Liberty .(LBTYA) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Presents Liberty Global plc's unaudited condensed consolidated financial information, including statements, notes, and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements of Liberty Global plc, including the balance sheets, statements of operations, comprehensive earnings (loss), equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting changes, revenue recognition, acquisitions, investments, derivative instruments, fair value measurements, long-lived assets, debt, leases, income taxes, equity, share-based compensation, earnings per share, commitments, contingencies, and segment reporting Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | ASSETS | | | | Total current assets | $5,961.5 | $5,802.4 | | Total assets | $46,844.8 | $59,092.7 | | LIABILITIES & EQUITY | | | | Total current liabilities | $4,058.7 | $4,511.1 | | Total liabilities | $21,252.1 | $45,794.3 | | Total equity | $25,592.7 | $13,298.4 | | Total liabilities and equity | $46,844.8 | $59,092.7 | - Total assets decreased significantly from $59,092.7 million at December 31, 2020, to $46,844.8 million at September 30, 2021, primarily due to the U.K. JV Transaction where Virgin Media's U.K. operations were contributed to the VMED O2 JV[6][32] - Total equity increased from $13,298.4 million at December 31, 2020, to $25,592.7 million at September 30, 2021, largely driven by accumulated earnings and other comprehensive earnings[10] Condensed Consolidated Statements of Operations Presents the company's revenues, expenses, and net earnings (loss) over specific periods, highlighting operational performance Condensed Consolidated Statements of Operations (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions, except per share) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $1,901.4 | $2,845.4 | $8,390.5 | $8,233.7 | | Operating income | $101.0 | $643.8 | $1,239.4 | $1,406.1 | | Net earnings (loss) | $318.7 | $(973.6) | $12,933.5 | $(459.7) | | Net earnings (loss) attributable to Liberty Global shareholders | $277.1 | $(1,023.1) | $12,790.7 | $(597.5) | | Basic EPS (Continuing operations) | $0.49 | $(1.75) | $22.71 | $(1.05) | | Diluted EPS (Continuing operations) | $0.48 | $(1.75) | $22.19 | $(1.05) | - Revenue decreased by 33.2% for the three months ended September 30, 2021, compared to the prior year, primarily due to the U.K. JV Transaction, however, for the nine months ended September 30, 2021, revenue increased by 1.9% year-over-year[12][32] - Net earnings attributable to Liberty Global shareholders significantly improved, reporting $277.1 million for the three months and $12,790.7 million for the nine months ended September 30, 2021, compared to losses in the prior year periods, largely driven by a substantial gain on the U.K. JV Transaction[12][54] Condensed Consolidated Statements of Comprehensive Earnings (Loss) Details net earnings (loss) and other comprehensive income (loss) components, reflecting the total change in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Earnings (Loss) (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net earnings (loss) | $318.7 | $(973.6) | $12,933.5 | $(459.7) | | Other comprehensive earnings (loss) | $(974.2) | $1,378.4 | $306.6 | $935.8 | | Comprehensive earnings (loss) | $(655.5) | $404.8 | $13,240.1 | $476.1 | | Comprehensive earnings (loss) attributable to Liberty Global shareholders | $(697.1) | $355.3 | $13,096.0 | $345.0 | - Comprehensive earnings attributable to Liberty Global shareholders showed a significant increase for the nine months ended September 30, 2021, reaching $13,096.0 million, compared to $345.0 million in the prior year, primarily influenced by net earnings and foreign currency translation adjustments[15] Condensed Consolidated Statements of Equity Outlines changes in shareholders' equity, including net earnings, share repurchases, and other comprehensive earnings, over a period Condensed Consolidated Statements of Equity (January 1, 2021 to September 30, 2021) | Metric (in millions) | Jan 1, 2021 | Sep 30, 2021 | | :------------------- | :---------- | :----------- | | Total Liberty Global shareholders | $13,662.6 | $25,908.0 | | Noncontrolling interests | $(364.2) | $(315.3) |\n| Total equity | $13,298.4 | $25,592.7 | - Total equity increased substantially from $13,298.4 million at January 1, 2021, to $25,592.7 million at September 30, 2021, driven by net earnings and accumulated other comprehensive earnings, partially offset by share repurchases[21][194] - The company repurchased 5,845,800 Class A ordinary shares and 32,700,700 Class C ordinary shares for an aggregate of $1,026.8 million during the nine months ended September 30, 2021[194] Condensed Consolidated Statements of Cash Flows Reports the inflows and outflows of cash from operating, investing, and financing activities, showing liquidity and solvency Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $2,557.7 | $2,692.3 | | Net cash used by investing activities | $(5,742.3) | $(4,172.5) | | Net cash provided (used) by financing activities | $(761.6) | $348.2 | | Net decrease in cash and cash equivalents and restricted cash | $(3,944.0) | $(1,111.8) | | End of period cash and cash equivalents and restricted cash | $773.3 | $7,069.1 | - Net cash provided by operating activities decreased to $2,557.7 million in 2021 from $2,692.3 million in 2020, primarily due to a decrease in cash provided by Adjusted EBITDA and related working capital, partially offset by lower interest and derivative payments[24][408] - Net cash used by investing activities increased significantly to $(5,742.3) million in 2021 from $(4,172.5) million in 2020, largely due to $3,424.0 million in restricted cash contributed to the VMED O2 JV, partially offset by lower net cash paid for investments[24][409] - Net cash used by financing activities shifted from a provision of $348.2 million in 2020 to a usage of $(761.6) million in 2021, mainly due to higher net borrowings of debt and lower net cash receipts from derivative instruments[27][413] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements (1) Basis of Presentation Describes the company's business, operational structure, and the accounting principles applied in preparing the financial statements - Liberty Global plc is an international provider of broadband internet, video, fixed-line telephony, and mobile communications services in Europe, with continuing operations in Switzerland, Slovakia, Belgium (Telenet), and Ireland (VM Ireland)[30][31] - The company holds 50% noncontrolling interests in the VodafoneZiggo JV (Netherlands) and the VMED O2 JV (U.K.)[31] - Operations in Poland are classified as discontinued operations due to a pending sale agreement signed on September 22, 2021[32] (2) Accounting Changes Discusses recent accounting standard adoptions and their impact on the company's consolidated financial statements - Liberty Global adopted ASU 2019-12, 'Simplifying the Accounting for Income Taxes,' on January 1, 2021, which did not have a significant impact on its consolidated financial statements[38] (3) Revenue Recognition and Related Costs Explains the company's policies for recognizing revenue from contracts with customers and associated contract balances Contract Balances (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Trade receivables, net | $943.1 | $1,078.4 | | Contract assets | $31.4 | $43.3 | | Deferred revenue | $331.7 | $437.3 | - Deferred revenue decreased by $105.6 million for the nine months ended September 30, 2021, primarily due to the recognition of $292.8 million of revenue from the prior year's deferred balance[39] - Revenue from contracts is generally recognized over the contract term, typically 12 months for residential, one to three years for mobile, and one to five years for B2B services[41] (4) Acquisitions and Dispositions Details significant business combinations, asset sales, and their financial impact, including gains and losses - Liberty Global entered into an agreement on September 22, 2021, to sell its operations in Poland (UPC Poland) for an enterprise value of PLN 7,025.0 million ($1,763.5 million), with closing expected in the first half of 2022[44] UPC Poland Operating Results (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $113.2 | $109.1 | $344.9 | $319.5 | | Net earnings attributable to Liberty Global shareholders | $3.1 | $12.0 | $44.3 | $42.5 | - On June 1, 2021, Liberty Global contributed