Record Q3 RGU additions at Virgin Media, driven by 104,000
net adds in the U.K.
Q3 continuing operations operating income of $209
million
Q3 continuing operations rebased OCF growth of 5.2% led by
Belgium & U.K.
Reconfirming all full-year 2018 guidance
_______________________________________________________________________________________
Q3 Continuing
OperationsRevenue & YoY
Growth4$3.0bn | +1.9%
OCF & YoY Growth4$1.3bn | +5.2%
YTD Continuing
OperationsRevenue & YoY
Growth4$9.1bn | +2.4%
OCF & YoY Growth4$3.9bn | +3.6%
Full Company 1Q3
OCF & YoY Growth4$1.8bn | +5.3%
YTD OCF & YoY Growth4$5.7bn | +4.6%
Liberty Global plc today announced its three months ("Q3") and
nine months ("YTD") 2018 financial results. Our operations in
Germany, Austria, Hungary, Romania and the Czech Republic
(collectively, the "Discontinued European Operations") and the
former LiLAC Group have been accounted for as discontinued
operations. Unless otherwise indicated, the information in this
release relates only to our continuing operations. As used in this
release, the term "Full Company" includes our continuing operations
and the Discontinued European Operations. For additional
information, including the reasons that we present selected
information on a Full Company basis, see note 1. In addition, on
January 1, 2018, we adopted new revenue recognition rules on a
prospective basis and a new presentation of certain components of
our pension expense on a retrospective basis. All information in
this release is presented on a comparable basis with respect to
both of these accounting changes. For additional information
concerning our discontinued operations and these accounting
changes, see notes 2 and 3.
CEO Mike Fries stated, "The continued operating and
financial momentum at Virgin Media helped fuel our Q3 results. With
respect to our U.K. subscriber growth, we generated over 100,000
net additions, which represents a record third quarter performance.
This achievement was supported by strong volume growth in both our
Project Lightning and legacy footprints. From a product
perspective, we continue to reap the benefits of our
next-generation V6 set-top box and Hub 3 WiFi router deployments,
as we saw meaningful year-over-year improvement in churn. We also
announced a 4.5% average U.K. customer price rise, which should
underpin our results in the coming quarters. In our other markets,
we reported mixed results as Telenet delivered 8.4% rebased OCF
growth in the quarter, driven by synergy realization, while we
posted a 9% rebased OCF contraction in Switzerland.
2018
Guidance* Rebased
OCF Growth
P&E
Additions
New Build
& Upgrade
Adjusted FreeCash Flow
Continuing Operations
~4% $4.0 BN $0.8 BN
Not provided Full Company
~5% $5.1 BN $1.2
BN $1.6 BN
* Absolute U.S. dollar guidance figures based on FX rates as of
February 13, 2018; EUR/USD 1.23; GBP/USD 1.38. New build and
upgrade spend excludes related CPE
"The Swiss market remains challenging but we have a number of
initiatives that we believe will improve performance. Our
turnaround plan is underpinned by revamped video products, a
refreshed MySports programming line-up, the launch of 1 Gig
broadband speeds and a new and improved MVNO offering. The
cornerstone of our enhanced video offering is the introduction of
Horizon 4, our cutting-edge, next-generation TV entertainment
platform, which will revolutionize the video experience for our
customers. Switzerland is the first market where we've launched
this innovation and we look forward to expanding the platform
across more markets in the coming years.
Our previously announced deal to sell our German and certain CEE
operations to Vodafone remains on track. Last month, Vodafone
officially filed the submission paperwork with the European Union
and we still expect that the deal will close in mid-2019.
Turning to our balance sheet, at the end of Q3 our continuing
operations had an average debt tenor5 of more than seven years, a
fully-swapped borrowing cost of 4.3% and a liquidity6 position in
excess of $3 billion. During the quarter we bought back nearly $400
million of stock and continue to anticipate at least $2 billion of
share repurchases in 2018."
About Liberty Global
Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK) is the world’s
largest international TV and broadband company, with operations in
10 European countries under the consumer brands Virgin Media,
Unitymedia, Telenet and UPC. We invest in the infrastructure and
digital platforms that empower our customers to make the most of
the video, internet and communications revolution. Our substantial
scale and commitment to innovation enable us to develop
market-leading products delivered through next-generation networks
that connect 21 million customers subscribing to 45 million TV,
broadband internet and telephony services. We also serve 6 million
mobile subscribers and offer WiFi service through 12 million
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, Casa
Systems, LionsGate, the Formula E racing series and several
regional sports networks.
* The figures included in this paragraph include both the
continuing and discontinued operations that we owned on September
30, 2018
YTD and Q3 Highlights (on a continuing
operations basis unless otherwise noted)
- YTD and Q3 rebased revenue up 2.4% and
1.9%, respectively
- Q3 residential cable revenue7 of $2.0
billion decreased 0.7% year-over-year
- Q3 residential mobile revenue7
increased 2.4% year-over-year to $416.8 million
- Q3 B2B8 revenue7 increased 6.1%
year-over-year to $491.8 million
- YTD operating income decreased 4.8%
year-over-year to $592.9 million
- Q3 operating income decreased 1.0%
year-over-year to $208.6 million
- YTD rebased OCF growth was 3.6% to $3.9
billion, including 5.2% growth in Q3
- YTD results supported by strong
performances in Belgium and Virgin Media
