Segment Reporting

3 Months Ended

Mar. 31, 2024

Segment Reporting, Measurement Disclosures [Abstract]

Segment Reporting

Segment Reporting

We generally identify our reportable segments as (i) those consolidated subsidiaries that represent 10% or more of our revenue, Adjusted EBITDA (as defined below) or total assets or (ii) those equity method affiliates where our investment or share of revenue or Adjusted EBITDA represents 10% or more of our total assets, revenue or Adjusted EBITDA, respectively. In certain cases, we may elect to include an operating segment in our segment disclosure that does not meet the above-described criteria for a reportable segment. We evaluate performance and make decisions about allocating resources to our operating segments based on financial measures such as revenue and Adjusted EBITDA. In addition, we review non-financial measures such as customer growth, as appropriate.

Adjusted EBITDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance and is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, “Adjusted EBITDA” is defined as net earnings (loss) before net income tax benefit (expense), other non-operating income or expenses, net share of results of affiliates, net gains (losses) on debt extinguishment, net realized and unrealized gains (losses) due to changes in fair values of certain investments, net foreign currency transaction gains (losses), net gains (losses) on derivative instruments, net interest expense, depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe Adjusted EBITDA is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between segments and (3) identify strategies to improve operating performance in the different countries in which we operate. A reconciliation of net earnings or loss to Adjusted EBITDA is presented below.

As of March 31, 2024, our reportable segments are as follows:

Consolidated:

•Sunrise

•Telenet

•VM Ireland

Nonconsolidated:

•VMO2 JV

•VodafoneZiggo JV

All of our reportable segments derive their revenue primarily from residential and B2B communications services, including broadband internet, video, fixed-line telephony and mobile services.

Our “Central and Other” category primarily includes (i) services provided to the VMO2 JV, the VodafoneZiggo JV and various third parties related to service agreements, (ii) sales of CPE to the VMO2 JV and the VodafoneZiggo JV, (iii) certain centralized functions, including billing systems, network operations, technology, marketing, facilities, finance and other administrative functions and (iv) our operations in Slovakia.

Our centrally-managed technology and innovation function (our T&I Function) provides, and allocates charges for, certain products and services to our consolidated reportable segments (the Tech Framework). These products and services include CPE hardware and related essential software, maintenance, hosting and other services. Our consolidated reportable segments capitalize the combined cost of the CPE hardware and essential software as property and equipment additions and the corresponding amounts charged by our T&I Function are reflected as revenue when earned.

During the second quarter of 2023, we determined to market and sell certain of our internally-developed software to third parties. As a result of these strategic and operational changes, from May 2023, proceeds from the licensing and related sale of products from this internally-developed software (including proceeds generated from our arrangements with the VMO2 JV and the VodafoneZiggo JV) were applied against the net book value of our existing internally-developed capitalized software. As of December 31, 2023, the net book value of our existing internally-developed software was reduced to zero, after which time we began recognizing revenue for such licensing and related sale of products. Further, from May 2023, we expense the costs of development of such software due to the fact that it is able to be externally marketed to third parties.

Performance Measures of Our Reportable Segments

The amounts presented below represent 100% of each of our reportable segment’s revenue and Adjusted EBITDA. The noncontrolling owners’ interests in the operating results of Telenet, prior to the Telenet Takeover Bid, and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations. Furthermore, despite only holding a 50% noncontrolling interest in both the VMO2 JV and the VodafoneZiggo JV, we present 100% of the revenue and Adjusted EBITDA of those entities in the tables below. Our share of the operating results of the VMO2 JV and the VodafoneZiggo JV is included in share of results of affiliates, net, in our condensed consolidated statements of operations.

	Revenue
	Three months ended March 31,
	2024		2023
	in millions
Sunrise	$	854.0	$	807.4
Telenet	762.6		754.5
VM Ireland	123.0		123.0
Central and Other	269.6		244.5
Intersegment eliminations (a)	(64.1)		(61.0)
Total	$	1,945.1	$	1,868.4
VMO2 JV	$	3,282.8	$	3,162.7
VodafoneZiggo JV	$	1,114.0	$	1,083.4

______________

(a)Amounts primarily relate to the revenue recognized within our T&I Function related to the Tech Framework.

	Adjusted EBITDA
	Three months ended March 31,
	2024		2023
	in millions
Sunrise	$	279.3	$	263.0
Telenet	308.4		302.9
VM Ireland	40.0		41.5
Central and Other (a)	(31.0)		32.1
Intersegment eliminations (b)	(15.3)		(15.0)
Total	$	581.4	$	624.5
VMO2 JV	$	1,073.6	$	1,025.9
VodafoneZiggo JV	$	519.0	$	471.5

_______________

(a)The 2024 amount includes development costs related to our internally-developed software subsequent to our decision to externally market such software during the second quarter of 2023.

