# Liberty Global Ltd. (LBTYA) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Liberty Global Ltd.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1570585/000157058522000038/lbtya-20211231.htm
Accession: 0001570585-22-000038
Filing date: 2022-02-17
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/LBTYA/
All MD&A years: /company/LBTYA/mda/
Next year: /company/LBTYA/mda/fy2022/ (FY 2022)

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis, which should be read in conjunction with our consolidated financial statements, is intended to assist in providing an understanding of our results of operations and financial condition and is organized as follows:

•Overview. This section provides a general description of our business and recent events.

•Results of Operations. This section provides an analysis of our results of operations for the years ended December 31, 2021 and 2020.

•Liquidity and Capital Resources. This section provides an analysis of our corporate and subsidiary liquidity and consolidated statements of cash flow.

•Critical Accounting Policies, Judgments and Estimates. This section discusses those material accounting policies that involve uncertainties and require significant judgment in their application.

•Quantitative and Qualitative Disclosures about Market Risk. This section provides discussion and analysis of the foreign currency, interest rate and other market risk that our company faces.

Unless otherwise indicated, convenience translations into U.S. dollars are calculated, and operational data is presented, as of December 31, 2021.

Included below is an analysis of our results of operations and cash flows for 2021, as compared to 2020. An analysis of our results of operations and cash flows for 2020, as compared to 2019, can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2020 (our 2020 10-K), which is available through the Securities and Exchange Commission’s website at www.sec.gov.

Overview

General

We are an international provider of broadband internet, video, fixed-line telephony and mobile communications services to residential customers and businesses in Europe. Our operations comprise businesses that provide residential and B2B communications services in (i) Switzerland and Slovakia through UPC Holding, (ii) Belgium through Telenet and (iii) Ireland through another wholly-owned subsidiary of Liberty Global. In addition, we own 50% noncontrolling interests in (a) the VodafoneZiggo JV, which provides residential and B2B communications services in the Netherlands, and (b) the VMO2 JV, which provides residential and B2B communication services in the U.K.

In addition, we currently provide residential and B2B communications services in Poland through UPC Holding. On September 22, 2021, we entered into an agreement to sell our operations in Poland. Accordingly, our operations in Poland are reflected as discontinued operations for all periods presented. In the following discussion and analysis, the operating statistics, results of operations, cash flows and financial condition that we present and discuss are those of our continuing operations, unless otherwise indicated. For additional information regarding the pending sale of UPC Poland, including with respect to our current expectations on timing and use of proceeds, see note 6 to our consolidated financial statements.

Through May 31, 2021, our consolidated operations also provided residential and B2B communications services in the U.K. through Virgin Media. On June 1, 2021, we contributed the U.K. JV Entities to the VMO2 JV and began accounting for our 50% interest in the VMO2 JV as an equity method investment. For additional information, see note 6 to our consolidated financial statements.

Operations

Our company delivers market-leading products through next-generation networks that connect our customers to broadband internet, video, fixed-line telephony and mobile services. At December 31, 2021, our continuing operations owned and operated networks that passed 7,477,100 homes and served 4,129,700 fixed-line customers and 5,689,900 mobile subscribers.

Broadband internet services. We offer multiple tiers of broadband internet service up to Gigabit speeds depending on location. We continue to invest in new technologies that allow us to increase the internet speeds we offer to our customers.

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Video services. We provide video services, including various enhanced products that enable our customers to control when they watch their programming. These products range from digital video recorders to multimedia home gateway systems capable of distributing video, voice and data content throughout the home and to multiple devices.

Fixed-line telephony services. We offer fixed-line telephony services via either voice-over-internet-protocol or “VoIP” technology or circuit-switched telephony, depending on location.

Mobile services. We offer voice and data mobile services, either over our own networks or as an MVNO over third-party networks, depending on location. In addition, we generate revenue from the sale of mobile handsets.

B2B services. Our B2B services include voice, broadband internet, data, video, wireless and cloud services.

Other. We also have significant investments in ITV, Univision, Lacework, Plume, the Atlas Edge JV, All3Media, EdgeConneX, Lionsgate, the Formula E racing series and several regional sports networks.

For additional information regarding the details of our products and services, see Item 1. Business included in Part I of this Annual Report on Form 10-K.

Strategy and Management Focus

From a strategic perspective, we are seeking to build national fixed-mobile converged communications businesses that have strong prospects for future growth. As discussed further under Liquidity and Capital Resources — Capitalization below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.

We strive to achieve organic revenue and customer growth in our operations by developing and marketing bundled entertainment and information and communications services, and extending and upgrading the quality of our networks where appropriate. As we use the term, organic growth excludes foreign currency translation effects (FX) and the estimated impact of acquisitions and dispositions. While we seek to increase our customer base, we also seek to maximize the average revenue we receive from each household by increasing the penetration of our broadband internet, digital video, fixed-line telephony and mobile services with existing customers through product bundling and upselling.

Impact of COVID-19

The global COVID-19 pandemic continues to impact the economies of the countries in which we operate. However, during 2021, the impact on our company continued to be relatively minimal as demand for our products and services remained strong. It is not currently possible to estimate the duration and severity of the COVID-19 pandemic or the adverse economic impact resulting from the preventative measures taken to contain or mitigate its outbreak, therefore no assurance can be given that an extended period of global economic disruption would not have a material adverse impact on our business, financial condition and results of operations in future periods. For additional information regarding the impact of COVID-19 on our results of operations during 2021 and 2020, see Discussion and Analysis of our Reportable Segments below.

Competition and Other External Factors

We are experiencing competition in all of the markets in which we or our affiliates operate. This competition, together with macroeconomic and regulatory factors, has adversely impacted our revenue, number of customers and/or average monthly subscription revenue per fixed-line customer or mobile subscriber, as applicable (ARPU). For additional information regarding the competition we face, see Item 1. Business - Competition and - Regulatory Matters included in Part I of this Annual Report on Form 10-K. For additional information regarding the revenue impact of changes in the fixed-line customers and ARPU of our consolidated reportable segments, see Discussion and Analysis of our Reportable Segments below.

For information regarding certain other regulatory developments that could adversely impact our results of operations in future periods, see Legal and Regulatory Proceedings and Other Contingencies in note 18 to our consolidated financial statements.

II-5

Results of Operations

We have completed a number of transactions that impact the comparability of our 2021 and 2020 results of operations, the most notable of which are (i) the Sunrise Acquisition on November 11, 2020 and (ii) the U.K. JV Transaction on June 1, 2021. For further information regarding our acquisitions and dispositions, see notes 5 and 6, respectively, to our consolidated financial statements.

In the following discussion, we quantify the estimated impact of material acquisitions (the Acquisition Impact) and dispositions on our operating results. The Acquisition Impact represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. In general, we base our estimate of the Acquisition Impact on an acquired entity’s operating results during the first three to twelve months following the acquisition date, as adjusted to remove integration costs and any other material unusual or nonoperational items, such that changes from those operating results in subsequent periods are considered to be organic changes. Accordingly, in the following discussion, (i) organic variances attributed to an acquired entity during the first 12 months following the acquisition date represent differences between the Acquisition Impact and the actual results and (ii) the calculation of our organic change percentages includes the organic activity of an acquired entity relative to the Acquisition Impact of such entity. With respect to material dispositions, the organic changes that are discussed below reflect adjustments to exclude the historical prior-year results of any disposed entities to the extent that such entities are not included in the corresponding results for the current-year period.

Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating segments have functional currencies other than the U.S. dollar. Our primary exposure to FX risk during the three months ended December 31, 2021 was to the euro and Swiss franc, as 55.2% and 43.7% of our reported revenue during such period was derived from subsidiaries whose functional currencies are the euro and Swiss franc, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for certain other local currencies in Europe. The portions of the changes in the various components of our results of operations that are attributable to changes in FX are highlighted under Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results below. For information regarding our foreign currency risks and the applicable foreign currency exchange rates in effect for the periods covered by this Annual Report on Form 10-K, see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.

The amounts presented and discussed below represent 100% of each of our consolidated reportable segment’s results of operations. As we have the ability to control Telenet, we consolidate 100% of its revenue and expenses in our consolidated statements of operations despite the fact that third parties own a significant interest. The noncontrolling owners’ interests in the operating results of Telenet and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our consolidated statements of operations.

Discussion and Analysis of our Reportable Segments

General

All of our reportable segments derive their revenue primarily from residential and B2B communications services. For detailed information regarding the composition of our reportable segments and how we define and categorize our revenue components, see note 19 to our consolidated financial statements. For information regarding the results of operations of the VodafoneZiggo JV and, for the period beginning June 1, 2021, the VMO2 JV, refer to Discussion and Analysis of our Consolidated Operating Results — Share of results of affiliates, net, below.

The tables presented below in this section provide the details of the revenue and Adjusted EBITDA of our consolidated reportable segments for 2021, as compared to 2020. These tables present (i) the amounts reported for the current and comparative periods, (ii) the reported U.S. dollar change and percentage change from period to period and (iii) the organic U.S. dollar change and percentage change from period to period. For our organic comparisons, which exclude the impact of FX, we assume that exchange rates remained constant at the prior-period rate during all periods presented. We also provide a table showing the Adjusted EBITDA margins of our consolidated reportable segments for 2021 and 2020 at the end of this section.

Most of our revenue is derived from jurisdictions that administer VAT or similar revenue-based taxes. Any increases in these taxes could have an adverse impact on our ability to maintain or increase our revenue to the extent that we are unable to pass such tax increases on to our customers. In the case of revenue-based taxes for which we are the ultimate taxpayer, we will also experience increases in our operating costs and expenses and corresponding declines in our Adjusted EBITDA and Adjusted EBITDA margins to the extent of any such tax increases.

