.
Mobile Subscriber Count: the number
of active SIM cards in service rather than services provided. For
example, if a mobile subscriber has both a data and voice plan on a
smartphone this would equate to one mobile subscriber.
Alternatively, a subscriber who has a voice and data plan for a
mobile handset and a data plan for a laptop would be counted as two
mobile subscribers. Customers who do not pay a recurring monthly
fee are excluded from our mobile telephony subscriber counts after
periods of inactivity ranging from 30 to 90 days, based on industry
standards within the respective country. In a number of countries,
our mobile subscribers receive mobile services pursuant to prepaid
contracts.
MVNO: Mobile Virtual Network
Operator.
NPS: Net Promoter Score.
OFCF: As used herein, Operating
Free Cash Flow or "OFCF", which is a non-GAAP measure, represents
Adjusted EBITDA less property and equipment additions. OFCF is an
additional metric that we use to measure the performance of our
operations after considering the level of property and equipment
additions incurred during the period.
A reconciliation of Adjusted EBITDA to OFCF for our continuing
operations is presented in the following table:
Three months ended
Six months ended
June 30,
June 30,
2020
2019
2020
2019
in millions
Adjusted EBITDA
$
1,188.5
$
1,190.7
$
2,338.8
$
2,374.0
Property and equipment additions
(588.0
)
(682.7
)
(1,242.4
)
(1,381.3
)
OFCF
$
600.5
$
508.0
$
1,096.4
$
992.7
Property and equipment additions (P&E
additions): includes capital expenditures on an accrual
basis, amounts financed under vendor financing or finance lease
arrangements and other non-cash additions.
RGU: A Revenue Generating Unit is
separately a Basic Video Subscriber, Enhanced Video Subscriber,
Internet Subscriber or Telephony Subscriber. A home, residential
multiple dwelling unit, or commercial unit may contain one or more
RGUs. For example, if a residential customer in our U.K. market
subscribed to our enhanced video service, fixed-line telephony
service and broadband internet service, the customer would
constitute three RGUs. Total RGUs is the sum of Basic Video,
Enhanced Video, Internet and Telephony Subscribers. RGUs generally
are counted on a unique premises basis such that a given premises
does not count as more than one RGU for any given service. On the
other hand, if an individual receives one of our services in two
premises (e.g., a primary home and a vacation home), that
individual will count as two RGUs for that service. Each bundled
cable, internet or telephony service is counted as a separate RGU
regardless of the nature of any bundling discount or promotion.
Non-paying subscribers are counted as subscribers during their free
promotional service period. Some of these subscribers may choose to
disconnect after their free service period. Services offered
without charge on a long-term basis (e.g., VIP subscribers or free
service to employees) generally are not counted as RGUs. We do not
include subscriptions to mobile services in our externally reported
RGU counts. In this regard, our RGU counts exclude our separately
reported postpaid and prepaid mobile subscribers.
SIM: Subscriber Identification
Module.
SOHO: Small or Home Office
Subscribers.
Telephony Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
voice services over our networks, or that we service through a
partner network. Telephony Subscribers exclude mobile telephony
subscribers.
U.S. GAAP: Accounting principles
generally accepted in the United States.
YoY: Year-over-year.
Appendix - Supplemental Adjusted EBITDA, P&E and OFCF
information
The following table presents (i) Adjusted EBITDA, (ii) property
and equipment additions, (iii) OFCF and (iv) percentage change from
period to period for Adjusted EBITDA and OFCF on both a reported
and rebased basis for each of our consolidated reportable
segments:
Three months ended June
30,
Increase/(decrease)
2020
2019
Reported %
Rebased %
in millions, except %
amounts
Adjusted EBITDA(i):
U.K./Ireland
$
654.9
$
687.5
(4.7
)
(1.5
)
Belgium
354.1
349.4
1.3
3.7
Switzerland
150.9
159.8
(5.6
)
(9.9
)
CEE
52.7
54.1
(2.6
)
4.2
Central and Corporate
(24.1
)
(60.1
)
59.9
2.7
Total Adjusted EBITDA
$
1,188.5
$
1,190.7
(0.2
)
(0.4
)
Property and equipment additions(ii):
U.K./Ireland
$
322.8
$
371.4
Belgium
110.3
133.4
Switzerland
54.6
77.3
CEE
20.9
19.7
Central and Corporate
79.4
80.9
Total property and equipment additions
$
588.0
$
682.7
OFCF(i) (ii):
U.K./Ireland
$
332.1
$
316.1
5.1
8.7
Belgium
243.8
216.0
12.9
15.4
Switzerland
96.3
82.5
16.7
10.4
CEE
31.8
34.4
(7.6
)
(1.4
)
Central and Corporate
(103.5
)
(141.0
)
26.6
0.6
Total OFCF
$
600.5
$
508.0
18.2
14.2
Six months ended June
30,
Increase/(decrease)
2020
2019
Reported %
Rebased %
in millions, except %
amounts
Adjusted EBITDA(i):
U.K./Ireland
$
1,310.3
$
1,379.7
(5.0
)
(2.5
)
Belgium
685.7
688.4
(0.4
)
2.2
Switzerland
285.0
316.1
(9.8
)
(12.9
)
CEE
107.0
107.8
(0.7
)
4.5
Central and Corporate
(49.2
)
(119.4
)
58.8
3.9
Intersegment eliminations
—
1.4
N.M.