its U.K. operations (Virgin Media) to the VMED O2 JV, recognizing a provisional pre-tax gain of $11,138.0 million, adjusted to $10,790.7 million after a measurement period adjustment[52][54] - On September 1, 2021, Liberty Global contributed assets and liabilities to the newly-formed Atlas Edge JV, recognizing a provisional gain of $213.7 million[63] (5) Investments Provides information on the company's equity method and fair value investments, including their carrying amounts and share of results Total Investments by Accounting Method (September 30, 2021 vs. December 31, 2020) | Accounting Method (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------ | :----------- | :----------- | | Total — equity | $17,262.3 | $3,488.7 | | Total — fair value | $4,798.3 | $3,466.0 | | Total investments | $22,060.6 | $6,954.7 | - The significant increase in equity method investments is primarily due to the VMED O2 JV, which became an equity method investment on June 1, 2021, with a carrying value of $13,962.7 million[68] Share of Results of Affiliates, Net (Three and Nine Months Ended September 30, 2021 vs. 2020) | Affiliate (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | All3Media | $(3.4) | $(0.3) | $(18.2) | $(40.1) | | VMED O2 JV | $(10.4) | — | $(10.7) | — | | VodafoneZiggo JV | $(2.6) | $(6.8) | $6.8 | $(34.9) | | Formula E | $(10.9) | $(17.4) | $(6.5) | $(16.7) | | Other, net | $(1.9) | $(2.6) | $(7.0) | $(7.4) | | Total | $(29.2) | $(27.1) | $(35.6) | $(99.1) | - The VodafoneZiggo JV provided dividend distributions of $240.9 million and $102.0 million during the nine months ended September 30, 2021 and 2020, respectively[85] (6) Derivative Instruments Describes the company's use of derivative instruments to manage financial risks and their fair values and gains/losses - Liberty Global uses derivative instruments to manage exposure to interest rate increases, foreign currency movements, and decreases in market prices of certain securities, generally not applying hedge accounting[97] Fair Values of Derivative Instrument Assets and Liabilities (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Total Assets | $510.3 | $884.7 | | Total Liabilities | $694.1 | $1,616.8 | Realized and Unrealized Gains (Losses) on Derivative Instruments, Net (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total | $199.3 | $(717.5) | $707.4 | $200.4 | - The company's exposure to counterparty credit risk for derivative assets was $113.6 million at September 30, 2021[105] (7) Fair Value Measurements Explains the methodologies and inputs used to determine the fair value of financial and non-financial assets and liabilities - Fair value measurements are used for certain investments, derivative instruments, and debt, as well as for nonrecurring valuations in acquisitions and impairment assessments[122][125] - The valuation of the initial investment in the VMED O2 JV used a weighted average cost of capital of 6.9%[125] Fair Value Measurements at September 30, 2021 (in millions) | Description | Total | Level 1 | Level 2 | Level 3 | | :------------------- | :---------- | :---------- | :---------- | :---------- | | Assets: | | | | | | Derivative instruments | $510.3 | $0 | $395.9 | $114.4 | | Investments | $4,798.3 | $1,359.2 | $2,390.3 | $1,048.8 | | Total assets | $5,308.6 | $1,359.2 | $2,786.2 | $1,163.2 | | Liabilities: | | | | | | Derivative instruments | $694.1 | $0 | $694.1 | $0 | | Total liabilities | $694.1 | $0 | $694.1 | $0 | (8) Long-lived Assets Presents information on property and equipment, goodwill, and other intangible assets, including changes and carrying amounts Property and Equipment, Net (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Total property and equipment, gross | $14,962.7 | $15,460.8 | | Accumulated depreciation | $(7,978.1) | $(7,834.2) | | Total property and equipment, net | $6,984.6 | $7,626.6 | Goodwill Carrying Amount (January 1, 2021 to September 30, 2021) | Segment (in millions) | Jan 1, 2021 | Sep 30, 2021 | | :-------------------- | :---------- | :----------- | | Switzerland | $6,816.0 | $6,429.5 | | Belgium | $2,783.7 | $2,634.5 | | Ireland | $296.2 | $280.4 | | Central and Other | $69.8 | $66.1 | | Total | $9,965.7 | $9,410.5 | - Goodwill decreased