- RGU additions of 28,000 in Q3
- Built nearly 150,000 new premises in Q3
- Virgin Media delivered 109,000 new
premises in the U.K. & Ireland
- Solid balance sheet with $3.4 billion
of liquidity
- Net leverage9 of 4.9x for the Full
Company
- Fully-swapped borrowing cost of
4.3%
Subscribers
Organic RGU
Net Additions10 28,100 (51.0 %) 28,500 (87.3 %)
Financial (in USD
millions)
Revenue Continuing operations $ 2,958.1 1.9 % $ 9,097.7 2.4 % OCF:
Continuing operations $ 1,294.1 5.2 % $ 3,875.7 3.6 % Full
Company(ii) 5.3 % 4.6 % Operating income $ 208.6 (1.0 %) $ 592.9
(4.8 %) Adjusted FCF: Continuing operations $ 165.3 $ (962.6
) Pro forma continuing operations(iii) $ 244.8 $ (746.9 ) Full
Company $ 394.6 $ (15.7 ) Cash provided by operating activities $
587.2 $ 2,730.1 Cash provided by investing activities $ 1,687.1 $
790.8 Cash used by financing activities $ (2,388.8 ) $ (5,426.3 )
(i) Revenue and OCF YoY growth rates are on a rebased basis
(ii) Full Company rebased OCF growth in the Q3 and YTD periods
includes the net positive impacts of certain German channel
carriage settlements of $13.7 million and $36.9 million,
respectively (iii) Pro forma Adjusted FCF gives pro forma effect to
certain increases in our recurring cash flows that we expect to
realize following the disposition of the Discontinued European
Operations. For additional details, see the information and
reconciliation included within the Glossary
Subscriber Growth
Three months ended Nine
months ended September 30, September 30,
2018 2017 2018*
2017 Organic RGU net additions (losses) by
product Video (36,700 ) (29,100 ) (120,100 ) (55,300 ) Data
24,000 62,700 73,600 203,700 Voice 40,800 23,800
75,000 76,300 Total 28,100 57,400
28,500 224,700
Organic RGU net additions
(losses) by market U.K./Ireland 105,300 92,400 262,400 328,500
Belgium (52,900 ) (14,600 ) (99,800 ) (41,900 ) Switzerland (41,500
) (15,500 ) (139,000 ) (18,300 ) Continuing CEE (Poland, Slovakia
and DTH) 17,200 (4,900 ) 4,900 (43,600 ) Total 28,100
57,400 28,500 224,700
Organic
Mobile SIM additions (losses) by product Postpaid 54,800 67,000
248,700 240,700 Prepaid (37,100 ) (27,600 ) (122,900 ) (193,500 )
Total 17,700 39,400 125,800 47,200
Organic Mobile SIM additions (losses) by market
U.K./Ireland 5,000 (16,200 ) 50,900 (20,300 ) Belgium 4,500 43,400
52,600 43,800 Other 8,200 12,200 22,300 23,700
Total 17,700 39,400 125,800 47,200
* Amounts have been restated. See note (vi) to the subscriber
table
- Cable Product
Performance: During Q3 we added 28,000 RGUs, a decline
compared to the 57,000 RGUs added in the prior-year period, as an
improved performance at Virgin Media was largely offset by weakness
in Belgium and Switzerland. From a product perspective, data and
video adds showed a year-over-year decrease, while telephony net
adds increased year-over-year
- U.K./Ireland: Record Q3 RGU additions of 105,000
were 14% higher than the prior year, with contributions both from
our new build areas and our existing footprint. A shift in our
sales and marketing focus to high value triple-play bundles has
successfully driven growth in telephony, broadband and video
product subscriptions
- Belgium:
RGU attrition of 53,000 in Q3 was primarily due to intensified
competition and churn stemming from our July price increase
- Switzerland: Lost 41,500 RGUs in Q3, compared to a
loss of 15,500 in Q3 2017, primarily due to heightened
competition
- Continuing CEE
(Poland, Slovakia and DTH): Gained 17,000 RGUs in Q3, as
compared to a loss of 5,000 in the prior-year period, mainly driven
by stronger video and voice adds in Poland
- Next-Generation
Video Penetration (including Horizon TV, Horizon-Lite, TiVo, Virgin
TV V6 and Yelo TV): Added 70,000 subscribers to our advanced
platforms in Q3 and reached 6.7 million or 78% of our total cable
video base (excluding DTH) by the end of the quarter
- WiFi Connect
Box: Deployments of our latest WiFi Connect box increased by
552,000 in Q3, ending the quarter with an installed base of nearly
5.6 million or 61% of broadband subscribers across our continuing
operations
- Mobile:
Added 18,000 mobile subscribers in Q3, as 55,000 postpaid additions
were partially offset by continued attrition in our low-ARPU
prepaid base
- Belgium added 4,500 mobile subscribers
during Q3
- U.K./Ireland added 5,000 mobile
subscribers in Q3 as postpaid growth was partially offset by
low-ARPU prepaid losses. The penetration of 4G at Virgin Media
increased to 75% of our postpaid base at the end of Q3, and over
50% of our mobile base has now migrated to our full MVNO platform
in the U.K. allowing us to offer more converged bundles
- Switzerland added 8,000 mobile
subscribers in Q3, driven by bundling success
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) Nine months ended
Increase/(decrease) September 30,
September 30, Revenue 2018
20173 % Rebased %
2018 20173 %
Rebased % in millions, except % amounts
Continuing operations: U.K./Ireland $ 1,667.7 $ 1,609.9 3.6
4.1 $ 5,180.8 $ 4,676.2 10.8 4.5 Belgium 746.8 758.7 (1.6 ) (1.5 )
2,260.3 2,103.5 7.5 (1.2 ) Switzerland 323.3 351.7 (8.1 ) (6.3 )
1,000.4 1,020.7 (2.0 ) (3.2 ) Continuing CEE 148.6 149.9 (0.9 ) 1.0
462.0 426.2 8.4 0.8 Central and Corporate 71.9 53.0 35.7 31.7 197.4
137.8 43.3 31.7 Intersegment eliminations (0.2 ) (3.0 ) N.M.
N.M.
(3.2 ) (8.3 ) N.M. N.M. Total continuing operations $ 2,958.1
$ 2,920.2 1.3 1.9 $ 9,097.7 $
8,356.1 8.9 2.4
Discontinued
European Operations(i): Germany $ 714.4 $ 685.5
4.2 5.1 $ 2,226.1 $ 1,943.7 14.5 6.6 Austria 35.2 103.2 (65.9 ) 3.0
253.7 291.9 (13.1 ) 3.4 Discontinued CEE 159.6 156.6 1.9 5.4 494.7
439.4 12.6 5.6 Intersegment eliminations (1.0 ) (0.9 ) N.M. N.M.
(4.4 ) (2.6 ) N.M. N.M. Total discontinued European operations $
908.2 $ 944.4 (3.8 ) 5.3 $ 2,970.1 $
2,672.4 11.1 6.2
N.M. - Not Meaningful
(i) For information concerning our discontinued operations, see
note 2.