N.M.
Adjusted EBITDA
$
2,338.8
$
2,374.0
(1.5
)
(2.0
)
Property and equipment additions(ii):
U.K./Ireland
$
669.4
$
766.7
Belgium
251.9
275.1
Switzerland
123.8
135.9
CEE
39.8
41.4
Central and Corporate
157.5
162.2
Total property and equipment additions
$
1,242.4
$
1,381.3
OFCF(i) (ii):
U.K./Ireland
$
640.9
$
613.0
4.6
7.3
Belgium
433.8
413.3
5.0
7.4
Switzerland
161.2
180.2
(10.5
)
(13.6
)
CEE
67.2
66.4
1.2
6.7
Central and Corporate
(206.7
)
(281.6
)
26.6
1.3
Intersegment eliminations.
—
1.4
N.M.
N.M.
Total OFCF
$
1,096.4
$
992.7
10.4
6.0
_______________
(i) Includes the Centrally-held Operating Cost Allocations, as
defined and described below. (ii) Excludes the Centrally-held
P&E Attributions, as defined and described below.
Centrally-held Operating Cost
Allocations
During the fourth quarter of 2019, we changed the presentation
of certain operating costs related to our centrally-managed
technology and innovation function. These costs, which were
previously included in Central and Corporate, are now allocated to
our consolidated reportable segments. This change, which we refer
to as the “Centrally-held Operating Cost Allocations”, was made as
a result of internal changes with respect to the way in which our
chief operating decision maker evaluates the Adjusted EBITDA of our
operating segments. Segment information for the three and six
months ended June 30, 2019 has been revised in our reported U.S.
GAAP disclosures to reflect this change. The following table
provides a summary of the impact on the Adjusted EBITDA of our
consolidated reportable segments and Central and Corporate that
resulted from the Centrally-held Operating Cost Allocations.
Three months ended June
30,
Six months ended June
30,
2020
2019
2020
2019
in millions
Increase (decrease) to Adjusted
EBITDA:
U.K./Ireland
$
(12.3
)
$
(15.7
)
$
(24.4
)
$
(31.8
)
Switzerland
(4.8
)
(9.9
)
(9.6
)
(16.7
)
CEE
(2.7
)
(3.8
)
(5.2
)
(7.3
)
Central and Corporate
19.8
29.4
39.2
55.8
Total Liberty Global
$
—
$
—
$
—
$
—
Centrally-held Property & Equipment
Attributions
Property and equipment additions presented for Central and
Corporate include certain capital costs incurred for the benefit of
our operating segments. Generally, for purposes of the consolidated
financial statements of our borrowing groups, the expense
associated with these capital costs is allocated and/or charged to
our operating segments as related-party fees and allocations in
their respective statements of operations over the period in which
the operating segment benefits from the use of the Central and
Corporate asset. Related-party fees and allocations are excluded
from the reported Adjusted EBITDA metric of these borrowing groups.
These amounts are based on (i) our estimate of its share of
underlying costs, (ii) our estimate of its share of the underlying
costs plus a mark-up or (iii) commercially-negotiated rates. These
charges and allocations differ from the attributed OFCF approach,
as further described below.
For internal management reporting and capital allocation
purposes, we evaluate the OFCF of our operating segments on an
"attributed" basis, whereby we estimate and attribute certain
capital costs incurred by Central and Corporate to our operating
segments as if that operating segment directly incurred its
estimated share of the capital costs in the same period the costs
were incurred by Central and Corporate. These capital costs
represent assets that are jointly used by our operating segments.
In the context of evaluating our operating segments, we believe
this non-GAAP approach, which we refer to as the "Centrally-held
Property and Equipment Attributions", is a meaningful measure as it
represents a transparent view of what the estimated capital spend
for our operating segments might be if they were to operate as a
stand-alone business (excluding, among other considerations, any
impact from lost economies of scale) and allows us to more
accurately (i) review capital trends by operating segment, (ii)
perform benchmarking between operating segments and (iii) drive
alignment and accountability between Central and Corporate and our
operating segments with respect to our consolidated capital spend.
The amounts attributed to each operating segment are estimated
based on (a) actual costs incurred by Central and Corporate,
without any mark-up, and (b) each respective operating segment's
estimated use of the associated assets.
The below table summarizes the Centrally-held Property and
Equipment Attributions, consistent with our internal management
reporting approach. This presentation is for illustrative purposes
only and is intended as a supplement to, and not a substitute for,
our U.S. GAAP presentation of the property and equipment additions
of our reportable segments.
Three months ended June
30,
Six months ended June
30,
2020
2019
2020
2019
in millions
Increase (decrease) to property and
equipment additions:
U.K./Ireland
$
31.9
$
30.0
$
66.8
$
56.5
Belgium
3.1
4.2
6.2
4.2
Switzerland
11.1
12.0
21.2
20.8
CEE
4.9
5.9
11.8
11.2
Central and Corporate
(51.0
)
(52.1
)
(106.0
)
(92.7
)
Total Liberty Global
$
—
$
—
$
—
$
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200803005762/en/
Investor Relations Max Adkins +44 78 1795 9705 John Rea
+1 303 220 4238 Stefan Halters +44 20 8483 6211
Corporate Communications Molly Bruce +1 303 220 4202 Matt
Beake +44 20 8483 6428
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