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We pay interconnection fees to other telephony providers when calls or text messages from our subscribers terminate on another network, and we receive similar fees from such providers when calls or text messages from their customers terminate on our networks or networks that we access through MVNO or other arrangements. The amounts we charge and incur with respect to fixed-line telephony and mobile interconnection fees are subject to regulatory oversight. To the extent that regulatory authorities introduce fixed-line or mobile termination rate changes, we would experience prospective changes and, in very limited cases, we could experience retroactive changes in our interconnect revenue and/or costs. The ultimate impact of any such changes in termination rates on our Adjusted EBITDA would be dependent on the call or text messaging patterns that are subject to the changed termination rates.

We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our consolidated reportable segments (non-functional currency expenses). Any cost increases that we are not able to pass on to our subscribers through rate increases would result in increased pressure on our operating margins. For additional information regarding our foreign currency exchange risks see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.

Consolidated Adjusted EBITDA is a non-GAAP measure, which we believe is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to readily view operating trends from a consolidated view. Investors should view consolidated Adjusted EBITDA as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.

The following table provides a reconciliation of earnings (loss) from continuing operations to Adjusted EBITDA:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","2019"],["","in millions"],["Earnings (loss) from continuing operations","$","13,527.5","","","$","(1,525.1)","","","$","(1,475.9)"],["Income tax expense (benefit)","473.3","","","(275.9)","","","234.0"],["Other income, net","(44.9)","","","(76.2)","","","(114.4)"],["Gain on Atlas Edge JV Transactions","(227.5)","","","\u2014","","","\u2014"],["Gain on U.K. JV Transaction","(10,873.8)","","","\u2014","","","\u2014"],["Share of results of affiliates, net","175.4","","","245.3","","","198.5"],["Losses on debt extinguishment, net","90.6","","","233.2","","","216.7"],["Realized and unrealized gains due to changes in fair values of certain investments and debt, net","(735.0)","","","(45.2)","","","(72.0)"],["Foreign currency transaction losses (gains), net","(1,324.5)","","","1,409.3","","","95.6"],["Realized and unrealized losses (gains) on derivative instruments, net","(622.9)","","","878.7","","","193.2"],["Interest expense","882.1","","","1,186.8","","","1,384.2"],["Operating income","1,320.3","","","2,030.9","","","659.9"],["Impairment, restructuring and other operating items, net","(19.0)","","","97.4","","","155.4"],["Depreciation and amortization","2,353.7","","","2,227.2","","","3,546.3"],["Share-based compensation expense","308.1","","","348.0","","","305.8"],["Adjusted EBITDA","$","3,963.1","","","$","4,703.5","","","$","4,667.4"]]
[[/GREPCENT_TABLE]]

II-7

Revenue of our Consolidated Reportable Segments

General. While not specifically discussed in the below explanations of the changes in the revenue of our consolidated reportable segments, we are experiencing competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our total number of customers and/or our ARPU.

Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of our fixed-line customers or mobile subscribers outstanding during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (a) changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected, (d) variances in subscriber usage patterns and (e) the overall mix of fixed and mobile products within a segment during the period.

Revenue — 2021 compared to 2020

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Switzerland","$","3,321.9","","","$","1,573.8","","","$","1,748.1","","","111.1","","","$","(35.5)","","","(1.1)"],["Belgium","3,065.9","","","2,940.9","","","125.0","","","4.3","","","21.7","","","0.7"],["U.K. (a)","2,736.4","","","6,076.9","","","(3,340.5)","","","(55.0)","","","63.1","","","2.6"],["Ireland","550.0","","","513.7","","","36.3","","","7.1","","","18.2","","","3.5"],["Central and Other","648.7","","","461.9","","","186.8","","","40.4","","","32.3","","","7.0"],["Intersegment eliminations","(11.6)","","","(21.8)","","","10.2","","","N.M.","","10.2","","","N.M."],["Total","$","10,311.3","","","$","11,545.4","","","$","(1,234.1)","","","(10.7)","","","$","110.0","","","1.1"]]
[[/GREPCENT_TABLE]]

_______________

N.M. — Not Meaningful.

(a)Represents the revenue of the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

II-8

Switzerland. The details of the increase in Switzerland’s revenue during 2021, as compared to 2020, are set forth below:

[[GREPCENT_TABLE]]
[["","Subscription revenue","","Non-subscription revenue","","Total"],["","in millions"],["Decrease in residential fixed subscription revenue due to change in:"],["Average number of customers","$","(25.5)","","","$","\u2014","","","$","(25.5)"],["ARPU","(15.1)","","","\u2014","","","(15.1)"],["Decrease in residential fixed non-subscription revenue","\u2014","","","(2.7)","","","(2.7)"],["Total decrease in residential fixed revenue","(40.6)","","","(2.7)","","","(43.3)"],["Increase (decrease) in residential mobile revenue (a)","46.7","","","(73.8)","","","(27.1)"],["Increase (decrease) in B2B revenue (b)","(0.7)","","","45.3","","","44.6"],["Decrease in other revenue","\u2014","","","(9.7)","","","(9.7)"],["Total organic increase (decrease)","5.4","","","(40.9)","","","(35.5)"],["Impact of acquisitions","1,178.9","","","547.0","","","1,725.9"],["Impact of FX","31.2","","","26.5","","","57.7"],["Total","$","1,215.5","","","$","532.6","","","$","1,748.1"]]
[[/GREPCENT_TABLE]]
_______________

(a)The increase in residential mobile subscription revenue is largely due to an increase in the average number of mobile subscribers. The decrease in residential mobile non-subscription revenue is primarily attributable to a decrease in revenue from mobile handset sales.

(b)The increase in B2B non-subscription revenue is primarily due to the net effect of (i) higher revenue from wholesale services and (ii) lower revenue from telephony services.

II-9

Belgium. The details of the increase in Belgium’s revenue during 2021, as compared to 2020, are set forth below:

[[GREPCENT_TABLE]]
[["","Subscription revenue","","Non-subscription revenue","","Total"],["","in millions"],["Increase (decrease) in residential fixed subscription revenue due to change in:"],["Average number of customers","$","(24.0)","","","$","\u2014","","","$","(24.0)"],["ARPU","11.8","","","\u2014","","","11.8"],["Increase in residential fixed non-subscription revenue","\u2014","","","4.6","","","4.6"],["Total increase (decrease) in residential fixed revenue","(12.2)","","","4.6","","","(7.6)"],["Increase (decrease) in residential mobile revenue (a)","12.3","","","(20.7)","","","(8.4)"],["Increase (decrease) in B2B revenue (b)","21.4","","","(1.3)","","","20.1"],["Increase in other revenue (c)","\u2014","","","17.6","","","17.6"],["Total organic increase","21.5","","","0.2","","","21.7"],["Impact of dispositions","(1.8)","","","(0.5)","","","(2.3)"],["Impact of FX","80.8","","","24.8","","","105.6"],["Total","$","100.5","","","$","24.5","","","$","125.0"]]
[[/GREPCENT_TABLE]]

_______________

(a)The increase in residential mobile subscription revenue is primarily due to the net effect of (i) higher ARPU and (ii) a decrease in the average number of mobile subscribers. The decrease in residential mobile non-subscription revenue is primarily attributable to lower interconnect revenue.

(b)The increase in B2B subscription revenue is primarily attributable to an increase in the average number of customers.

(c)The increase in other revenue is attributable to higher broadcasting revenue.

For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see Legal and Regulatory Proceedings and Other Contingencies — Belgium Regulatory Developments in note 18 to our consolidated financial statements.

II-10

U.K. The details of the decrease in the U.K.’s revenue during 2021, as compared to 2020, are set forth below:

[[GREPCENT_TABLE]]
[["","Subscription revenue","","Non-subscription revenue","","Total"],["","in millions"],["Increase (decrease) in residential fixed subscription revenue due to change in:"],["Average number of customers","$","74.7","","","$","\u2014","","","$","74.7"],["ARPU (a)","(93.8)","","","\u2014","","","(93.8)"],["Increase in residential fixed non-subscription revenue (b)","\u2014","","","13.0","","","13.0"],["Total increase (decrease) in residential fixed revenue","(19.1)","","","13.0","","","(6.1)"],["Increase in residential mobile revenue (c)","1.3","","","32.7","","","34.0"],["Increase in B2B revenue (d)","9.9","","","25.4","","","35.3"],["Decrease in other revenue","\u2014","","","(0.1)","","","(0.1)"],["Total organic increase (decrease)","(7.9)","","","71.0","","","63.1"],["Impact of dispositions","(2,802.3)","","","(802.2)","","","(3,604.5)"],["Impact of FX","158.7","","","42.2","","","200.9"],["Total","$","(2,651.5)","","","$","(689.0)","","","$","(3,340.5)"]]
[[/GREPCENT_TABLE]]

_______________

(a)The decrease in fixed subscription revenue related to a change in ARPU includes an increase of approximately $19 million associated with the pausing or cancellation of certain sporting events during the second quarter of 2020, as further described under Discussion and Analysis of our Consolidated Operating Results — Programming and other direct costs of services below.

(b)The increase in residential fixed non-subscription revenue is primarily attributable to increases in (i) revenue from late fees, (ii) cancellation revenue and (iii) installation revenue.

(c)The increase in residential mobile non-subscription revenue is primarily attributable to an increase in revenue from mobile handset sales.

(d)The increase in B2B subscription revenue is primarily due to an increase in the average number of customers. The increase in B2B non-subscription revenue is primarily attributable to the net effect of (i) an increase in revenue associated with long-term leases of a portion of our network and (ii) lower revenue from data services.