- Reported revenue for the three and nine
months ended September 30, 2018, increased 1.3% and 8.9%
year-over-year, respectively
- The YTD results were primarily driven
by the impact of (i) positive foreign exchange ("FX") movements,
mainly related to the strengthening of the British Pound and Euro
against the U.S. dollar, and (ii) organic revenue growth
- Rebased revenue grew 1.9% and 2.4% in
the Q3 and YTD 2018 periods, respectively. The result in the YTD
period included:
- A $6.4 million headwind from the
release of unclaimed customer credits in Switzerland in H1
2017
- A $5.6 million headwind from the
expected recovery of VAT paid in prior periods with respect to
copyright fees in Belgium, which benefited revenue in H1 2017
- The unfavorable $3.9 million impact due
to the reversal during the first quarter of 2018 of revenue in
Switzerland that was recognized during prior-year periods
- The favorable impact of $3.8 million of
mobile subscription revenue recognized in the U.K. during the third
quarter of 2018 related to the expected recovery of certain
prior-period VAT payments
Q3 2018 Rebased Revenue Growth - Segment
Highlights
- U.K./Ireland: Rebased revenue growth of 4.1% in Q3
reflects (i) 2.9% rebased growth in our residential cable business
supported by subscriber growth and accelerating cable ARPU, (ii)
13.0% rebased growth in residential mobile revenue (including
interconnect and mobile handset revenue), reflecting higher value
mobile handset sales and the aforementioned benefit related to the
expected recovery of certain prior-period VAT payments, and (iii)
2.8% rebased revenue growth in our B2B business, driven by
continued growth in our SOHO base
- Belgium:
Rebased revenue decline of 1.5% in Q3 was mainly driven by the net
effect of (i) lower mobile revenue growth, (ii) higher B2B growth
and (iii) lower cable subscription revenue due to lower video
subscribers
- Switzerland: Rebased revenue declined 6.3% in Q3,
primarily due to the net effect of lower residential cable
subscription revenue, which was driven primarily by competitive
pressures, and higher mobile revenue due to increases in the
average number of mobile subscribers
- Continuing CEE
(Poland, Slovakia and DTH): Rebased revenue growth of 1.0%
in Q3, due to the net effect of growth in our B2B business and a
decrease in residential cable subscription revenue
- Central and
Corporate: Rebased revenue increased 31.7% in Q3 due largely
to the low-margin sale of customer premises equipment to the
VodafoneZiggo JV, which began in the second quarter of 2018
Operating Income
- Operating income of $208.6 million and
$210.7 million in Q3 2018 and Q3 2017, respectively, representing a
decrease of 1.0% year-over-year. For the nine months ended
September 30, 2018, our operating income of $592.9 million reflects
a decrease of 4.8% as compared to $622.7 million in YTD 2017
- The decrease in operating income in the
QTD period resulted from the net effect of (i) higher OCF, as
further described below, (ii) an increase in impairment,
restructuring and other operating items, net, including higher
provisions for litigation, (iii) an increase in share-based
compensation expense and (iv) a decrease in depreciation and
amortization expense
- The decrease in operating income in the
YTD period resulted from the net effect of (i) higher OCF, as
further described below, (ii) an increase in depreciation and
amortization expense, (iii) an increase in impairment,
restructuring and other operating items, net, including the
aforementioned increase in litigation provisions, and (iv) an
increase in share-based compensation expense
Operating Cash Flow Highlights
The following table presents (i) OCF 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) Nine months ended
Increase/(decrease) September 30,
September 30, OCF 2018
20173 % Rebased %
2018 20173 %
Rebased % in millions, except % amounts
Continuing operations: U.K./Ireland $ 742.1 $ 708.2 4.8 5.3
$ 2,268.3 $ 2,052.1 10.5 4.3 Belgium 383.4 356.4 7.6 8.4 1,124.7
969.6 16.0 6.7 Switzerland 191.0 214.1 (10.8 ) (9.0 ) 566.5 630.2
(10.1 ) (11.2 ) Continuing CEE 69.6 70.6 (1.4 ) 0.5 209.4 193.7 8.1
0.7 Central and Corporate (88.7 ) (104.0 ) 14.7 14.0 (283.3 )
(307.5 ) 7.9 12.6 Intersegment eliminations (3.3 ) (4.8 ) N.M. N.M.
(9.9 ) (9.2 ) N.M. N.M. Total continuing operations $ 1,294.1
$ 1,240.5 4.3 5.2 $ 3,875.7 $
3,528.9 9.8 3.6 OCF margin - continuing
operations 43.7 % 42.5 % 42.6 % 42.2 %
Discontinued
European Operations(i): Germany $ 463.4 $ 440.5
5.2 6.2 $ 1,418.9 $ 1,231.8 15.2 7.4 Austria 19.6 57.2 (65.7 ) 5.8
137.3 159.7 (14.0 ) 3.2 Discontinued CEE 66.0 67.4 (2.1 ) 0.7 201.8
178.1 13.3 6.1 Intersegment eliminations 6.2 10.5
N.M. N.M. 24.8 28.2 N.M. N.M. Total discontinued
European operations $ 555.2 $ 575.6 (3.5 ) 5.8
$ 1,782.8 $ 1,597.8 11.6 6.9
Full Company 5.3 4.6
N.M. - Not Meaningful
(i) For information concerning our discontinued operations, see
note 2.
- Reported OCF for the three and nine
months ended September 30, 2018, increased 4.3% and 9.8%
year-over-year, respectively
- The YTD result was primarily driven by
(i) the aforementioned positive impact of FX movements and (ii)
organic OCF growth
- Rebased OCF growth of 5.2% in Q3 and
3.6% in YTD 2018 included:
- The net unfavorable impact on our
revenue of certain items, as discussed in the "Revenue Highlights"
section above
- Higher costs of $23.8 million in
U.K./Ireland in the YTD period resulting from the net impact of
credits recorded during the second quarter of 2017 ($28.8 million)
and the second quarter of 2018 ($5.0 million) in connection with a
telecommunications operator's agreement to compensate Virgin Media
and other communications providers for certain prior-period
contractual breaches related to network charges
- Unfavorable network tax increases of
$4.7 million and $17.7 million, respectively, following an increase
in the rateable value of our existing U.K. networks, which is being
phased in over a six-year period ending in 2022
- Favorable impacts of $9.3 million and
$28.7 million, respectively, due to the expected settlement of a
portion of our 2018 annual incentive compensation with Liberty
Global ordinary shares through a shareholding incentive program
that was implemented in 2018
- The impacts of the reassessment of
certain accruals in the U.K., including a $5.2 million aggregate
decrease in costs in Q3 and a $6.4 million increase in costs during
the second quarter of 2018.
- As compared to the prior-year periods,
our Q3 and YTD 2018 OCF margins were up 120 and up 40 basis points,
respectively, to 43.7% and 42.6%
Q3 2018 Rebased Operating Cash Flow Growth
- Segment Highlights
- U.K./Ireland: Rebased OCF growth of 5.3% was
attributable to strong revenue growth and lower marketing spend
partially offset by higher mobile handset costs, increased
programming expenses and an increase in network taxes
- Belgium:
Rebased OCF growth of 8.4%, largely driven by the net effect of
lower direct costs as a result of the migration of subscribers to
our own mobile network and the aforementioned revenue decrease
- Switzerland: Rebased OCF decline of 9.0% in Q3,
largely due to the aforementioned residential cable subscription
revenue decline
- Continuing CEE
(Poland, Slovakia and DTH): Rebased OCF growth of 0.5%,
driven by the net effect of the aforementioned revenue trend and an
increase in interconnect costs
Net Earnings (Loss) Attributable to Liberty Global
Shareholders
- Net earnings (loss) attributable to
Liberty Global shareholders was $974.1 million and ($804.5 million)
for the three months ended September 30, 2018 and 2017,
respectively, and $700.2 million and ($1,814.2 million) during the
nine months ended September 30, 2018 and 2017, respectively
Leverage and Liquidity
- Total capital
leases and principal amount of third-party debt: $29.7
billion for continuing operations
- Leverage
ratios9: At September 30, 2018, our adjusted gross and net
leverage ratios for the Full Company were 5.1x and 4.9x,
respectively.