from $9,965.7 million to $9,410.5 million during the nine months ended September 30, 2021, primarily due to foreign currency translation adjustments[146] (9) Debt Details the company's debt obligations, finance lease obligations, and associated interest rates and maturities Total Debt and Finance Lease Obligations (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Total debt before deferred financing costs, discounts and premiums | $14,650.9 | $14,516.3 | | Total carrying amount of debt | $14,590.6 | $14,397.9 | | Finance lease obligations | $493.2 | $549.5 | | Total debt and finance lease obligations | $15,083.8 | $14,947.4 | | Current maturities of debt and finance lease obligations | $(986.5) | $(1,086.1) | | Long-term debt and finance lease obligations | $14,097.3 | $13,861.3 | - The weighted average interest rate on aggregate variable- and fixed-rate indebtedness was 3.54% at September 30, 2021, including effects of derivative instruments, premiums/discounts, and commitment fees[154] - UPC Holding completed financing transactions in Q2 2021, resulting in lower interest rates and extended maturities, and recognized a $90.6 million loss on debt extinguishment[163] - VM Ireland entered into a new credit facility in June 2021, comprising a €900.0 million term loan and a €100.0 million revolving facility[169] (10) Leases Provides information on the company's right-of-use assets and lease liabilities, including lease terms and discount rates ROU Assets and Lease Liabilities (September 30, 2021 vs. December 31, 2020) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Total ROU assets | $1,754.6 | $1,911.9 | | Total lease liabilities | $1,816.8 | $1,981.5 | Total Lease Expense (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total lease expense | $59.0 | $42.1 | $245.0 | $160.1 | - The weighted average remaining lease term for finance leases was 22.6 years with a 6.0% discount rate, while for operating leases it was 11.6 years with a 5.8% discount rate at September 30, 2021[179][180] (11) Income Taxes Discusses the company's income tax benefit or expense, effective tax rates, and unrecognized tax benefits Income Tax Benefit (Expense) (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total income tax benefit (expense) | $(2.2) | $165.5 | $(444.2) | $252.2 | - The income tax expense for the nine months ended September 30, 2021, was primarily due to the non-taxable gain associated with the U.K. JV Transaction[189][380] - Unrecognized tax benefits were $504.9 million as of September 30, 2021, with $382.5 million potentially having a favorable impact on the effective income tax rate if recognized[191] (12) Equity Details changes in the company's equity, including share repurchases and new share repurchase programs - During the nine months ended September 30, 2021, Liberty Global repurchased 5,845,800 Class A ordinary shares and 32,700,700 Class C ordinary shares for an aggregate of $1,026.8 million[194] - In July 2021, the board approved a new share repurchase program, increasing the authorized amount for 2021 to $1.4 billion and committing to repurchase a minimum of 10% of outstanding shares in 2022 and 2023[194] (13) Share-based Compensation Reports on the expense associated with share-based incentive awards and the details of compensation plans Total Share-based Compensation Expense (Three and Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total | $58.0 | $104.4 | $220.6 | $243.4 | - Share-based compensation expense decreased for both the three-month and nine-month periods in 2021 compared to 2020, with performance-based incentive awards seeing a notable reduction[198] - The 2021 Ventures Incentive Plan, approved in April 2021, is a new liability-classified incentive plan for executive officers and key employees, based on the performance of the Liberty Global Ventures Portfolio[208] (14) Earnings or Loss per Share Presents the calculation of basic and diluted earnings per share, including weighted average shares outstanding Weighted Average Ordinary Shares Outstanding (Basic and Diluted EPS Computation) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS computation | 551,973,418 | 590,985,197 | 561,295,200 | 608,816,109 | | Diluted EPS computation | 565,044,476 | 590,985,197 | 574,426,784 | 608,816,109 | - The calculation of diluted EPS for the three and nine months ended September 30, 2021, excluded 51.5 million options, SARs, and RSUs due to their anti-dilutive effect[211] (15) Commitments and Contingencies Outlines the company's contractual commitments and potential liabilities from legal proceedings and other contingencies Total Commitments by Category (in millions) | Category | Remainder of 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | | :--------------------------- | :---------------- | :------ | :------ | :------ | :------ | :------ | :--------- | :-------- | | Network and connectivity commitments | $62.2 | $92.8 | $68.8 | $50.4 | $48.7 | $40.4 | $684.4 | $1,047.7 | | Purchase commitments | $249.5 | $263.5 | $39.7 | $21.9 | $10.5 | $7.8 | $0.7 | $593.6 | | Programming commitments | $57.8 | $188.2 | $119.2 | $79.6 | $66.2 | $46.7 | $18.4 | $576.1 | | Other commitments | $13.5 | $73.6 | $54.2 | $28.3 | $29.0 | $29.0 | $122.3 | $349.9 | | Total | $383.0 | $618.1 | $281.9 | $180.2 | $154.4 | $123.9 | $825.8 | $2,567.3 | - Programming commitments represent a significant portion of operating costs and are expected to rise due to content expansion and rate increases[217] - Legal proceedings, including the Interkabel Acquisition litigation in Belgium and the Telekom Deutschland Litigation, are ongoing, but the company does not expect their ultimate resolution to have a material impact on its financial position[222][224][225] (16) Segment Reporting Provides financial information by reportable segment, including revenue and Adjusted EBITDA, to assess performance - Liberty Global's reportable segments include Switzerland, Belgium, Ireland (consolidated), and the VMED O2 JV and VodafoneZiggo JV (nonconsolidated)[237] - Adjusted EBITDA is the primary measure used to evaluate segment operating performance and allocate resources[236] Revenue by Reportable Segment (Three and Nine Months Ended September 30, 2021 vs. 2020) | Segment (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.K. | — | $1,543.6 | $2,736.4 | $4,457.3 | | Belgium | $755.4 | $746.6 | $2,302.9 | $2,147.2 | | Switzerland | $830.2 | $315.0 | $2,497.4 | $930.9 | | Ireland | $136.0 | $126.4 | $406.2 | $366.2 | | Central and Other | $181.4 | $118.9 | $458.7 | $346.9 | | Total | $1,901.4 | $2,845.4 | $8,390.5 | $8,233.7 | | VMED O2 JV | $3,614.0 | — | $4,822.5 | — | | VodafoneZiggo JV | $1,206.1 | $1,166.7 | $3,638.4 | $3,345.4 | Adjusted EBITDA by Reportable Segment (Three and Nine Months Ended September 30, 2021 vs. 2020) | Segment (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.K. | — | $610.9 | $1,085.3 | $1,819.6 | | Belgium | $369.1 | $367.4 | $1,130.5 | $1,053.1 | | Switzerland | $330.8 | $154.4 | $910.9 | $439.4 | | Ireland | $59.1 | $49.9 | $160.7 | $143.2 | | Central and Other | $1.5 | $(20.5) | $(15.8) | $(50.6) | | Total | $758.5 | $1,163.5 | $3,273.2 | $3,406.1 | | VMED O2 JV | $1,180.3 | — | $1,591.3 | — | | VodafoneZiggo JV | $578.1 | $559.1 | $1,713.4 | $1,593.4 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a comprehensive discussion and analysis of Liberty Global's financial condition and results of operations, including an overview of its business, material changes in operating results by segment and on a consolidated basis, and an analysis of financial condition covering sources and uses of cash, capitalization, and adjusted free cash flow, also highlighting forward-looking statements and key factors impacting the business Forward-looking Statements Highlights the inherent uncertainties and risks associated with future-oriented information presented in the report - The report contains forward-looking statements subject to risks and uncertainties, including economic conditions, competition, currency fluctuations, regulatory changes, and the impact of COVID-19[265][266] - Key factors that could cause actual results to differ include consumer preferences, technological changes, ability to manage customer service, capital availability, and outcomes from legal/regulatory proceedings[265][266] Overview Provides a high-level description of Liberty Global's business, services, and market presence in Europe - Liberty Global is an international