II-11

Ireland. The details of the increase in Ireland’s revenue during 2021, as compared to 2020, are set forth below:

[[GREPCENT_TABLE]]
[["","Subscription revenue","","Non-subscription revenue","","Total"],["","in millions"],["Increase (decrease) in residential fixed subscription revenue due to change in:"],["Average number of customers","$","(1.5)","","","$","\u2014","","","$","(1.5)"],["ARPU","0.3","","","\u2014","","","0.3"],["Increase in residential fixed non-subscription revenue","\u2014","","","0.1","","","0.1"],["Total increase (decrease) in residential fixed revenue","(1.2)","","","0.1","","","(1.1)"],["Increase (decrease) in residential mobile revenue","4.1","","","(1.0)","","","3.1"],["Increase (decrease) in B2B revenue","0.7","","","(3.0)","","","(2.3)"],["Increase in other revenue (a)","\u2014","","","18.5","","","18.5"],["Total organic increase","3.6","","","14.6","","","18.2"],["Impact of FX","14.2","","","3.9","","","18.1"],["Total","$","17.8","","","$","18.5","","","$","36.3"]]
[[/GREPCENT_TABLE]]

_______________

(a)The increase in other revenue is attributable to higher broadcasting revenue.

Revenue — 2020 compared to 2019 

For discussion and analysis of the revenue of our consolidated reportable segments during 2020, as compared to 2019, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2020 10-K.

Programming and Other Direct Costs of Services, Other Operating Expenses and SG&A Expenses of our Consolidated Reportable Segments

For information regarding the changes in our (i) programming and other direct costs of services, (ii) other operating expenses and (iii) SG&A expenses, see Discussion and Analysis of our Consolidated Operating Results below.

II-12

Adjusted EBITDA of our Consolidated Reportable Segments

Adjusted EBITDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. As presented below, consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations. The following tables set forth the Adjusted EBITDA of our consolidated reportable segments.

Adjusted EBITDA — 2021 compared to 2020

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Switzerland","$","1,208.7","","","$","693.8","","","$","514.9","","","74.2","","","$","(10.5)","","","(0.9)"],["Belgium","1,481.8","","","1,413.4","","","68.4","","","4.8","","","17.2","","","1.2"],["U.K. (a)","1,085.3","","","2,453.5","","","(1,368.2)","","","(55.8)","","","(13.0)","","","(1.3)"],["Ireland","218.6","","","202.0","","","16.6","","","8.2","","","9.6","","","4.8"],["Central and Other","(33.1)","","","(61.4)","","","28.3","","","46.1","","","(49.4)","","","(80.5)"],["Intersegment eliminations","1.8","","","2.2","","","(0.4)","","","N.M.","","(0.4)","","","N.M."],["Total","$","3,963.1","","","$","4,703.5","","","$","(740.4)","","","(15.7)","","","$","(46.5)","","","(1.2)"]]
[[/GREPCENT_TABLE]]

_______________

N.M. — Not Meaningful.

(a)Represents the Adjusted EBITDA of the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

Adjusted EBITDA Margin

The following table sets forth the Adjusted EBITDA margins (Adjusted EBITDA divided by revenue) of each of our consolidated reportable segments:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["Switzerland","36.4","%","","44.1","%"],["Belgium","48.3","%","","48.1","%"],["U.K. (a)","39.7","%","","40.4","%"],["Ireland","39.7","%","","39.3","%"]]
[[/GREPCENT_TABLE]]

_______________

(a)Represents the results of the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

In addition to organic changes in the revenue, operating and SG&A expenses of our consolidated reportable segments, the Adjusted EBITDA margins presented above include the impact of acquisitions, as applicable. In this regard, the Sunrise Acquisition had a significant adverse impact on the Adjusted EBITDA margin in Switzerland, as the acquired Sunrise mobile business generates a relatively lower Adjusted EBITDA margin than our legacy operations in Switzerland. For discussion of the factors contributing to the changes in the Adjusted EBITDA margins of our consolidated reportable segments, see the analysis of our revenue included in Discussion and Analysis of our Reportable Segments above and the analysis of our expenses included in Discussion and Analysis of our Consolidated Operating Results below.

Adjusted EBITDA — 2020 compared to 2019

For the details of our Adjusted EBITDA and Adjusted EBITDA margins during 2020, as compared to 2019, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2020 10-K.

II-13

Discussion and Analysis of our Consolidated Operating Results

General

For more detailed explanations of the changes in our revenue, see Discussion and Analysis of our Reportable Segments above.

2021 compared to 2020

Revenue

Our revenue by major category is set forth below:

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Residential revenue:"],["Residential fixed revenue (a):"],["Subscription revenue (b):"],["Broadband internet","$","2,371.7","","","$","3,181.9","","","$","(810.2)","","","(25.5)","","","$","43.1","","","1.9"],["Video","1,831.8","","","2,446.2","","","(614.4)","","","(25.1)","","","(30.2)","","","(1.7)"],["Fixed-line telephony","841.1","","","1,328.2","","","(487.1)","","","(36.7)","","","(85.9)","","","(9.7)"],["Total subscription revenue","5,044.6","","","6,956.3","","","(1,911.7)","","","(27.5)","","","(73.0)","","","(1.5)"],["Non-subscription revenue","161.2","","","217.3","","","(56.1)","","","(25.8)","","","14.5","","","10.3"],["Total residential fixed revenue","5,205.8","","","7,173.6","","","(1,967.8)","","","(27.4)","","","(58.5)","","","(1.2)"],["Residential mobile revenue (c):"],["Subscription revenue (b)","1,630.7","","","1,090.3","","","540.4","","","49.6","","","64.4","","","4.2"],["Non-subscription revenue","760.8","","","691.5","","","69.3","","","10.0","","","(62.9)","","","(7.8)"],["Total residential mobile revenue","2,391.5","","","1,781.8","","","609.7","","","34.2","","","1.5","","","0.1"],["Total residential revenue","7,597.3","","","8,955.4","","","(1,358.1)","","","(15.2)","","","(57.0)","","","(0.8)"],["B2B revenue (d):"],["Subscription revenue","619.0","","","563.9","","","55.1","","","9.8","","","31.3","","","5.5"],["Non-subscription revenue","1,243.8","","","1,431.5","","","(187.7)","","","(13.1)","","","63.1","","","5.7"],["Total B2B revenue","1,862.8","","","1,995.4","","","(132.6)","","","(6.6)","","","94.4","","","5.6"],["Other revenue (e)","851.2","","","594.6","","","256.6","","","43.2","","","72.6","","","11.7"],["Total","$","10,311.3","","","$","11,545.4","","","$","(1,234.1)","","","(10.7)","","","$","110.0","","","1.1"]]
[[/GREPCENT_TABLE]]

_______________

(a)Residential fixed subscription revenue includes amounts received from subscribers for ongoing services and the recognition of deferred installation revenue over the associated contract period. Residential fixed non-subscription revenue includes, among other items, channel carriage fees, late fees and revenue from the sale of equipment.

(b)Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone pricing of our fixed and mobile products or the composition of bundles can contribute to changes in our product revenue categories from period to period.

(c)Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile handsets and other devices. Residential mobile interconnect revenue was $232.6 million and $227.9 million during 2021 and 2020, respectively.

II-14

(d)B2B subscription revenue represents revenue from (i) services provided to SOHO subscribers and (ii) mobile services provided to medium and large enterprises. SOHO subscribers pay a premium price to receive expanded service levels along with broadband internet, video, fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. A portion of the increase in our B2B subscription revenue is attributable to the conversion of certain residential subscribers to SOHO subscribers. B2B non-subscription revenue includes (a) revenue from business broadband internet, video, fixed-line telephony and data services offered to medium and large enterprises and, on a wholesale basis, to other operators and (b) revenue from long-term leases of portions of our network.

(e)Other revenue includes, among other items, (i) revenue earned from the VMO2 JV Services, the NL JV Services and the sale of customer premises equipment to the VodafoneZiggo JV, (ii) broadcasting revenue in Belgium and Ireland and (iii) revenue earned from transitional and other services provided to various third parties.

Total revenue. Our consolidated revenue decreased $1,234.1 million or 10.7% during 2021, as compared to 2020. This decrease includes a decrease of $3,604.5 million attributable to the impact of the U.K. JV Transaction and an increase of $1,725.9 million attributable to the impact of the Sunrise Acquisition. On an organic basis, our consolidated revenue increased $110.0 million or 1.1%.

Residential revenue. The details of the decrease in our consolidated residential revenue during 2021, as compared to 2020, are as follows (in millions):

[[GREPCENT_TABLE]]
[["Increase (decrease) in residential fixed subscription revenue due to change in:"],["Average number of customers","$","25.3"],["ARPU","(98.3)"],["Increase in residential fixed non-subscription revenue","14.5"],["Total decrease in residential fixed revenue","(58.5)"],["Increase in residential mobile subscription revenue","64.4"],["Decrease in residential mobile non-subscription revenue","(62.9)"],["Total organic decrease in residential revenue","(57.0)"],["Impact of acquisitions and dispositions","(1,592.1)"],["Impact of FX","291.0"],["Total decrease in residential revenue","$","(1,358.1)"]]
[[/GREPCENT_TABLE]]

On an organic basis, our consolidated residential fixed subscription revenue decreased $73.0 million or 1.5% during 2021, as compared to 2020, primarily attributable to decreases in Switzerland and the U.K.

On an organic basis, our consolidated residential fixed non-subscription revenue decreased $14.5 million or 10.3% during 2021, as compared to 2020, primarily due an increase in the U.K.

On an organic basis, our consolidated residential mobile subscription revenue increased $64.4 million or 4.2% during 2021, as compared to 2020, primarily attributable to increases in Switzerland and Belgium.

On an organic basis, our consolidated residential mobile non-subscription revenue decreased $62.9 million or 7.8% during 2021, as compared to 2020, primarily due to the net effect of (i) decreases in Switzerland and Belgium and (ii) an increase in the U.K.

B2B revenue. On an organic basis, our consolidated B2B subscription revenue increased $31.3 million or 5.5% during 2021, as compared to 2020, primarily due to increases in Belgium and the U.K.