- Average debt
tenor: Over 7 years, with ~74% not due until 2024 or
thereafter for continuing operations
- Borrowing
costs: Blended fully-swapped borrowing cost of our
third-party debt was 4.3% for continuing operations
- Liquidity:
$3.4 billion, including (i) $0.9 billion of cash at September 30,
2018 and (ii) aggregate unused borrowing capacity11 under our
credit facilities of $2.5 billion, for our continuing
operations
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
our OCF growth, our Adjusted FCF, our new build and upgrade and our
P&E additions, each on a continuing operations and full company
basis; expectations with respect to the development, launch and
benefits of our innovative and advanced products and services,
including Horizon 4; expectations with respect to our capital
intensity for 2019; the anticipated closing of the Vodafone
transaction; expectations regarding our share buyback program; the
expected settlement of a portion of our 2018 annual incentive
compensation with Liberty Global ordinary shares; the strength of
our balance sheet and tenor of our third-party debt; 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 effects of changes in
laws or regulation; 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 and vendors (including our third-party wireless
network providers under our MVNO arrangements) 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 Forms 10-K and 10-Q. 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.
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
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2018, we have
adjusted our historical revenue and OCF for the three and nine
months ended September 30, 2017 to (i) include the pre-acquisition
revenue and OCF of entities acquired during 2018 and 2017 in our
rebased amounts for the three and nine months ended September 30,
2017 to the same extent that the revenue and OCF of these entities
are included in our results for the three and nine months ended
September 30, 2018, (ii) exclude the revenue and OCF of UPC Austria
to the same extent that the revenue and OCF of UPC Austria is
excluded from our results for the three and nine months ended
September 30, 2018, and to exclude the revenue and OCF of entities
disposed of during 2017, (iii) include revenue for the temporary
elements of transition and other services provided to the
VodafoneZiggo JV, Deutsche Telekom (the buyer of UPC Austria) and
Liberty Latin America, to reflect amounts related to these services
equal to those included in our results for the three and nine
months ended September 30, 2018, (iv) reflect the January 1, 2018
adoption of the new revenue recognition standard (ASU 2014-09,
Revenue from Contracts with Customers) as if such adoption had
occurred on January 1, 2017 and (v) reflect the translation of our
rebased amounts for the three and nine months ended September 30,
2017 at the applicable average foreign currency exchange rates that
were used to translate our results for the three and nine months
ended September 30, 2018. We have reflected the revenue and OCF of
these acquired entities in our 2017 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 and OCF 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.
The adjustments reflected in our rebased amounts have not been
prepared with a view towards complying with Article 11 of
Regulation S-X. In addition, the rebased growth percentages are not
necessarily indicative of the revenue and OCF that would have
occurred if these transactions had occurred on the dates assumed
for purposes of calculating our rebased amounts or the revenue and
OCF that will occur in the future. The rebased growth percentages
have been presented as a basis for assessing growth rates on a
comparable basis, and are not presented as a measure of our pro
forma financial performance.
The following table provides adjustments made to the 2017
amounts to derive our rebased growth rates:
Revenue OCF
Three
monthsendedSeptember 30,
Nine monthsendedSeptember
30,
Three
monthsendedSeptember 30,
Nine monthsendedSeptember
30,
2017 2017 2017 2017 in millions
Continuing operations: Acquisitions $ 16.4 $ 57.2 $ 2.9 $ 22.4
Revenue Recognition (ASU 2014-09) (8.8 ) (17.6 ) (10.9 ) (24.3 )
Dispositions(i) (5.7 ) (20.7 ) (2.1 ) (9.2 ) Foreign Currency (26.6
) 487.6 (10.7 ) 198.8 Total increase (decrease) $
(24.7 ) $ 506.5 $ (20.8 ) $ 187.7 Discontinued
European Operations: Revenue Recognition (ASU 2014-09) $ (5.2 ) $
(15.2 ) $ (4.7 ) $ (9.8 ) Dispositions (68.0 ) (68.0 ) (37.6 )
(37.6 ) Foreign Currency (13.6 ) 192.1 (12.8 ) 108.0
Total increase (decrease) $ (86.8 ) $ 108.9 $ (55.1 ) $ 60.6
Full Company: Acquisitions $ 16.4 $ 57.2 $ 2.9 $ 22.4
Revenue Recognition (ASU 2014-09) (14.0 ) (32.8 ) (15.6 ) (34.1 )
Dispositions(i) (73.7 ) (88.7 ) (39.7 ) (46.8 ) Foreign Currency
(40.2 ) 679.7 (23.5 ) 306.8 Total increase (decrease)
$ (111.5 ) $ 615.4 $ (75.9 ) $ 248.3 (i)
Includes rebase adjustments related to agreements to provide
transitional and other services to the VodafoneZiggo JV, Liberty
Latin America and UPC Austria. These adjustments result in an equal
amount of fees in both the 2018 and 2017 periods for those services
that are deemed to be temporary in nature. The net amount of these
adjustments resulted in an increase (decrease) in revenue and OCF
of $1.2 million and ($0.7 million), respectively, for the three
months ended September 30, 2017 and decreases in revenue and OCF of
$0.4 million and $2.2 million, respectively, for the nine months
ended September 30, 2017.
Summary of Debt, Capital Lease Obligations & Cash and
Cash Equivalents
The following table(i) details the U.S. dollar equivalent
balances of the outstanding principal amount of our continuing
operations debt, capital lease obligations and cash and cash
equivalents at September 30, 2018:
Capital Debt
& Capital Cash Lease
Lease and Cash Debt(ii), (iii)
Obligations Obligations Equivalents in
millions Liberty Global and unrestricted subsidiaries $ 1,583.7
$ 49.4 $ 1,633.1 $ 795.7 Virgin Media(iv) 16,398.7 70.9 16,469.6
42.6 UPC Holding 5,951.0 78.0 6,029.0 14.7 Telenet 5,265.1
464.9 5,730.0 96.2 Total $ 29,198.5 $ 663.2
$ 29,861.7 $ 949.2
______________________________
(i) Except as otherwise indicated, the amounts reported in
the table include the named entity and its subsidiaries. (ii) Debt
amounts for UPC Holding and Telenet include notes issued by special
purpose entities that are consolidated by the respective
subsidiary. (iii) Debt amounts for UPC Holding include those
amounts that are not a direct obligation of the entities to be
disposed within the UPC Holding borrowing group. Certain of these
obligations have been or are expected to be repaid with portions of
the proceeds from the disposition of UPC Austria and the Vodafone
Disposal Group. (iv) The Virgin Media borrowing group includes
certain subsidiaries of Virgin Media, but excludes the parent
entity, Virgin Media Inc. The cash and cash equivalents amount
includes cash and cash equivalents held by the Virgin Media
borrowing group, but excludes cash and cash equivalents held by
Virgin Media Inc. This amount is included in the amount shown for
Liberty Global and unrestricted subsidiaries.