provider of broadband internet, video, fixed-line telephony, and mobile communications services in Europe, with continuing operations in Switzerland, Slovakia, Belgium, and Ireland, and 50% noncontrolling interests in the VodafoneZiggo JV and VMED O2 JV[268] - As of September 30, 2021, continuing operations served 4,134,900 fixed-line customers and 5,670,300 mobile subscribers[271] - Competition, macroeconomic factors, and regulatory developments continue to impact revenue, customer numbers, and ARPU across all markets[272] Material Changes in Results of Operations Analyzes significant changes in the company's revenue, expenses, and overall profitability across reporting periods Discussion and Analysis of our Reportable Segments Examines the financial performance of each operating segment, including revenue and Adjusted EBITDA trends - Consolidated revenue decreased by $944.0 million (33.2%) for the three months ended September 30, 2021, but increased by $156.8 million (1.9%) for the nine months, primarily due to the U.K. JV Transaction and Sunrise Acquisition[286][287] - Organic revenue increased by 0.8% for the three months and 1.2% for the nine months, driven by increases in Belgium and Ireland, partially offset by decreases in Switzerland[286][287] Adjusted EBITDA by Reportable Segment (Three and Nine Months Ended September 30, 2021 vs. 2020) | Segment (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.K. | — | $610.9 | $1,085.3 | $1,819.6 | | Belgium | $369.1 | $367.4 | $1,130.5 | $1,053.1 | | Switzerland | $330.8 | $154.4 | $910.9 | $439.4 | | Ireland | $59.1 | $49.9 | $160.7 | $143.2 | | Central and Other | $1.5 | $(20.5) | $(15.8) | $(50.6) | | Total | $758.5 | $1,163.5 | $3,273.2 | $3,406.1 | | VMED O2 JV | $1,180.3 | — | $1,591.3 | — | | VodafoneZiggo JV | $578.1 | $559.1 | $1,713.4 | $1,593.4 | - Adjusted EBITDA margins varied by segment, with Switzerland's margin adversely impacted by the Sunrise Acquisition due to the acquired mobile business having a lower margin[309][310] Discussion and Analysis of our Consolidated Operating Results Provides a detailed review of the company's consolidated financial performance, including revenue, costs, and net earnings Consolidated Revenue by Major Category (Three and Nine Months Ended September 30, 2021 vs. 2020) | Revenue Category (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total residential revenue | $1,331.9 | $2,217.9 | $6,304.9 | $6,421.7 | | Total B2B revenue | $346.5 | $490.0 | $1,493.4 | $1,399.5 | | Other revenue | $223.0 | $137.5 | $592.2 | $412.5 | | Total | $1,901.4 | $2,845.4 | $8,390.5 | $8,233.7 | - Organic residential fixed subscription revenue decreased by 1.9% and 1.5% for the three and nine months, respectively, primarily due to Switzerland and the U.K.[320] - Organic residential mobile subscription revenue increased by 9.7% and 4.2% for the three and nine months, respectively, mainly driven by increases in Switzerland[321] - Programming and other direct costs of services decreased by 34.0% for the three months but increased by 6.1% for the nine months, influenced by acquisitions and dispositions, and organic changes in programming costs and interconnect fees[326][327][330] - Interest expense decreased by 49.8% and 20.2% for the three and nine months, respectively, due to lower weighted average interest rates and average outstanding debt balances, following the U.K. JV Transaction and Sunrise Acquisition[356] - Realized and unrealized gains on derivative instruments, net, showed a significant positive shift, from a loss of $(717.5) million in Q3 2020 to a gain of $199.3 million in Q3 2021, and from $200.4 million to $707.4 million for the nine-month period[360] - Foreign currency transaction gains (losses), net, improved significantly, from a loss of $(754.6) million in Q3 2020 to a gain of $422.4 million in Q3 2021, and from a loss of $(836.3) million to a gain of $857.6 million for the nine-month period[364] - A pre-tax gain of $10,790.7 million was recognized on the U.K. JV Transaction for the nine months ended September 30, 2021[374] Material Changes in Financial Condition Discusses significant changes in the company's assets, liabilities, and equity, and their impact on financial health