On an organic basis, our consolidated B2B non-subscription revenue increased $63.1 million or 5.7% during 2021, as compared to 2020, primarily attributable to increases in Switzerland and the U.K.

Other revenue. On an organic basis, our consolidated other revenue increased $72.6 million or 11.7% during 2021, as compared to 2020, primarily attributable to (i) an increase in Central and Other related to revenue earned from (a) the sale of customer premises equipment to the VodafoneZiggo JV and (b) the NL JV Services and (ii) higher broadcasting revenue in Ireland and Belgium.

II-15

Programming and other direct costs of services

Programming and other direct costs of services include programming and copyright costs, interconnect and access costs, costs of mobile handsets and other devices and other direct costs related to our operations, including costs associated with our transitional service agreements. Programming and copyright costs represent a significant portion of our operating costs and are subject to rise in future periods due to various factors, including (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events and (ii) rate increases.

The details of our programming and other direct costs of services are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Switzerland","$","1,063.2","","","$","417.7","","","$","645.5","","","154.5","","","$","(49.8)","","","(4.5)"],["Belgium","706.8","","","695.9","","","10.9","","","1.6","","","(11.9)","","","(1.7)"],["U.K. (a)","868.1","","","1,911.9","","","(1,043.8)","","","(54.6)","","","35.4","","","4.6"],["Ireland","157.7","","","143.8","","","13.9","","","9.7","","","8.5","","","5.9"],["Central and Other","226.1","","","157.4","","","68.7","","","43.6","","","30.9","","","19.6"],["Intersegment eliminations","(4.3)","","","(6.1)","","","1.8","","","N.M.","","1.8","","","N.M."],["Total","$","3,017.6","","","$","3,320.6","","","$","(303.0)","","","(9.1)","","","$","14.9","","","0.5"]]
[[/GREPCENT_TABLE]]

_______________

N.M. — Not Meaningful.

(a)Represents the programming and other direct costs of the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

Our programming and other direct costs of services decreased $303.0 million or 9.1% during 2021, as compared to 2020. This decrease includes a decrease of $1,142.7 million attributable to the impact of the U.K. JV Transaction and an increase of $682.4 million attributable to the impact of the Sunrise Acquisition. On an organic basis, our programming and other direct costs of services increased $14.9 million or 0.5%. This increase includes the following factors:

•A decrease in mobile handset and other device costs of $52.4 million or 13.1%, primarily due to the net effect of (i) lower sales volumes, as a decrease in Switzerland was only partially offset by an increase in the U.K., and (ii) higher average costs per handset sold in the U.K.;

•An increase in programming and copyright costs of $51.2 million or 3.2%, attributable to higher costs for certain premium and/or basic content, primarily in the U.K., Belgium and Ireland. The higher costs in the U.K. include an increase of $14.1 million related to the net impact of credits received during the second quarters of 2020 and 2021 in connection with (i) the pausing or cancellation of certain sporting events due to the COVID-19 pandemic during 2020, which offset the aforementioned revenue increases, and (ii) the loss of certain content;

•A decrease in interconnect and access costs of $24.9 million or 2.8%, primarily due to the net effect of (i) lower interconnect and mobile roaming costs, primarily in Belgium, the U.K. and Switzerland, (ii) higher leased tower costs in Switzerland and (iii) lower MVNO costs, primarily in Switzerland and the U.K.;

•An increase of $16.3 million associated with the impact of the classification of costs in connection with the U.K. JV Services provided by Central and Other, which, subsequent to the completion of the U.K. JV Transaction, are classified as direct costs of services. This increase was fully offset by a corresponding decrease in various SG&A expense categories within Central and Other; and

•An increase in costs of $14.2 million in Central and Other related to the sale of customer premises equipment to the VodafoneZiggo JV.

II-16

Other operating expenses

Other operating expenses include network operations, customer operations, customer care, share-based compensation and other costs related to our operations. We do not include share-based compensation in the following discussion and analysis of the other operating expenses of our consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below.

The details of our other operating expenses are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Switzerland","$","405.1","","","$","210.5","","","$","194.6","","","92.4","","","$","(9.0)","","","(2.2)"],["Belgium","451.6","","","416.2","","","35.4","","","8.5","","","19.8","","","4.8"],["U.K. (a)","405.9","","","917.6","","","(511.7)","","","(55.8)","","","12.1","","","3.4"],["Ireland","94.5","","","93.2","","","1.3","","","1.4","","","(2.1)","","","(2.3)"],["Central and Other","115.1","","","72.2","","","42.9","","","59.4","","","29.4","","","40.7"],["Intersegment eliminations","(1.3)","","","2.0","","","(3.3)","","","N.M.","","(3.3)","","","N.M."],["Total other operating expenses excluding share-based compensation expense","1,470.9","","","1,711.7","","","(240.8)","","","(14.1)","","","$","46.9","","","3.4"],["Share-based compensation expense","13.7","","","7.6","","","6.1","","","80.3"],["Total","$","1,484.6","","","$","1,719.3","","","$","(234.7)","","","(13.7)"]]
[[/GREPCENT_TABLE]]

_______________

N.M. — Not Meaningful.

(a)Represents the other operating expenses of the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

Our other operating expenses (exclusive of share-based compensation expense) decreased $240.8 million or 14.1% during 2021, as compared to 2020. This decrease includes a decrease of $538.6 million attributable to the impact of the U.K. JV Transaction and an increase of $187.6 million attributable to the impact of the Sunrise Acquisition. On an organic basis, our other operating expenses increased $46.9 million or 3.4%. This increase includes the following factors:

•An increase in personnel costs of $27.7 million or 5.3%, primarily due to the net effect of (i) higher staffing levels, primarily in Switzerland and the U.K., (ii) lower costs due to the impact of an increase in the use of internal labor for certain network-related capital projects in the U.K. and (iii) higher average costs per employee, as a decrease in Switzerland was more than offset by increases in the U.K., Central and Other and Belgium;

•An increase in core network and information technology-related costs of $22.5 million or 8.3%, primarily due to higher information technology-related expenses in Central and Other, Belgium and Switzerland;

•A decrease in bad debt expense of $9.8 million or 12.0%, primarily due to decreases in the U.K., Switzerland and Ireland that were only partially offset by an increase in Belgium; and

•An increase in business service costs of $9.3 million or 5.1%, primarily due to higher consulting costs in Switzerland and Central and Other.

II-17

SG&A expenses

SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, share-based compensation and other general expenses. We do not include share-based compensation in the following discussion and analysis of the SG&A expenses of our consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below.

The details of our SG&A expenses are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase (decrease)","","Organic increase (decrease)"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["Switzerland","$","644.9","","","$","251.8","","","$","393.1","","","156.1","","","$","33.8","","","5.6"],["Belgium","425.7","","","415.4","","","10.3","","","2.5","","","(3.4)","","","(0.8)"],["U.K. (a)","377.1","","","793.9","","","(416.8)","","","(52.5)","","","28.6","","","9.0"],["Ireland","79.2","","","74.7","","","4.5","","","6.0","","","2.2","","","2.9"],["Central and Other","340.6","","","293.7","","","46.9","","","16.0","","","21.4","","","7.3"],["Intersegment eliminations","(7.8)","","","(19.9)","","","12.1","","","N.M.","","12.1","","","N.M."],["Total SG&A expenses excluding share-based compensation expense","1,859.7","","","1,809.6","","","50.1","","","2.8","","","$","94.7","","","5.6"],["Share-based compensation expense","294.4","","","340.4","","","(46.0)","","","(13.5)"],["Total","$","2,154.1","","","$","2,150.0","","","$","4.1","","","0.2"]]
[[/GREPCENT_TABLE]]

______________

N.M. — Not Meaningful.

(a)Represents the SG&A expenses the U.K. JV Entities through the June 1, 2021 closing of the U.K. JV Transaction.

Supplemental SG&A expense information

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Increase","","Organic increase"],["","2021","","2020","","$","","%","","$","","%"],["","in millions, except percentages"],["General and administrative (a)","$","1,443.6","","","$","1,406.2","","","$","37.4","","","2.7","","","$","83.8","","","6.4"],["External sales and marketing","416.1","","","403.4","","","12.7","","","3.1","","","10.9","","","2.8"],["Total","$","1,859.7","","","$","1,809.6","","","$","50.1","","","2.8","","","$","94.7","","","5.6"]]
[[/GREPCENT_TABLE]]

______________

(a)General and administrative expenses include all personnel-related costs within our SG&A expenses, including personnel-related costs associated with our sales and marketing function.

Our SG&A expenses (exclusive of share-based compensation expense) increased $50.1 million or 2.8% during 2021, as compared to 2020. This increase includes a decrease of $463.4 million attributable to the impact of the U.K. JV Transaction and an increase of $347.7 million attributable to the impact of the Sunrise Acquisition. On an organic basis, our SG&A expenses increased $94.7 million or 5.6%. This increase includes the following factors:

•An increase in core network and information technology-related costs of $34.4 million or 17.6%, primarily due to higher information technology-related expenses in the U.K., Switzerland and Central and Other;

•An increase in personnel costs of $34.4 million or 4.1%, primarily due to the net effect of (i) lower staffing levels, primarily in the U.K., Belgium and Switzerland, (ii) higher average costs per employee, primarily in Central and Other and the U.K., and (iii) higher incentive compensation costs, primarily in Central and Other, Switzerland and the U.K.

II-18

The higher average costs per employee in Central and Other include a decrease of $13.8 million associated with the aforementioned impact of the classification of costs in connection with the U.K. JV Services provided by Central and Other, which, subsequent to the completion of the U.K. JV Transaction, are classified as direct costs of services; and

•An increase in external sales and marketing costs of $10.9 million or 2.8%, primarily due to higher costs associated with advertising campaigns, as increases in the U.K. and Switzerland were only partially offset by a decrease in Belgium.