Property and Equipment Additions and Capital
Expenditures
The tables below highlight the categories of the property and
equipment additions for the indicated periods and reconcile those
additions to the capital expenditures that are presented in the
condensed consolidated statements of cash flows in our 10-Q.
Three months ended September 30, 2018
2017 2018
2017 2018 2017
Continuingoperations
DiscontinuedEuropean
Operations
Full Company in millions, except % amounts Customer
premises equipment $ 202.7 $ 227.9 $ 60.9 $ 75.0 $ 263.6 $ 302.9
New Build & Upgrade 153.2 244.1 69.9 79.6 223.1 323.7 Capacity
96.7 133.8 32.5 39.4 129.2 173.2 Baseline 264.5 235.3 40.5 56.4
305.0 291.7 Product & Enablers 174.2 185.2 25.7
11.5 199.9 196.7 Total P&E Additions 891.3
1,026.3 $ 229.5 $ 261.9 $ 1,120.8 $ 1,288.2
Reconciliation of P&E Additions to capital expenditures: Assets
acquired under capital-related vendor financing arrangements(i)
(471.3 ) (576.4 ) Assets acquired under capital leases (21.6 )
(30.5 ) Changes in current liabilities related to capital
expenditures (53.3 ) (156.6 ) Total capital expenditures, net(ii) $
345.1 $ 262.8 Capital expenditures, net:
Third-party payments $ 361.0 $ 356.6 Proceeds received for
transfers to related parties(iii) (15.9 ) (93.8 ) Total capital
expenditures, net $ 345.1 $ 262.8 P&E
Additions as % of revenue3 30.1 % 35.1 %
Nine
months ended September 30, 2018
2017 2018 2017
2018 2017
Continuingoperations
DiscontinuedEuropean
Operations
Full Company in millions, except % amounts Customer
premises equipment $ 719.5 $ 668.6 $ 197.4 $ 234.5 $ 916.9 $ 903.1
New Build & Upgrade 541.1 608.7 218.6 210.3 759.7 819.0
Capacity 312.4 362.6 92.6 90.2 405.0 452.8 Baseline 605.6 507.3
145.9 141.6 751.5 648.9 Product & Enablers 563.1 510.7
85.3 41.9 648.4 552.6 Total P&E
Additions 2,741.7 2,657.9 $ 739.8 $ 718.5 $ 3,481.5
$ 3,376.4 Reconciliation of P&E Additions to capital
expenditures: Assets acquired under capital-related vendor
financing arrangements(i) (1,659.2 ) (1,740.2 ) Assets acquired
under capital leases (68.1 ) (128.4 ) Changes in current
liabilities related to capital expenditures 128.5 61.4
Total capital expenditures, net(ii) $ 1,142.9 $ 850.7
Capital expenditures, net: Third-party payments $
1,216.1 $ 1,139.5 Proceeds received for transfers to related
parties(iii) (73.2 ) (288.8 ) Total capital expenditures, net $
1,142.9 $ 850.7 P&E Additions as % of
revenue3 30.1 % 31.8 %
______________________________
(i) Amounts exclude related VAT of $82 million and $101
million during the three months ended September 30, 2018 and 2017,
respectively, and $268 million and $285 million during the nine
months ended September 30, 2018 and 2017, respectively, that were
also financed by our vendors under these arrangements. (ii) The
capital expenditures that we report in our consolidated statements
of cash flows do not include amounts that are financed under vendor
financing or capital 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)
Primarily relates to transfers of centrally-procured property and
equipment to our discontinued operations and the VodafoneZiggo JV.
ARPU per Cable Customer Relationship
The following table provides ARPU per cable customer
relationship for the indicated periods:
Three months ended September 30,
% Rebased 2018
20173 Change % Change Liberty
Global $ 57.17 $ 57.06 0.2 % 1.7 % U.K. & Ireland (Virgin
Media) £ 51.09 £ 50.10 2.0 % 1.9 % Belgium (Telenet) € 56.49 €
55.07 2.6 % 2.6 % UPC € 31.27 € 32.20 (2.9 %) (1.8 %)
Mobile ARPU
The following tables provide ARPU per mobile subscriber for the
indicated periods:
ARPU per Mobile Subscriber Three months
ended September 30, %
Rebased 2018 20173
Change % Change Liberty Global: Including
interconnect revenue $ 19.39 $ 20.09 (3.5 %) (1.8 %) Excluding
interconnect revenue $ 15.56 $ 15.59 (0.2 %) (1.7 %)
Consolidated Operating Data — September 30, 2018
Video
Homes
Passed
Two-way
Homes
Passed
CableCustomerRelationships
Basic Video
Subscribers(i)
Enhanced Video
Subscribers
DTH
Subscribers
Total
Video
Internet
Subscribers(ii)
Telephony
Subscribers(iii)
Total
RGUs
Total Mobile
Subscribers(iv)
Continuing operations: U.K. 14,324,600 14,312,800
5,499,900 — 3,901,400 — 3,901,400 5,202,900 4,540,700 13,645,000
3,031,200 Belgium 3,341,700 3,341,700 2,135,700 209,700 1,756,500 —
1,966,200 1,666,500 1,275,500 4,908,200 2,729,100 Switzerland(v)
2,327,600 2,327,600 1,147,800 457,800 656,700 — 1,114,500 712,400
524,600 2,351,500 137,800 Ireland 912,100 879,000 437,700 6,500
264,200 — 270,700 375,100 352,600 998,400 72,400 Poland 3,430,800
3,375,200 1,430,900 179,700 1,033,100 — 1,212,800 1,153,500 643,900
3,010,200 3,300 Slovakia 611,800 597,000 193,400 27,100 141,400 —
168,500 135,200 83,000 386,700 — DTH — — 774,200
— — 774,200 774,200 11,000
11,000 796,200 —
Total continuing
operations 24,948,600 24,833,300
11,619,600 880,800 7,753,300
774,200 9,408,300
9,256,600 7,431,300 26,096,200
5,973,800 Discontinued European
Operations: Germany 13,083,200 13,007,000 7,175,900 4,674,000
1,627,200 — 6,301,200 3,573,800 3,339,300 13,214,300 285,500
Romania 3,146,400 3,110,500 975,100 236,300 692,600 — 928,900
592,900 567,800 2,089,600 — Hungary 1,816,600 1,799,100 858,600
72,800 616,800 — 689,600 688,100 665,500 2,043,200 103,300 Czech
Republic 1,543,800 1,523,900 615,800 172,600
364,200 — 536,800 503,300
184,700 1,224,800 —
Total Discontinued European
Operations 19,590,000 19,440,500
9,625,400 5,155,700 3,300,800
— 8,456,500 5,358,100
4,757,300 18,571,900
388,800 Subscriber Variance Table -
September 30, 2018 vs June 30, 2018
Video
Homes
Passed
Two-wayHomesPassed
CableCustomerRelationships
Basic Video
Subscribers(i)
EnhancedVideoSubscribers
DTH
Subscribers
Total
Video
Internet
Subscribers(ii)
Telephony
Subscribers(iii)
Total
RGUs
Total Mobile