Sources and Uses of Cash Explains how the company generates and utilizes cash, detailing liquidity sources and cash management strategies Consolidated Cash and Cash Equivalents (September 30, 2021) | Holder (in millions) | Amount | | :------------------- | :----- | | Liberty Global and unrestricted subsidiaries | $495.6 | | Borrowing groups | $270.6 | | Total cash and cash equivalents | $766.2 | - Corporate liquidity sources include cash held by Liberty Global and unrestricted subsidiaries, investments under SMAs, interest/dividend income, and proceeds from transitional services[392] - The company does not anticipate tax considerations to adversely impact corporate liquidity over the next 12 months, despite $749.2 million of cash held by entities domiciled outside the U.K.[394] Capitalization Describes the company's capital structure, including debt levels, finance lease obligations, and compliance with covenants - Liberty Global aims to maintain consolidated debt between four and five times its consolidated Adjusted EBITDA[401] - As of September 30, 2021, the outstanding principal amount of consolidated debt and finance lease obligations was $15.1 billion, with $1.0 billion classified as current and $13.8 billion due in 2027 or thereafter[403] - All borrowing groups were in compliance with their debt covenants at September 30, 2021, and no material adverse impact on liquidity is anticipated from non-compliance in the next 12 months[402] Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities, highlighting changes in liquidity Summary of Cash Flows from Continuing Operations (Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $2,414.0 | $2,568.4 | $(154.4) | | Net cash used by investing activities | $(5,704.3) | $(4,132.4) | $(1,571.9) | | Net cash provided (used) by financing activities | $(734.3) | $363.2 | $(1,097.5) | | Net decrease in cash and cash equivalents and restricted cash | $(4,022.4) | $(1,180.6) | $(2,841.8) | - The decrease in net cash from operating activities was primarily due to lower cash from Adjusted EBITDA and working capital, partially offset by lower interest and derivative payments[408] - The increase in net cash used by investing activities was mainly due to a $3,424.0 million contribution of restricted cash to the VMED O2 JV, partially offset by lower net cash paid for investments[409] - Capital expenditures, net, increased from $919.9 million in 2020 to $1,114.4 million in 2021, driven by the Sunrise Acquisition and local currency expenditures for network improvements and new projects[409][412] Adjusted Free Cash Flow Presents a non-GAAP measure of cash flow available to service debt and fund investments, indicating financial flexibility Adjusted Free Cash Flow (Nine Months Ended September 30, 2021 vs. 2020) | Metric (in millions) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | | Adjusted free cash flow | $943.8 | $473.4 | - Adjusted free cash flow increased to $943.8 million for the nine months ended September 30, 2021, from $473.4 million in the prior year, indicating improved ability to service debt and fund new investments[416] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details Liberty Global's exposure to market risks, including foreign currency exchange rates, interest rates, and stock prices, and outlines the strategies and derivative instruments used to manage these risks, also providing sensitivity analysis for key derivative contracts Foreign Currency Risk Discusses the company's exposure to fluctuations in foreign currency exchange rates and their potential financial impact - Liberty Global is exposed to foreign currency exchange rate risk, particularly with the euro and Swiss franc, as its operating segments have functional currencies other than the U.S. dollar[277][422] Foreign Currency Spot and Average Rates (per one U.S. dollar) | Currency | Spot Rate (Sep 30, 2021) | Spot Rate (Dec 31, 2020) | Average Rate (3 Months Ended Sep 30, 2021) | Average Rate (3 Months Ended Sep 30, 2020) | Average Rate (9 Months Ended Sep 30, 2021) | Average Rate (9 Months Ended Sep 30, 2020) | | :------------------- | :----------------------- | :----------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Euro | 0.8643 | 0.8180 | 0.8484 | 