Share-based compensation expense

Our share-based compensation expense primarily relates to the share-based incentive awards issued by Liberty Global to its employees and employees of its subsidiaries. A summary of our aggregate share-based compensation expense is set forth below:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Liberty Global:"],["Performance-based incentive awards (a)","$","59.6","","","$","127.4"],["Non-performance based incentive awards","168.6","","","134.1"],["Other (b)","33.6","","","46.2"],["Total Liberty Global","261.8","","","307.7"],["Telenet share-based incentive awards (c)","35.1","","","35.5"],["Other","11.2","","","4.8"],["Total","$","308.1","","","$","348.0"],["Included in:"],["Other operating expenses","$","13.7","","","$","7.6"],["Total SG&A expenses","294.4","","","340.4"],["Total","$","308.1","","","$","348.0"]]
[[/GREPCENT_TABLE]]

_______________ 

(a)Includes share-based compensation expense related to (i) PSUs, (ii) our 2019 CEO Performance Award and (iii) our 2019 Challenge Performance Awards.

(b)Represents annual incentive compensation and defined contribution plan liabilities that have been or are expected to be settled with Liberty Global ordinary shares. In the case of the annual incentive compensation, shares have been or will be issued to senior management and key employees pursuant to a shareholding incentive program. The shareholding incentive program allows these employees to elect to receive up to 100% of their annual incentive compensation in ordinary shares of Liberty Global in lieu of cash.

(c)Represents the share-based compensation expense associated with Telenet’s share-based incentive awards, which, at December 31, 2021, included performance- and non-performance-based stock option awards with respect to 4,126,221 Telenet shares. These stock option awards had a weighted average exercise price of €39.73 ($45.24).

For additional information concerning our share-based compensation, see note 15 to our consolidated financial statements.

II-19

Depreciation and amortization expense

Our depreciation and amortization expense was $2,353.7 million and $2,227.2 million during 2021 and 2020, respectively. Excluding the effects of FX, depreciation and amortization expense increased $67.3 million or 3.0% during 2021, as compared to 2020. This increase is primarily due to the net effect of (i) an increase due to the Sunrise Acquisition, (ii) a decrease in the U.K. of $577.5 million as a result of the held-for-sale presentation of the U.K. JV Entities effective May 7, 2020, (iii) an increase associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives, primarily in Central and Other, Belgium and Switzerland, and (iv) a decrease associated with certain assets becoming fully depreciated, primarily in Central and Other, Belgium and Switzerland. For information regarding the held-for-sale presentation of the U.K. JV Entities prior to completion of the U.K. JV Transaction, see note 6 to our consolidated financial statements.

Impairment, restructuring and other operating items, net

We recognized impairment, restructuring and other operating items, net, of ($19.0 million) during 2021, as compared to $97.4 million during 2020.

The 2021 amount primarily includes (i) a $108.6 million gain related to the settlement of certain litigation in Switzerland, (ii) restructuring charges of $58.2 million, including $53.7 million of employee severance and termination costs related to certain reorganization activities, primarily in Switzerland, and (iii) direct acquisition and disposition costs of $53.0 million, primarily related to costs incurred in connection with the formation of the VMO2 JV and the Sunrise Acquisition.

The 2020 amount primarily includes (i) direct acquisition and disposition costs of $76.1 million, primarily related to costs incurred in connection with the Sunrise Acquisition and the formation of the VMO2 JV, (ii) restructuring charges of $47.5 million, including $34.9 million of employee severance and termination costs related to certain reorganization activities, primarily in Switzerland, the U.K. and Central and Other, (iii) a $42.0 million gain in Belgium associated with the disposal of certain content assets and liabilities and (iv) impairment charges of $13.2 million, primarily in Belgium and the U.K.

If, among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.

For additional information regarding our impairments, see Critical Accounting Policies, Judgments and Estimates — Impairment of Property and Equipment and Intangible Assets below.

Interest expense

We recognized interest expense of $882.1 million and $1,186.8 million during 2021 and 2020, respectively. Excluding the effects of FX, interest expense decreased $349.8 million or 29.5% during 2021, as compared to 2020. This decrease is primarily attributable to (i) the impact of the U.K. JV Transaction and (ii) borrowings used to fund the Sunrise Acquisition, the net effect of which resulted in a lower average outstanding debt balance and a lower weighted average interest rate. For additional information regarding our outstanding indebtedness, see note 11 to our consolidated financial statements.

It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 8 to our consolidated financial statements and under Qualitative and Quantitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks.

II-20

Realized and unrealized gains (losses) on derivative instruments, net

Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Cross-currency and interest rate derivative contracts (a)","$","578.9","","","$","(1,184.3)"],["Equity-related derivative instruments:"],["ITV Collar","(11.8)","","","364.2"],["Other","85.6","","","22.5"],["Total equity-related derivative instruments (b)","73.8","","","386.7"],["Foreign currency forward and option contracts","(31.8)","","","(81.1)"],["Other","2.0","","","\u2014"],["Total","$","622.9","","","$","(878.7)"]]
[[/GREPCENT_TABLE]]

_______________ 

(a)The gain during 2021 is attributable to net gains associated with changes in (i) certain market interest rates and (ii) the relative value of certain currencies. In addition, the gain during 2021 includes a net loss of $10.7 million resulting from changes in our credit risk valuation adjustments. The loss during 2020 is attributable to net losses associated with changes in (a) the relative value of certain currencies and (b) certain market interest rates. In addition, the loss during 2020 includes a net gain of $336.0 million resulting from changes in our credit risk valuation adjustments.

(b)For information concerning the factors that impact the valuations of our equity-related derivative instruments, see note 9 to our consolidated financial statements.

For additional information concerning our derivative instruments, see notes 8 and 9 to our consolidated financial statements and Quantitative and Qualitative Disclosures about Market Risk below.

II-21

Foreign currency transaction gains (losses), net

Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gain (losses), net, are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Intercompany payables and receivables denominated in a currency other than the entity\u2019s functional currency (a)","$","1,595.7","","","$","(1,880.2)"],["U.S. dollar denominated debt issued by euro functional currency entities","(399.1)","","","435.0"],["U.S. dollar denominated debt issued by British pound sterling functional currency entities","246.2","","","50.7"],["Cash and restricted cash denominated in a currency other than the entity\u2019s functional currency","(101.1)","","","(134.1)"],["Euro denominated debt issued by British pound sterling functional currency entities","(24.1)","","","30.5"],["British pound sterling denominated debt issued by a U.S. dollar functional currency entity","\u2014","","","88.9"],["Other","6.9","","","(0.1)"],["Total","$","1,324.5","","","$","(1,409.3)"]]
[[/GREPCENT_TABLE]]

_______________

(a)Amounts primarily relate to (i) loans between certain of our non-operating and operating subsidiaries in Europe, which generally are denominated in the currency of the applicable operating subsidiary, and (ii) loans between certain of our non-operating subsidiaries in the U.S. and Europe.

For information regarding how we manage our exposure to foreign currency risk, see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.

II-22

Realized and unrealized gains due to changes in fair values of certain investments and debt, net

Our realized and unrealized gains or losses due to changes in fair values of certain investments and debt include unrealized gains or losses associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash transactions. For additional information regarding our investments, fair value measurements and debt, see notes 7, 9 and 11, respectively, to our consolidated financial statements. The details of our realized and unrealized gains due to changes in fair values of certain investments and debt, net, are as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Investments:"],["Univision","$","301.6","","","$","\u2014"],["Lacework","223.9","","","1.1"],["Plume","133.9","","","29.6"],["Skillz","(100.4)","","","238.0"],["Aviatrix","65.4","","","\u2014"],["Lionsgate","33.9","","","4.0"],["EdgeConneX","28.9","","","33.1"],["ITV","15.3","","","(217.1)"],["Other, net (a)","32.5","","","(52.9)"],["Total investments","735.0","","","35.8"],["Debt","\u2014","","","9.4"],["Total","$","735.0","","","$","45.2"]]
[[/GREPCENT_TABLE]]

_______________

(a)The 2021 amount includes gains of $12.9 million related to investments that were sold during the year.

Losses on debt extinguishment, net

We recognized net losses on debt extinguishment of $90.6 million and $233.2 million during 2021 and 2020, respectively.

The loss during 2021 is attributable to (i) the write-off of $77.7 million of unamortized deferred financing costs and discounts and (ii) the payment of $12.9 million of redemption premiums.

The loss during 2020 is primarily attributable to (i) the payment of $206.6 million of redemption premiums and (ii) the write-off of $30.0 million of net unamortized deferred financing costs, discounts and premiums.

For additional information concerning our losses on debt extinguishment, net, see note 11 to our consolidated financial statements.

II-23

Share of results of affiliates, net

The following table sets forth the details of our share of results of affiliates, net:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["VMO2 JV (a)","$","(97.2)","","","$","\u2014"],["VodafoneZiggo JV (b)","(32.0)","","","(201.1)"],["All3Media","(17.4)","","","(27.9)"],["Atlas Edge JV","(5.8)","","","\u2014"],["Formula E","(2.5)","","","(8.4)"],["Other","(20.5)","","","(7.9)"],["Total","$","(175.4)","","","$","(245.3)"]]
[[/GREPCENT_TABLE]]

_______________

(a)Represents our 50% share of the results of operations of the VMO2 JV beginning June 1, 2021 and includes 100% of the share-based compensation expense associated with Liberty Global awards held by VMO2 JV employees who were formerly employees of Liberty Global, as these awards remain our responsibility. The summarized results of operations of the VMO2 JV for the period June 1, 2021 through December 31, 2021 are set forth below (in millions):

[[GREPCENT_TABLE]]
[["Revenue","$","8,522.9"],["Adjusted EBITDA","$","2,716.6"],["Operating income (1)","$","74.8"],["Non-operating expense (2)","$","(311.5)"],["Net loss","$","(164.9)"]]
[[/GREPCENT_TABLE]]

_______________

(1)Includes depreciation and amortization of $2,551.2 million.