(b)Amounts relate to the Adjusted EBITDA impact within our T&I Function related to the Tech Framework.

The following table provides a reconciliation of net earnings (loss) to Adjusted EBITDA:

	Three months ended March 31,
	2024		2023
	in millions
Net earnings (loss)	$	527.0	$	(713.5)
Income tax expense	26.9		12.5
Other income, net	(43.5)		(43.9)
Share of results of affiliates, net	8.0		238.6
Realized and unrealized losses (gains) due to changes in fair values of certain investments, net	(114.9)		5.5
Foreign currency transaction losses (gains), net	(69.1)		302.9
Realized and unrealized losses (gains) on derivative instruments, net	(565.3)		34.4
Interest expense	253.5		200.9
Operating income	22.6		37.4
Impairment, restructuring and other operating items, net	33.5		16.4
Depreciation and amortization	480.7		526.9
Share-based compensation expense	44.6		43.8
Adjusted EBITDA	$	581.4	$	624.5

Property and Equipment Additions of our Reportable Segments

The property and equipment additions of our reportable segments (including capital additions financed under capital-related vendor financing or finance lease arrangements) are presented below and reconciled to the capital expenditure amounts included in our condensed consolidated statements of cash flows. For additional information concerning capital additions financed under vendor financing and finance lease arrangements, see notes 7 and 9, respectively.

	Three months ended March 31,
	2024		2023
	in millions
Sunrise	$	149.9	$	149.0
Telenet	183.7		173.0
VM Ireland	39.4		33.1
Central and Other (a)	7.4		49.8
Intersegment eliminations (b)	(15.3)		(15.0)
Total property and equipment additions	365.1		389.9
Assets acquired under capital-related vendor financing arrangements	(39.8)		(42.3)
Assets acquired under finance leases	(0.5)		(7.3)
Changes in current liabilities related to capital expenditures	26.0		36.9
Total capital expenditures, net	$	350.8	$	377.2
Property and equipment additions:
VMO2 JV	$	685.8	$	590.6
VodafoneZiggo JV	$	244.7	$	250.4

_______________

(a)Includes (i) property and equipment additions representing centrally-owned assets that benefit our operating segments, including development costs related to our internally-developed software prior to our decision to externally market such software during the second quarter of 2023, (ii) the net impact of certain centrally-procured network equipment that is ultimately transferred to our operating segments and (iii) property and equipment additions of our operations in Slovakia.

(b)Amounts reflect the charge under the Tech Framework to each respective consolidated reportable segment related to the value attributed to centrally-held internally developed technology that is embedded within our various CPE, as well as any applicable markup.

Revenue by Major Category

Our revenue by major category for our consolidated reportable segments is set forth below:

	Three months ended March 31,
	2024		2023
	in millions
Residential revenue:
Residential fixed revenue (a):
Subscription revenue (b):
Broadband internet	$	382.3	$	359.5
Video	264.3		273.2
Fixed-line telephony	84.2		92.1
Total subscription revenue	730.8		724.8
Non-subscription revenue	13.7		14.3
Total residential fixed revenue	744.5		739.1
Residential mobile revenue (c):
Subscription revenue (b)	376.6		356.4
Non-subscription revenue	137.3		133.9
Total residential mobile revenue	513.9		490.3
Total residential revenue	1,258.4		1,229.4
B2B revenue (d):
Subscription revenue	144.9		133.4
Non-subscription revenue	231.0		223.8
Total B2B revenue	375.9		357.2
Other revenue (e)	310.8		281.8
Total	$	1,945.1	$	1,868.4

_______________

(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.

(d)B2B subscription revenue represents revenue from (i) services provided to small or home office (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. 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, fixed-line and mobile services 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) broadcasting revenue at Telenet, VM Ireland and Sunrise, (ii) revenue earned from the U.K. JV Services and NL JV Services and (iii) revenue earned from the sale of CPE to the VMO2 JV and VodafoneZiggo JV.

Geographic Segments

The revenue of our geographic segments is set forth below:

	Three months ended March 31,
	2024		2023
	in millions
Switzerland	$	854.0	$	807.4
Belgium	720.0		716.6
Ireland	123.0		123.0
Slovakia	12.7		13.3
Other, including intersegment eliminations (a)	235.4		208.1
Total	$	1,945.1	$	1,868.4
VMO2 JV (U.K.)	$	3,282.8	$	3,162.7
VodafoneZiggo JV (Netherlands)	$	1,114.0	$	1,083.4

______________

(a)Revenue from our other geographic segments relates to (i) our Central functions, most of which are located in the Netherlands and the U.K., and (ii) certain other operations at Telenet, primarily in the U.S. and Luxembourg.