Subscribers(iv)
Continuing operations: U.K. 94,700 94,700 26,700 —
13,000 — 13,000 36,400 54,600 104,000 (3,200 ) Belgium 8,400 8,400
(23,500 ) (10,500 ) (26,500 ) — (37,000 ) (12,900 ) (20,000 )
(69,900 ) 4,500 Switzerland(v) 25,100 25,100 (20,700 ) (11,400 )
(8,600 ) — (20,000 ) (12,700 ) (5,800 ) (38,500 ) 8,400 Ireland
8,600 9,200 2,600 (4,200 ) 4,100 — (100 ) 4,000 100 4,000 8,200
Poland 22,400 23,300 700 (900 ) 3,800 — 2,900 5,700 7,100 15,700
(200 ) Slovakia 2,600 2,600 600 400 1,200 — 1,600 1,900 1,900 5,400
— DTH — — (4,100 ) — — (4,100 ) (4,100
) 100 100 (3,900 ) —
Total continuing
operations 161,800 163,300
(17,700 ) (26,600 ) (13,000
) (4,100 ) (43,700 )
22,500 38,000 16,800
17,700 Discontinued European
Operations: Germany 45,300 47,500 11,300 8,600 (13,200 ) —
(4,600 ) 32,800 27,900 56,100 (7,400 ) Romania 9,000 12,900 (3,300
) (9,500 ) 6,800 — (2,700 ) 3,100 10,500 10,900 — Hungary 9,300
9,300 5,400 (4,600 ) 6,500 — 1,900 7,800 12,800 22,500 4,300 Czech
Republic 6,700 6,600 — (1,400 ) 3,800 —
2,400 1,900 5,900 10,200 —
Total Discontinued European Operations 70,300
76,300 13,400 (6,900
) 3,900 — (3,000 )
45,600 57,100 99,700
(3,100 ) Subscriber Variance
Table - September 30, 2018 vs June 30, 2018
Video
HomesPassed
Two-wayHomesPassed
CableCustomerRelationships
Basic Video
Subscribers(i)
EnhancedVideoSubscribers
DTH
Subscribers
Total
Video
Internet
Subscribers(ii)
Telephony
Subscribers(iii)
Total
RGUs
Total Mobile
Subscribers(iv)
Organic Change Summary: U.K. 94,700
94,700 26,700 — 13,000 — 13,000 36,400 54,600 104,000 (3,200 )
Belgium 8,400 8,400 (22,100 ) (9,900 ) (16,300 ) — (26,200 ) (9,800
) (16,900 ) (52,900 ) 4,500 Other Europe 43,200 44,700
(22,800 ) (19,100 ) (300 ) (4,100 ) (23,500 ) (2,600 ) 3,100
(23,000 ) 16,400 Total Organic Change 146,300
147,800 (18,200 ) (29,000 ) (3,600 ) (4,100 ) (36,700 )
24,000 40,800 28,100 17,700
Q3 2018 Adjustments: Q3 2018 Acquisition -
Ireland — — 1,900 — 800 — 800 1,600 300 2,700 Q3 2018 Acquisition -
Switzerland 15,500 15,500 — 3,000 — — 3,000 — — 3,000 — Q3 2018
Belgium Adjustment
(vi) — — (1,400 ) (600 )
(10,200 ) — (10,800 ) (3,100 ) (3,100 ) (17,000 ) (300 )
Net Adds (Reductions) 161,800 163,300 (17,700
) (26,600 ) (13,000 ) (4,100 ) (43,700 ) 22,500 38,000
16,800 17,400
Footnotes for Consolidated Operating
Data and Subscriber Variance Tables
(i) We have approximately 25,100 “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. (ii) 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
77,700 subscribers who have requested and received this service.
(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 143,400
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 September 30, 2018, our mobile
subscriber count included 496,000 and 410,600 prepaid mobile
subscribers in Belgium and the U.K., respectively. (v) Pursuant to
service agreements, Switzerland offers enhanced video, broadband
internet 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 September 30, 2018, Switzerland’s partner networks
account for 127,500 Cable Customer Relationships, 299,200 RGUs,
which include 107,500 Enhanced Video Subscribers, 109,300 Internet
Subscribers, and 82,400 Telephony Subscribers. Subscribers to our
enhanced video services provided over partner networks 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 report homes passed for Switzerland’s partner
networks. (vi) Represents the aggregate effect of adjustments to
correct the overstatement of our and Telenet's Q1 2018 and Q2 2018
net RGU additions. These corrections, which relate to an entity
that was acquired by Telenet in June 2017, include reductions to
Telenet's and our reported RGU net additions of 3,700 and 13,300
for Q1 2018 and Q2 2018, respectively. Our and Telenet's RGU
additions for Q1 2018 and Q2 2018 as restated for the above
adjustments are detailed below:
Three
months ended Three months ended March
31, 2018 June 30, 2018 Telenet
Liberty Global* Telenet Liberty
Global* Organic RGU net additions (losses) by
product Video (22,600 ) (64,500 ) (16,300 ) (18,900 ) Data
2,100 30,700 100 18,900 Voice (4,700 ) 4,600 (5,500 ) 29,600
Total (25,200 ) (29,200 ) (21,700 ) 29,600
* Represents the restated RGU statistics of Liberty Global's
continuing operations.
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 Germany, homes passed reflect the footprint and two-way homes
passed reflect the technological capability of our network up to
the street cabinet, with drops from the street cabinet to the
building generally added, and in-home wiring generally upgraded, on
an as needed or success-based basis. In Belgium, Telenet leases a
portion of its network under a long-term capital 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
1 The term "Full Company" includes our continuing operations
and our Discontinued European Operations, which is the basis (i) on
which analyst consensus estimates for our key performance
indicators are currently derived and on which we originally
provided our 2018 guidance for OCF, Adjusted FCF and Property and
Equipment Additions and (ii) that we use to calculate our
respective leverage ratios for debt covenant compliance purposes.
We present OCF, Adjusted FCF and Property and Equipment Additions
on a Full Company basis in order to allow readers to track our
performance against analyst consensus estimates and our original
2018 guidance, as applicable. We plan to provide Full Company
information with respect to our original 2018 guidance in our
fourth quarter 2018 earnings releases so that investors can
continue to track our progress against this guidance. 2 On December
29, 2017, the former LiLAC Group was split-off into a separate
public company, and on May 9, 2018, we agreed to sell our
operations in Germany, Hungary, Romania and the Czech Republic.