(2)Includes interest expense of $568.6 million.

(b)Represents the net effect of (i) interest income of $56.5 million and $48.0 million, respectively, representing 100% of the interest earned on the VodafoneZiggo JV Receivables and (ii) our 50% share of the results of operations of the VodafoneZiggo JV. The summarized results of operations of the VodafoneZiggo JV are set forth below:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Revenue","$","4,824.2","","","$","4,565.4"],["Adjusted EBITDA","$","2,265.6","","","$","2,142.0"],["Operating income (1)","$","351.2","","","$","283.7"],["Non-operating expense (2)","$","(442.1)","","","$","(570.9)"],["Net loss","$","(163.1)","","","$","(448.7)"]]
[[/GREPCENT_TABLE]]

_______________

(1)Includes depreciation and amortization of $1,870.0 million and $1,871.4 million, respectively.

(2)Includes interest expense of $605.0 million and $598.6 million, respectively.

For additional information regarding our equity method investments, see note 7 to our consolidated financial statements.

II-24

Gain on U.K. JV Transaction

In connection with the U.K. JV Transaction, we recognized a pre-tax gain during 2021 of $10,873.8 million, net of the recognition of a cumulative foreign currency translation loss of $1,198.6 million. For additional information, see note 6 to our consolidated financial statements.

Gain on Atlas Edge JV Transactions

In connection with the Atlas Edge JV Transactions, we recognized a pre-tax gain during 2021 of $227.5 million, net of the recognition of a cumulative foreign currency translation loss of $1.8 million. For additional information, see note 6 to our consolidated financial statements.

Other income, net

We recognized other income, net, of $44.9 million and $76.2 million during 2021 and 2020, respectively. These amounts include (i) credits related to the non-service components of our net periodic pension costs of $38.9 million and $16.7 million, respectively, (ii) interest and dividend income of $13.9 million and $57.1 million, respectively, and (iii) during 2020, a $15.3 million gain related to certain assets that were contributed to a joint venture.

Income tax benefit (expense)

We recognized income tax benefit (expense) of ($473.3 million) and $275.9 million during 2021 and 2020, respectively.

The income tax expense during 2021 differs from the expected income tax expense of $2,660.2 million (based on the U.K. statutory income tax rate of 19.0%), primarily due to the positive impact of the non-taxable gain associated with the U.K. JV Transaction.

The income tax benefit during 2020 differs from the expected income tax benefit of $342.2 million (based on the U.K. statutory income tax rate of 19.0%), primarily due to the net negative impact of (i) non-deductible or non-taxable foreign currency exchange results and (ii) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiaries. The negative impact of these items was partially offset by the net positive impact of (a) the recognition of previously unrecognized tax benefits, (b) an increase in deferred tax assets in the U.K. due to an enacted change in tax law and (c) tax benefits associated with technology innovation incentives.

For additional information concerning our income taxes, see note 13 to our consolidated financial statements.

Earnings (loss) from continuing operations

During 2021 and 2020, we reported earnings (loss) from continuing operations of $13,527.5 million and ($1,525.1 million), respectively, consisting of (i) operating income of $1,320.3 million and $2,030.9 million, respectively, (ii) net non-operating income (expense) of $12,680.5 million and ($3,831.9 million), respectively, and (iii) income tax benefit (expense) of ($473.3 million) and $275.9 million, respectively.

Gains or losses associated with (i) changes in the fair values of derivative instruments, (ii) movements in foreign currency exchange rates and (iii) the disposition of assets and changes in ownership are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate operating income to a level that more than offsets the aggregate amount of our (a) interest expense, (b) other non-operating expenses and (c) income tax expense.

Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed under Material Changes in Financial Condition — Capitalization below, we expect that we will continue to report significant levels of interest expense for the foreseeable future. For information concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see the discussion under Overview above. For information concerning the reasons for changes in specific line items in our consolidated statements of operations, see Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results above.

II-25

Earnings from discontinued operations, net of taxes

We reported earnings from discontinued operations, net of taxes, of $82.6 million and $58.4 million during 2021 and 2020, respectively, representing the results of UPC Poland. For additional information, see note 6 to our consolidated financial statements.

Net earnings attributable to noncontrolling interests

Net earnings attributable to noncontrolling interests were $183.3 million and $161.3 million during 2021 and 2020, respectively, primarily attributable to the results of operations of Telenet.

2020 compared to 2019

For information regarding the discussion and analysis of our consolidated operating results during 2020, as compared to 2019, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2020 10-K.

Liquidity and Capital Resources

Sources and Uses of Cash

We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Each of our significant operating subsidiaries is separately financed within one of our three subsidiary “borrowing groups.” These borrowing groups include the respective restricted parent and subsidiary entities within UPC Holding, Telenet and VM Ireland. Although our borrowing groups typically generate cash from operating activities, the terms of the instruments governing the indebtedness of these borrowing groups may restrict our ability to access the liquidity of these subsidiaries. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests and other factors.

Cash and cash equivalents

The details of the U.S. dollar equivalent balances of our consolidated cash and cash equivalents at December 31, 2021 are set forth in the following table (in millions):

[[GREPCENT_TABLE]]
[["Cash and cash equivalents held by:"],["Liberty Global and unrestricted subsidiaries:"],["Liberty Global (a)","$","1.7"],["Unrestricted subsidiaries (b)","730.4"],["Total Liberty Global and unrestricted subsidiaries","732.1"],["Borrowing groups (c):"],["Telenet","158.8"],["UPC Holding","19.3"],["VM Ireland","0.4"],["Total borrowing groups","178.5"],["Total cash and cash equivalents","$","910.6"]]
[[/GREPCENT_TABLE]]

_______________

(a)Represents the amount held by Liberty Global on a standalone basis.

(b)Represents the aggregate amount held by subsidiaries that are outside of our borrowing groups.

(c)Represents the aggregate amounts held by the parent entity and restricted subsidiaries of our borrowing groups.

II-26

Liquidity of Liberty Global and its unrestricted subsidiaries

The $1.7 million of cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, the $730.4 million of aggregate cash and cash equivalents held by unrestricted subsidiaries, together with the $2,801.3 million of investments held under SMAs, represented available liquidity at the corporate level at December 31, 2021. Our remaining cash and cash equivalents of $178.5 million at December 31, 2021 were held by our borrowing groups, as set forth in the table above. As noted above, various factors may limit our ability to access the cash of our borrowing groups. For information regarding certain limitations imposed by our subsidiaries’ debt instruments at December 31, 2021, see note 11 to our consolidated financial statements.

Our short-term sources of corporate liquidity include (i) cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, Liberty Global’s unrestricted subsidiaries, (ii) investments held under SMAs, (iii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments, including dividends received from the VodafoneZiggo JV or the VMO2 JV, (iv) cash received with respect to transitional and other services provided to various third parties and (v) interest payments received with respect to the VodafoneZiggo JV Receivables.

From time to time, Liberty Global and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments from Liberty Global’s borrowing groups or affiliates (including amounts from the VodafoneZiggo JV or the VMO2 JV) upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets of Liberty Global and its unrestricted subsidiaries, such as the pending sale of UPC Poland, and (iii) proceeds in connection with the incurrence of debt by Liberty Global or its unrestricted subsidiaries or the issuance of equity securities by Liberty Global, including equity securities issued to satisfy subsidiary obligations. No assurance can be given that any external funding would be available to Liberty Global or its unrestricted subsidiaries on favorable terms, or at all.

At December 31, 2021, our consolidated cash and cash equivalents balance included $660.5 million held by entities that are domiciled outside of the U.K. Based on our assessment of our ability to access the liquidity of our subsidiaries on a tax efficient basis and our expectations with respect to our corporate liquidity requirements, we do not anticipate that tax considerations will adversely impact our corporate liquidity over the next 12 months. Our ability to access the liquidity of our subsidiaries on a tax efficient basis is a consideration in assessing the extent of our share repurchase program.

In addition, the amount of cash we receive from our subsidiaries to satisfy U.S. dollar-denominated liquidity requirements is impacted by fluctuations in exchange rates, particularly with regard to the translation of British pounds sterling and euros into U.S. dollars. In this regard, the strengthening (weakening) of the U.S. dollar against these currencies will result in decreases (increases) in the U.S. dollars received from the applicable subsidiaries to fund the repurchase of our equity securities and other U.S. dollar-denominated liquidity requirements.

Our short- and long-term corporate liquidity requirements include corporate general and administrative expenses and, from time to time, cash requirements in connection with (i) the repayment of third-party and intercompany debt, (ii) the satisfaction of contingent liabilities, (iii) acquisitions, (iv) the repurchase of equity and debt securities, (v) other investment opportunities, (vi) any funding requirements of our subsidiaries and affiliates or (vii) income tax payments. In addition, our parent entity uses available liquidity to make interest and principal payments on notes payable to certain of our unrestricted subsidiaries (aggregate outstanding principal of $11.5 billion at December 31, 2021 with varying maturity dates).

During 2021, the aggregate amount of our share repurchases, including direct acquisition costs, was $1,581.1 million. As a U.K. incorporated company, we may only elect to repurchase shares or pay dividends to the extent of our Distributable Reserves. Under our current repurchase program, we are authorized during 2022 to repurchase 10% of our total outstanding shares as of the beginning of the year. For additional information regarding our share repurchase programs, see note 14 to our consolidated financial statements.

II-27

Liquidity of borrowing groups

The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of our borrowing groups at December 31, 2021, see note 11 to our consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from Liberty Global and its unrestricted subsidiaries.

