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Liberty Global Misses Q2 Earnings and Revenue Estimates

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Liberty Global plc. (LBTYA - Free Report) declared disappointing financial results for the second quarter of 2014. Both the top and the bottom failed to meet the respective Zacks Consensus Estimate. In the reported quarter, Liberty Global added 239,000 organic revenue generating units (RGU), up 25.1% year over year. Meanwhile, quarterly total RGU generation stood at 268,000.

Quarterly GAAP net loss came in at $234 million or 31 cents per share compared with a net income of $12.9 million or 1 cent per share in the prior-year quarter. However, adjusted earnings per share of 1 cent fell well short of the Zacks Consensus Estimate of 13 cents.

Quarterly total revenue of $4,602.2 million was up a substantial 50.5% year over year but lagged the Zacks Consensus Estimate of $4,618 million.

Cost of operations was $3,932.7 million, up 50.5% year over year. However, operating income came in at $669.5 million, up 50.4% year over year. Operating margin was 14.5% compared with 14.6% in the year-ago quarter.

In the second quarter of 2014, Liberty Global generated $1,596.3 million of cash from operations compared with $796.9 million in the year-ago quarter. Free cash flow in the reported quarter stood at $710.6 million against $203 million in the prior-year quarter.

At the end of the second quarter of 2014, Liberty Global had $4,703.3 million of cash and marketable securities and $42,559.3 million of outstanding debt on its balance sheet compared with $6,193.1 million and $43,681 million, respectively, at the end of 2013.

Subscriber Statistics

As of Jun 30, 2014, Liberty Global had approximately 24.47 million subscribers, which constitute around 48.99 million RGUs. Of the total, 21.6582 million were video RGUs, 14.8223 million were broadband Internet RGUs and the remaining 12.4249 million were telephony RGUs. Moreover, the company had 4.2538 million mobile subscribers with a quarterly addition of 110,600.  

The total Single-Play customer count stood at 10.2912 million, down 6.1% year over year. The total Double-Play customer count was 3.925 million, down 1.4% year over year. The total Triple-Play customer count stood at over 10.2547 million, up 7.5% year over year.

During the reported quarter, Liberty Global added 239,000 organic RGUs including net gains of 185,000 and 125,000 subscribers for broadband Internet and telephony services, respectively, and a net loss of 72,000 video subscribers.

At the end of the reported quarter, the company had over 645,000 Horizon TV subscribers in the Netherlands, Switzerland, Ireland and Germany. Liberty Global had around 2.3 million TiVo Inc. (TIVO - Free Report) -platform based video subscribers. The company added a net 240,000 net-generation video subscribers in the same quarter.

As of Jun 30, 2014, Liberty Global had 13.4 million digital video subscribers with a digital technology penetration of 64% and 7.5 million analog video subscribers. The next-generation (Horizon and TiVo-platform) video subscriber base was over 2.9 million, reflecting 22% penetration of digital footprint.     

Segment-wise Results

Total revenue at the European Operations division was $4,284.2 million, up 57.5% year over year. Within this segment, revenues from Western Europe were $3,960.9 million, up 64.6% year over year. Revenues from Central and Eastern Europe came in at $290.7 million, up 3.3% year over year. Revenues from Central and other operation were $32.6 million, up 1.1% year over year. VTR Chile revenues were $229.8 million, down 9.1% year over year. Corporate and other revenues totaled $94.2 million, down 0.3% year over year.

Recent Development

Liberty Global is also trying to bring about a systematic diversification in the content development segment apart from steadily strengthening its foothold in the European pay-TV market. In May 2014, Liberty Global acquired TV content producer All3Media for $1 billion, in a partnership with Discovery Communications Inc. (DISCA - Free Report) .

On Jul 2014, Liberty Global acquired an approximately 6.4% stake of ITV plc from British Sky Broadcasting Group plc. ITV – the largest commercial TV broadcaster in the U.K. which competes intensely with Channel 5, a subsidiary of Viacom Inc. (VIAB - Free Report) .

Further, Liberty Global is hopeful that it will get the European regulatory body’s approval for completely acquiring the Dutch cable MSO, Ziggo N.V. in the second half of 2014.

Liberty Global currently has a Zacks Rank #3 (Hold).

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