Previously we had agreed to sell our operations in Austria and this
transaction was completed on July 31, 2018. As a result of the
foregoing, the former LiLAC Group and our operations in Germany,
Austria, Hungary, Romania and the Czech Republic have all been
accounted for as discontinued operations in our 10-Q. Unless
otherwise indicated, the information in this release relates only
to our continuing operations. For additional information regarding
our discontinued operations, see note 4 to the condensed
consolidated financial statements included in our 10-Q. 3 Effective
January 1, 2018, we adopted Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), on
a prospective basis. All applicable 2017 amounts in this release
are presented on a pro forma basis that gives effect to the
adoption of ASU 2014-09 as if such adoption had occurred on January
1, 2017. In addition, on January 1, 2018, we adopted ASU No.
2017-07, Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”) on a
retrospective basis. Accordingly, the operating income and OCF
amounts for the 2017 periods in this release have been
retrospectively revised to reflect the impact of ASU 2017-07. For
additional information regarding these accounting changes, see note
2 to the condensed consolidated financial statements included in
our 10-Q. 4 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. 5 For purposes of
calculating our average tenor, total third-party debt excludes
vendor financing. 6 Liquidity refers to cash and cash equivalents
plus the maximum undrawn commitments under subsidiary borrowing
facilities, without regard to covenant compliance calculations. 7
Includes subscription and non-subscription revenue. For additional
information regarding how we define our revenue categories, see
note 16 to the condensed consolidated financial statements included
in our 10-Q. 8 Total B2B includes subscription (SOHO) and
non-subscription revenue. B2B and SOHO growth rates include upsell
from our residential businesses. 9 Consistent with how we calculate
our leverage ratios under our debt agreements, we calculate our
debt ratios on a Full Company basis, with the gross and net debt
ratios defined as total debt and net debt, respectively, divided by
annualized OCF of the latest quarter. Net debt is defined as total
debt less cash and cash equivalents. 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. We have not presented leverage ratios on a
continuing operations basis as we believe that such a presentation
would overstate our leverage and would not be representative of the
actual leverage ratios that we will report once all dispositions
are completed. This is due to the fact that our continuing
operations exclude all of the OCF of the entities to be disposed
but include a portion of the debt that we expect to repay with the
proceeds from such dispositions. For additional information, see
the details of our pro forma Adjusted FCF within the Glossary and
note 4 to the condensed consolidated financial statements included
in our 10-Q.
The following table details the calculation of our Full Company
consolidated debt and net debt to annualized consolidated OCF
ratios as of September 30, 2018:
September 30, 2018 in millions, except
ratios Consolidated Debt to Annualized Consolidated
OCF: Debt and capital lease obligations before deferred
financing costs, discounts and premiums $ 39,741.1 Principal
related projected derivative cash payments (1,273.1 ) ITV Collar
Loan (1,411.6 ) Lionsgate Collar Loan (82.9 ) Adjusted debt and
capital lease obligations before deferred financing costs,
discounts and premiums $ 36,973.5 Annualized
quarterly OCF* $ 7,318.8 Consolidated debt to annualized
consolidated OCF ratio 5.1
Consolidated Net Debt to
Annualized Consolidated OCF: Adjusted debt and capital lease
obligations before deferred financing costs, discounts and premiums
$ 36,973.5 Cash and cash equivalents (957.9 ) Adjusted net debt and
capital lease obligations before deferred financing costs,
discounts and premiums $ 36,015.6 Annualized
quarterly OCF* $ 7,318.8 Consolidated net debt to annualized
consolidated OCF ratio 4.9
* Amount excludes the OCF of Austria as the related debt that
was repaid with proceeds from the sale is not included in the debt
balances shown.
10 Organic figures exclude RGUs of acquired entities at the
date of acquisition and other nonorganic adjustments, but include
the impact of changes in RGUs from the date of acquisition. All
subscriber/RGU additions or losses refer to net organic changes,
unless otherwise noted. 11 Our aggregate unused borrowing capacity
of $2.5 billion represents the maximum undrawn commitments under
the applicable facilities of our continuing operations without
regard to covenant compliance calculations. Upon completion of the
relevant September 30, 2018 compliance reporting requirements for
our credit facilities, and assuming no further changes from
quarter-end borrowing levels, we anticipate that the borrowing
capacity of our continuing operations will continue to be $2.5
billion.
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 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 capital leases
(exclusive of the portions of the network lease in Belgium and the
duct leases in Germany that we assumed in connection with certain
acquisitions), with each item excluding any cash provided or used
by our discontinued operations. 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.
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 the changes to our Adjusted
Free Cash Flow that we expect will occur following the sale of the
Discontinued European Operations, we also present Adjusted Free
Cash Flow on a pro forma basis for three and nine months ended
September 30, 2018 as if the sale of the Discontinued European
Operations had been completed on January 1, 2018.
Three months ended September 30, 2018
2017(i) 2018
2017(i) 2018
2017(i)
Continuingoperations
Discontinued
EuropeanOperations
Full Company in millions Net cash provided by
operating activities of our continuing operations $ 587.2 $ 904.1 $
348.1 $ 324.3 $ 935.3 $ 1,228.4 Cash payments for direct
acquisition and disposition costs 9.2 0.9 — — 9.2 0.9 Expenses
financed by an intermediary(ii) 507.4 375.4 127.2 47.1 634.6 422.5
Capital expenditures, net (345.1 ) (262.7 ) (103.3 ) (170.1 )
(448.4 ) (432.8 ) Principal payments on amounts financed by vendors
and intermediaries (570.3 ) (396.6 ) (141.3 ) (84.9 ) (711.6 )
(481.5 ) Principal payments on certain capital leases (23.1 ) (22.0
) (1.4 ) (1.0 ) (24.5 ) (23.0 ) Adjusted FCF 165.3 $ 599.1 $
229.3 $ 115.4 $ 394.6 $ 714.5
Pro forma adjustments for sale of the Discontinued European
Operations related to: Interest and derivative payments(iii) 37.5
Transition services agreements(iv) 42.0 Pro forma Adjusted
FCF(v) $ 244.8
Nine months ended
September 30, 2018 2017(i)
2018 2017(i)
2018 2017(i)
Continuingoperations
DiscontinuedEuropean
Operations
Full company in millions Net cash provided by
operating activities of our continuing operations $ 2,730.1 $
2,462.5 $ 1,470.3 $ 1,178.8 $ 4,200.4 $ 3,641.3 Cash payments for
direct acquisition and disposition costs 14.0 6.9 — — 14.0 6.9
Expenses financed by an intermediary(ii) 1,423.8 952.6 255.5 114.5
1,679.3 1,067.1 Capital expenditures, net (1,142.9 ) (850.7 )
(384.5 ) (526.7 ) (1,527.4 ) (1,377.4 ) Principal payments on
amounts financed by vendors and intermediaries (3,923.6 ) (2,341.0
) (390.2 ) (221.8 ) (4,313.8 ) (2,562.8 ) Principal payments on
certain capital leases (64.0 ) (63.8 ) (4.2 ) (2.9 ) (68.2 ) (66.7
) Adjusted FCF (962.6 ) $ 166.5 $ 946.9 $ 541.9
$ (15.7 ) $ 708.4 Pro forma adjustments for
sale of Discontinued European Operations related to: Interest and
derivative payments(iii) 71.2 Transition services agreements(iv)
144.5 Pro forma Adjusted FCF(v) $ (746.9 )
_______________
(i) Adjusted free cash flow for the three and nine months
ended September 30, 2017 has been restated to reflect our January
1, 2018 adoption of ASU 2016-18, Restricted Cash. (ii) 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.