The liquidity of our borrowing groups generally is used to fund (i) property and equipment additions, (ii) debt service requirements and (iii) income tax payments, as well as to settle certain obligations that are not included on our December 31, 2021 consolidated balance sheet. In this regard, we have significant commitments related to (a) programming, studio output and sports rights contracts, (b) certain operating costs associated with our networks and (c) purchase obligations associated with customer premises equipment and certain service-related commitments. These obligations are expected to represent a significant liquidity requirement of our borrowing groups, the majority of which is due over the next 12 to 24 months. For additional information regarding our commitments, see note 18 to our consolidated financial statements.

From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to Liberty Global, (iii) capital distributions to Liberty Global and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all.

For additional information regarding our consolidated cash flows, see the discussion under Consolidated Statements of Cash Flows below.

Capitalization

We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated Adjusted EBITDA, although the timing of our acquisitions and financing transactions and the interplay of average and spot foreign currency rates may impact this ratio. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.

Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase the Adjusted EBITDA of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by the incurrence-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Adjusted EBITDA of one of our borrowing groups were to decline, our ability to obtain additional debt could be limited. Under our credit facilities and senior and senior secured notes there is no cross-default risk between subsidiary borrowing groups in the event that one or more of our borrowing groups were to experience significant declines in their Adjusted EBITDA to the extent they were no longer able to service their debt obligations. Any mandatory prepayment events or events of default that may occur would only impact the relevant borrowing group in which these events occur and do not allow for any recourse to other borrowing groups or Liberty Global plc. Our credit facilities and senior and senior secured notes require that certain members of the relevant borrowing group guarantee the payment of all sums payable thereunder and such group members are required to grant first-ranking security over their shares or, in certain borrowing groups, over substantially all of their assets to secure the payment of all sums payable thereunder. At December 31, 2021, each of our borrowing groups was in compliance with its debt covenants. In addition, we do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months.

At December 31, 2021, the outstanding principal amount of our consolidated debt, together with our finance lease obligations, aggregated $14.9 billion, including $0.9 billion that is classified as current on our consolidated balance sheet and $13.7 billion that is not due until 2027 or thereafter. All of our consolidated debt and finance lease obligations have been borrowed or incurred by our subsidiaries at December 31, 2021.

II-28

We believe we have sufficient resources to repay or refinance the current portion of our debt and finance lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our maturing debt grows in later years, we anticipate we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions (including with respect to the COVID-19 pandemic), sovereign debt concerns or any adverse regulatory developments could impact the credit and equity markets we access and, accordingly, our future liquidity and financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution, and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.

For additional information concerning our debt and finance lease obligations, see notes 11 and 12, respectively, to our consolidated financial statements.

Consolidated Statements of Cash Flows

General. Our cash flows are subject to significant variations due to FX. See related discussion under Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.

Consolidated Statements of Cash Flows — 2021 compared to 2020

Summary. The 2021 and 2020 consolidated statements of cash flows of our continuing operations are summarized as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","Change"],["","in millions"],["Net cash provided by operating activities","$","3,364.0","","","$","4,016.8","","","$","(652.8)"],["Net cash used by investing activities","(5,745.5)","","","(8,817.2)","","","3,071.7"],["Net cash provided (used) by financing activities","(1,512.6)","","","1,104.5","","","(2,617.1)"],["Effect of exchange rate changes on cash and cash equivalents and restricted cash","(6.6)","","","141.0","","","(147.6)"],["Net decrease in cash and cash equivalents and restricted cash","$","(3,900.7)","","","$","(3,554.9)","","","$","(345.8)"]]
[[/GREPCENT_TABLE]]

Operating Activities. The decrease in net cash provided by our operating activities is primarily attributable to the net effect of (i) a decrease in cash provided by our Adjusted EBITDA and related working capital items, including lower cash provided by receivables financing transactions, which decreased from $272.1 million in 2020 to $63.4 million in 2021, (ii) an increase in cash provided due to lower payments of interest, (iii) an increase in cash provided due to higher cash dividends received, primarily attributable to $214.8 million received from the VMO2 JV during 2021, of which $98.7 million was attributable to proceeds from securitization of certain handset receivables and various other transactions completed at the VMO2 JV, (iv) an increase due to FX, (v) an increase in cash provided due to lower payments for taxes and (vi) an increase in cash provided due to lower net cash receipts related to derivative instruments. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.

Investing Activities. The decrease in net cash used by our investing activities is primarily attributable to the net effect of (i) a decrease in cash used of $5,197.0 million associated with lower net cash paid for acquisitions, primarily related to the Sunrise Acquisition, (ii) an increase in cash used of $3,424.0 million associated with restricted cash contributed to the VMO2 JV in connection with the U.K. JV Transaction, (iii) a decrease in cash used of $1,117.6 million associated with lower net cash paid for investments, primarily related to our investments held under SMAs, (iv) a decrease in cash used of $144.5 million associated with cash received in connection with the Atlas Edge JV Transactions and (v) an increase in cash used of $115.2 million due to higher capital expenditures. Capital expenditures increased from $1,292.8 million during 2020 to $1,408.0 million during 2021 due to the net effect of (a) a decrease due to the impact of the U.K. JV Transaction, (b) an increase due to the impact of the Sunrise Acquisition, (c) an increase in our net local currency capital expenditures and related working capital movements, including the impact of lower capital-related vendor financing, and (d) an increase due to FX.

II-29

The capital expenditures we report in our consolidated statements of cash flows do not include amounts that are financed under capital-related vendor financing or finance lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal is repaid. In this discussion, we refer to (i) our capital expenditures as reported in our consolidated statements of cash flows, which exclude amounts financed under capital-related vendor financing or finance lease arrangements, and (ii) our total property and equipment additions, which include our capital expenditures on an accrual basis and amounts financed under capital-related vendor financing or finance lease arrangements. For further details regarding our property and equipment additions, see note 19 to our consolidated financial statements. A reconciliation of our consolidated property and equipment additions to our consolidated capital expenditures, as reported in our consolidated statements of cash flows, is set forth below:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Property and equipment additions","$","2,169.5","","","$","2,603.6"],["Assets acquired under capital-related vendor financing arrangements","(661.1)","","","(1,339.6)"],["Assets acquired under finance leases","(42.6)","","","(48.7)"],["Changes in current liabilities related to capital expenditures","(57.8)","","","77.5"],["Capital expenditures, net","$","1,408.0","","","$","1,292.8"]]
[[/GREPCENT_TABLE]]

The decrease in our property and equipment additions during 2021, as compared to 2020, is primarily due to the net effect of (i) a decrease due to the impact of the U.K. JV Transaction, (ii) an increase due to the impact of the Sunrise Acquisition, (iii) an increase in local currency expenditures of our subsidiaries due to the net effect of (a) an increase in baseline expenditures, (b) a decrease in expenditures for new build and upgrade projects, (c) an increase in expenditures to support new customer products and operational efficiency initiatives and (iv) an increase due to FX. During 2021 and 2020, our property and equipment additions represented 21.0% and 22.6% of revenue, respectively.

We expect our 2022 property and equipment additions to remain relatively stable as compared to our 2021 property and equipment additions (excluding the 2021 property and equipment additions of the U.K. JV Entities). The actual amount of our 2022 property and equipment additions may vary from our expectations for a variety of reasons, including (i) changes in (a) the competitive or regulatory environment, (b) business plans, (c) our expected future operating results or (d) foreign currency exchange rates and (ii) the availability of sufficient capital. Accordingly, no assurance can be given that our actual property and equipment additions will not vary materially from our expectations.

Financing Activities. The change in net cash provided (used) by our financing activities is primarily attributable to the net effect of (i) a decrease in cash of $3,499.0 million due to lower net borrowings of debt, (ii) an increase in cash of $1,125.2 million due to lower net repayments of vendor financing, (iii) a decrease in cash of $508.1 million due to higher repurchases of Liberty Global ordinary shares and (iv) an increase in cash of $266.7 million due to lower payments for financing costs and debt premiums.

Consolidated Statements of Cash Flows — 2020 compared to 2019

For information regarding the consolidated statements of cash flows of our continuing operations for 2020, as compared to 2019, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2020 10-K.

II-30

Adjusted Free Cash Flow

We define adjusted free cash flow as net cash provided by the operating activities of our continuing operations, plus operating-related vendor financed expenses (which represents an increase in the period to our actual cash available as a result of extending vendor payment terms beyond normal payment terms, which are typically 90 days or less, through non-cash financing activities), less (i) cash payments in the period for capital expenditures, (ii) principal payments on operating- and capital-related amounts financed by vendors and intermediaries (which represents a decrease in the period to our actual cash available as a result of paying amounts to vendors and intermediaries where we previously had extended vendor payments beyond the normal payment terms) and (iii) principal payments on finance leases (which represents a decrease in the period to our actual cash available), each as reported in our consolidated statements of cash flows with each item excluding any cash provided or used by our discontinued operations. Prior to the fourth quarter of 2021, our definition of adjusted free cash flow excluded cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions. During the fourth quarter of 2021, we changed our definition of adjusted free cash flow to include these cash payments. Cash paid for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions was $80.5 million and $34.7 million during 2021 and 2020, respectively. We believe our presentation of adjusted free cash flow, which is a non-GAAP measure, provides useful information to our investors because this measure can be used to gauge our ability to (a) service debt and (b) fund new investment opportunities after consideration of all actual cash payments related to our working capital activities and expenses that are capital in nature whether paid inside normal vendor payment terms or paid later outside normal vendor payment terms (in which case we typically pay in less than 365 days). 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, that are not deducted to arrive at these amounts. Investors should view adjusted free cash flow as a supplement to, and not a substitute for, GAAP measures of liquidity included in our consolidated statements of cash flows. Further, our adjusted free cash flow may differ from how other companies define and apply their definition of adjusted free cash flow.