0.8851 | 0.8359 | 0.8904 | | British pound sterling | 0.7429 | 0.7325 | 0.7257 | 0.7737 | 0.7220 | 0.7871 | | Swiss franc | 0.9341 | 0.8852 | 0.9183 | 0.9195 | 0.9113 | 0.9506 | | Polish zloty | 3.9836 | 3.7363 | 3.8738 | 3.7977 | 3.8001 | 3.9381 | Interest Rate Risks Explains the company's exposure to changes in interest rates on its borrowings and the use of derivatives to mitigate this risk - The company is exposed to changes in interest rates from fixed-rate and variable-rate borrowings, primarily EURIBOR-indexed and LIBOR-indexed debt[424] - Derivative instruments, such as interest rate swaps, caps, floors, collars, and swaptions, are used to mitigate interest rate risk[425] - A hypothetical 50 basis point increase in the weighted average variable interest rate would increase annual consolidated interest expense and cash outflows by $49.5 million, excluding derivative effects[428] Sensitivity Information Provides quantitative analysis of the potential impact of market rate changes on the fair value of derivative instruments - For UPC Holding, a 10% increase in CHF relative to USD would decrease derivative fair value by approximately €439 million ($507 million)[430] - For Telenet, a 10% increase in EUR relative to USD would decrease derivative fair value by approximately €346 million ($400 million)[431] Projected Cash Flows Associated with Derivative Instruments Presents anticipated net cash payments or receipts related to the company's derivative financial instruments Projected Derivative Cash Payments (Receipts), Net (in millions) | Category | Remainder of 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | | :---------------- | :---------------- | :---- | :---- | :------ | :------ | :------ | :--------- | :-------- | | Interest-related | $(34.0) | $81.6 | $2.1 | $(47.7) | $(74.3) | $(74.9) | $(239.9) | $(387.1) | | Principal-related | — | — | $61.8 | $(1.4) | $17.2 | $(41.1) | $(16.1) | $20.4 | | Other | $27.4 | $(3.1) | — | — | — | — | $24.3 | | Total | $(6.6) | $78.5 | $63.9 | $(49.1) | $(57.1) | $(116.0) | $(256.0) | $(342.4) | ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of Liberty Global's disclosure controls and procedures and reports no material changes in internal controls over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2021, providing reasonable assurance of timely and accurate information disclosure[436] - No material changes in internal controls over financial reporting were identified during the fiscal quarter ended September 30, 2021[437] PART II — OTHER INFORMATION Contains additional information not included in the financial statements, such as legal proceedings and equity security sales ITEM 1. LEGAL PROCEEDINGS This section refers to the detailed discussion of legal proceedings and contingent liabilities provided in the notes to the condensed consolidated financial statements - Information regarding legal proceedings and claims arising in the normal course of business is detailed in Note 15 to the condensed consolidated financial statements[441] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Reports on the company's repurchases of equity securities during the quarter and the remaining authorization under its share repurchase program Issuer Purchases of Equity Securities (July 1, 2021 through September 30, 2021) | Period | Total number of shares purchased | Average price paid per share (a) | | :---------------------------------------- | :------------------------------- | :------------------------------- | | July 1, 2021 through July 31, 2021: Class C | 4,716,000 | $26.26 | | August 1, 2021 through August 31, 2021: Class C | 4,159,500 | $28.27 | | September 1, 2021 through September 30, 2021: Class C | 4,010,700 | $29.10 | | Total — July 1, 2021 through September 30, 2021: Class C | 12,886,200 | $27.79 | - As of September 30, 2021, $378.7 million remained authorized for share repurchases during the remainder of 2021, with additional commitments for 2022 and 2023[444] ITEM 6. EXHIBITS Lists all documents filed as exhibits to the quarterly report, including agreements and certifications - Key exhibits include the Sale and Purchase Agreement for UPC Poland, CEO and CFO certifications, and Inline XBRL Taxonomy Extension documents[446]