(iii) No debt, interest expense or derivative instruments of the
UPC Holding borrowing group, other than with respect to certain
borrowings that are direct obligations of the entities to be
disposed, has been allocated to discontinued operations in the
condensed consolidated financial statements that are included in
our 10-Q. Notwithstanding the foregoing, we expect to use proceeds
from the disposition of the Vodafone Disposal Group and have used
proceeds from the July 31, 2018 sale of UPC Austria to repay debt
of the UPC Holding borrowing group to the extent necessary to
maintain a leverage ratio that is approximately four to five times
UPC Holding's Covenant EBITDA. As a result, this pro forma
adjustment represents the estimated interest and related derivative
payments that would not have been made by UPC Holding if the sale
of the Discontinued European Operations had been completed on
January 1, 2018. These estimated payments are calculated based on
the Discontinued European Operation's pro rata share of UPC
Holding's OCF and UPC Holding's aggregate interest and derivative
payments during the applicable period. Although we believe that
these estimated payments represent a reasonable estimate of the
reduction in annual interest and related derivative payments that
will occur as a result of the sale of the Discontinued European
Operations, no assurance can be given that the actual debt
repayments will result in reductions equivalent to the amounts
presented. No pro forma adjustments are required with respect to
Unitymedia's interest and derivative payments as substantially all
of Unitymedia’s debt and related derivative instruments are direct
obligations of entities within the Vodafone Disposal Group. As a
result, the interest and related derivative payments associated
with such debt and derivative instruments of Unitymedia are
included in discontinued operations. (iv) Represents our
preliminary estimate of the net cash flows that we would have
received from transition services agreements if the sale of the
Discontinued European Operations had occurred on January 1, 2018.
The estimated net cash flows are based on the estimated revenue
that we expect to recognize from our transition services agreements
during the first 12 months following the completion of the sale of
the Discontinued European Operations, less the estimated
incremental costs that we expect to incur to provide such
transition services. (v) Represents the Adjusted FCF that we
estimate would have resulted if the sale of the Discontinued
European Operations had been completed on January 1, 2018. Actual
amounts may differ from the amounts assumed for purposes of this
pro forma calculation.
ARPU: Average Revenue Per Unit is
the average monthly subscription revenue per average cable customer
relationship or mobile subscriber, as applicable. Following the
adoption of ASU 2014-09, subscription revenue excludes interconnect
fees, channel carriage fees, mobile handset sales and late fees,
but includes the amortization of installation fees. Prior to the
adoption of ASU 2014-09, installation fees were excluded from
subscription revenue. ARPU per average cable customer relationship
is calculated by dividing the average monthly subscription revenue
from residential cable and SOHO services by the average number of
cable 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. Cable 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, we
adjust the prior-year subscription revenue, cable customer
relationships, mobile subscribers and RGUs, as applicable, to
reflect acquisitions, dispositions, FX and the January 1, 2018
adoption of the new revenue recognition standard (ASU 2014-09,
Revenue from Contracts with Customers) on a comparable basis with
the current year, consistent with how we calculate our rebased
growth for revenue and OCF, 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 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 capital 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.
Cable Customer Relationships: the
number of customers who receive at least one of our video, internet
or telephony services that we count as RGUs, without regard to
which or to how many services they subscribe. Cable 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 Cable Customer Relationships. We
exclude mobile-only customers from Cable Customer
Relationships.
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.
DTH Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives our video
programming broadcast directly via a geosynchronous satellite.
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.
Homes Passed: homes, residential
multiple dwelling units or commercial units that can be connected
to our networks without materially extending the distribution
plant, except for DTH homes. 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. We do not count homes passed
for DTH.
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. Our Internet Subscribers do not include customers
that receive services from dial-up connections.
MDU: Multiple Dwelling Unit.
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.
OCF: As used herein, OCF has the
same meaning as the term "Adjusted OIBDA" that is referenced in our
10-Q. OCF is the primary measure used by our chief operating
decision maker to evaluate segment operating performance. OCF 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, OCF is
defined as operating income before 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 OCF 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 OCF 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. OCF should be viewed as a measure of
operating performance that is a supplement to, and not a substitute
for, operating income, net earnings or loss, cash flow from
operating activities and other U.S. GAAP measures of income or cash
flows.
A reconciliation of our operating income to total OCF is
presented in the following table:
Three months ended September 30,
Nine months ended September 30, 2018
20173 2018 20173
Continuingoperations
FullCompany
Continuingoperations
FullCompany
Continuingoperations
FullCompany
Continuingoperations
FullCompany
in millions Operating income $ 208.6 $ 757.0 $ 210.7
$ 517.7 $ 592.9 $ 1,995.7 $ 622.7 $ 1,404.7 Share-based
compensation expense 42.8 47.1 21.5 23.2 131.0 141.6 101.8 110.0
Depreciation and amortization 935.3 935.3 953.7 1,216.5 2,952.8
3,308.8 2,743.4 3,523.3 Impairment, restructuring and other
operating items, net 107.4 109.9 54.6 58.7
199.0 212.4 61.0 88.7 Total OCF $
1,294.1 $ 1,849.3 $ 1,240.5 $ 1,816.1 $
3,875.7 $ 5,658.5 $ 3,528.9 $ 5,126.7
OCF margin: calculated by dividing
OCF by total revenue for the applicable period.
Property and equipment additions (P&E
Additions): includes capital expenditures on an accrual
basis, amounts financed under vendor financing or capital lease
arrangements and other non-cash additions.
RGU: A Revenue Generating Unit is
separately a Basic Video Subscriber, Enhanced Video Subscriber, DTH
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, DTH, 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 September 30, 2018 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.
Two-way Homes Passed: homes passed
by those sections of our networks that are technologically capable
of providing two-way services, including video, internet and
telephony services.
U.S. GAAP: United States Generally
Accepted Accounting Principles.
YoY: Year-over-year.
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version on businesswire.com: https://www.businesswire.com/news/home/20181107005792/en/
Liberty GlobalInvestor Relations:Matt Coates, +44
20 8483 6333John Rea, +1 303 220 4238Stefan Halters, +1 303 784
4528orCorporate Communications:Bill Myers, +1 303 220
6686Matt Beake, +44 20 8483 6428orCorporate
Websitewww.libertyglobal.com
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