The following table provides the details of our adjusted free cash flow:  

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["","in millions"],["Net cash provided by operating activities of our continuing operations","$","3,364.0","","","$","4,016.8"],["Operating-related vendor financing additions (a)","1,781.6","","","2,754.5"],["Cash capital expenditures, net","(1,408.0)","","","(1,292.8)"],["Principal payments on operating-related vendor financing","(1,408.0)","","","(2,381.7)"],["Principal payments on capital-related vendor financing","(964.4)","","","(2,088.8)"],["Principal payments on finance leases","(75.7)","","","(86.0)"],["Adjusted free cash flow","$","1,289.5","","","$","922.0"]]
[[/GREPCENT_TABLE]]

_______________

(a)For purposes of our consolidated statements of cash flows, operating-related vendor financing additions represent operating-related expenses financed by an intermediary that are treated as constructive operating cash outflows and constructive financing cash inflows when the intermediary settles the liability with the vendor. When we pay the financing intermediary, we record financing cash outflows in our consolidated statements of cash flows. For purposes of our adjusted free cash flow definition, we (i) add in the constructive financing cash inflow when the intermediary settles the liability with the vendor as our actual net cash available at that time is not affected and (ii) subsequently deduct the related financing cash outflows when we actually pay the financing intermediary, reflecting the actual reduction to our cash available to service debt or fund new investment opportunities.

II-31

Critical Accounting Policies, Judgments and Estimates

In connection with the preparation of our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe the following accounting policies are critical in the preparation of our consolidated financial statements because of the judgment necessary to account for these matters and the significant estimates involved, which are susceptible to change:

•Impairment of property and equipment and intangible assets (including goodwill);

•Costs associated with construction and installation activities;

•Fair value measurements; and

•Income tax accounting.

We have discussed the selection of the aforementioned critical accounting policies with the audit committee of our board of directors. For additional information concerning our significant accounting policies, see note 3 to our consolidated financial statements.

Impairment of Property and Equipment and Intangible Assets

Carrying Value. The aggregate carrying value of our property and equipment and intangible assets (including goodwill) that was held for use comprised 40.2% of our total assets at December 31, 2021.

When circumstances warrant, we review the carrying amounts of our property and equipment and our intangible assets (other than goodwill and other indefinite-lived intangible assets) to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include (i) an expectation of a sale or disposal of a long-lived asset or asset group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which we operate and (iv) operating or cash flow losses. For purposes of impairment testing, long-lived assets are grouped at the lowest level for which cash flows are largely independent of other assets and liabilities, generally at or below the reporting unit level (see below). If the carrying amount of the asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized. Such adjustment is measured by the amount that the carrying value of such asset or asset group exceeds its fair value. We generally measure fair value by considering (a) sale prices for similar assets, (b) discounted estimated future cash flows using an appropriate discount rate and/or (c) estimated replacement cost. Assets to be disposed of are recorded at the lower of their carrying amount or fair value less costs to sell.

We evaluate goodwill and other indefinite-lived intangible assets for impairment at least annually on October 1 and whenever facts and circumstances indicate that their carrying amounts may not be recoverable. For impairment evaluations with respect to both goodwill and other indefinite-lived intangibles, we first make a qualitative assessment to determine if the goodwill or other indefinite-lived intangible may be impaired. In the case of goodwill, if it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. Any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). With respect to other indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, we then estimate its fair value and any excess of the carrying value over the fair value is also charged to operations as an impairment loss.

When required, considerable management judgment is necessary to estimate the fair value of reporting units and underlying long-lived and indefinite-lived assets. The equity of one of our reporting units, Telenet, is publicly traded in an active market. For this reporting unit, our fair value determination is based on quoted market prices. For other reporting units, we typically determine fair value using an income-based approach (discounted cash flows) based on assumptions in our long-range business plans and, in some cases, a combination of an income-based approach and a market-based approach. With respect to our discounted cash flow analysis used in the income-based approach, the timing and amount of future cash flows under these business plans require estimates of, among other items, subscriber growth and retention rates, rates charged per product, expected gross margins and Adjusted EBITDA margins and expected property and equipment additions. The development of these cash flows, and the discount rate applied to the cash flows, is subject to inherent uncertainties, and actual results could vary significantly from such estimates. Our determination of the discount rate is based on a weighted average cost

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of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. Based on the results of our 2021 qualitative assessment of our reporting unit carrying values, we determined that it was more-likely-than-not that fair value exceeded carrying value for all of our reporting units.

During the three years ended December 31, 2021, we did not record any significant impairment charges with respect to our property and equipment and intangible assets. For additional information regarding our long-lived assets, see note 10 to our consolidated financial statements.

If, among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.

Costs Associated with Construction and Installation Activities

We capitalize costs associated with the construction of new fixed and mobile transmission and distribution facilities and the installation of new fixed-line services. Installation activities that are capitalized include (i) the initial connection (or drop) from our fixed-line system to a customer location, (ii) the replacement of a drop and (iii) the installation of equipment for additional services, such as broadband internet or fixed-line services. The costs of other customer-facing activities, such as reconnecting customer locations where a drop already exists, disconnecting customer locations and repairing or maintaining drops, are expensed as incurred.

The nature and amount of labor and other costs to be capitalized with respect to construction and installation activities involves significant judgment. In addition to direct external and internal labor and materials, we also capitalize other costs directly attributable to our construction and installation activities, including dispatch costs, quality-control costs, vehicle-related costs and certain warehouse-related costs. The capitalization of these costs is based on time sheets, time studies, standard costs, call tracking systems and other verifiable means that directly link the costs incurred with the applicable capitalizable activity. We continuously monitor the appropriateness of our capitalization policies and update the policies when necessary to respond to changes in facts and circumstances, such as the development of new products and services and changes in the manner that installations or construction activities are performed.

Fair Value Measurements

GAAP provides guidance with respect to the recurring and nonrecurring fair value measurements and for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Recurring Valuations. We perform recurring fair value measurements with respect to our derivative instruments and our fair value method investments. We use (i) cash flow valuation models to determine the fair values of our interest rate and foreign currency derivative instruments and (ii) a Black-Scholes option pricing model to determine the fair values of our equity-related derivative instruments. We use quoted market prices when available and, when not available, we use a combination of an income approach (discounted cash flows) and a market approach (market multiples of similar businesses) to determine the fair value of our fair value method investments. For a detailed discussion of the inputs we use to determine the fair value of our derivative instruments and fair value method investments, see note 9 to our consolidated financial statements. See also notes 7 and 8 to our consolidated financial statements for information concerning our fair value method investments and derivative instruments, respectively.

Changes in the fair values of our derivative instruments and fair value method investments have had, and we believe will continue to have, a significant and volatile impact on our results of operations. During 2021, 2020 and 2019, we recognized net gains (losses) of $1,357.9 million, ($833.5 million) and ($121.2 million), respectively, attributable to changes in the fair values of these items.

As further described in note 9 to our consolidated financial statements, actual amounts received or paid upon the settlement or disposition of these investments and instruments may differ materially from the recorded fair values at December 31, 2021.

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For information concerning the sensitivity of the fair value of certain of our more significant derivative instruments to changes in market conditions, see Quantitative and Qualitative Disclosures About Market Risk — Sensitivity Information below.

Nonrecurring Valuations. Our nonrecurring valuations are primarily associated with (i) the application of acquisition accounting, (ii) impairment assessments and (iii) the accounting for our initial investment in significant joint ventures, each of which require that we make fair value determinations as of the applicable valuation date. In making these determinations, we are required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, market comparables and discount rates, remaining useful lives of long-lived assets, replacement or reproduction costs of property and equipment and the amounts to be recovered in future periods from acquired net operating losses and other deferred tax assets. To assist us in making these fair value determinations, we may engage third-party valuation specialists. Our estimates in this area impact, among other items, the amount of depreciation and amortization, impairment charges and income tax expense or benefit that we report. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain. A significant portion of our long-lived assets were initially recorded through the application of acquisition accounting and all of our long-lived assets are subject to impairment assessments. For additional information, see note 9 to our consolidated financial statements. For information regarding our acquisitions and long-lived assets, see notes 5 and 10 to our consolidated financial statements, respectively.

Income Tax Accounting

We are required to estimate the amount of tax payable or refundable for the current year and the deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for each taxing jurisdiction in which we operate for the year in which those temporary differences are expected to be recovered or settled. This process requires our management to make assessments regarding the timing and probability of the ultimate tax impact of such items.

Net deferred tax assets are reduced by a valuation allowance if we believe that it is more-likely-than-not such net deferred tax assets will not be realized. Establishing or reducing a tax valuation allowance requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning strategies. At December 31, 2021, the aggregate valuation allowance provided against deferred tax assets was $1,744.6 million. The actual amount of deferred income tax benefits realized in future periods will likely differ from the net deferred tax assets reflected in our December 31, 2021 consolidated balance sheet due to, among other factors, possible future changes in income tax law, or interpretations thereof, in the jurisdictions in which we operate and differences between estimated and actual future taxable income. Any such factors could have a material effect on our current and deferred tax positions as reported in our consolidated financial statements. A high degree of judgment is required to assess the impact of possible future outcomes on our current and deferred tax positions.

Tax laws in jurisdictions in which we have a presence are subject to varied interpretation, and many tax positions we take are subject to significant uncertainty regarding whether the position will be ultimately sustained after review by the relevant tax authority. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. The determination of whether the tax position meets the more-likely-than-not threshold requires a facts-based judgment using all information available. In a number of cases, we have concluded that the more-likely-than-not threshold is not met and, accordingly, the amount of tax benefit recognized in our consolidated financial statements is different than the amount taken or expected to be taken in our tax returns. As of December 31, 2021, the amount of unrecognized tax benefits for financial reporting purposes, but taken or expected to be taken in our tax returns, was $447.1 million, of which $378.7 million would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances.

We are required to continually assess our tax positions, and the results of tax examinations or changes in judgment can result in substantial changes to our unrecognized tax benefits.

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