Elisa Oyj Ord A

Good morning, everyone, and welcome to ELISA's first quarter 2024 interim report, analyst meeting and conference call. I'm Vesa Sahivirta, head of investor relations, and now we have a bit new team here, and I'm happy to introduce our new CEO, Topi Manner, who will call highlights of the Q1 report. And then, of course, we have CFO Jari Kinnunen, and Jari will elaborate more on the financials. But now we are ready to start, so Aikki, a word to Topi. Please go ahead.

Thank you. Thank you, Vesa. And good day, everybody, both here in the room and for those who are participating remotely. Welcome to this quarterly earnings call of ELISA, also on my behalf. As Vesa was alluding to, I have now been the CEO of ELISA for seven weeks. And prior to that, I served three years as a board member of ELISA. And of course, in that capacity, I have been participating in the strategy formation of the company and looking at the company from the board vantage point. Before this job, I spent five years in aviation and 20 years in financial industry, needing to deal with all kinds of ups and downs. And the common denominator for all of the roles that I have had in these different industries is has been that they have all had a significant technology component and they have all in their own ways dealt with digital services. And now when I have been spending these seven weeks in in ELISA on the ground, meeting a lot of people, I must say that I'm really impressed by the culture of the company, the continuous improvement culture and the capabilities of our people. I have been participating in the strategy formation as a board member, as I said. So together with the entire ELISA team, I'm committed to continue down the lane of long-term value creation that ELISA is known for. I think ELISA has a distinct strategy in many ways. And as stated, there will be a lot of continuity But having said that, I do see further profitable growth potential both in our home markets in Finland and in Estonia and also internationally in the digital service space. And more broadly speaking, these growth areas, in my view, are related to the international software business that we are currently growing. But they are also related to IT services in our home market, you know, cybersecurity, AI clearly being on the rise. And I think that there is an opportunity to increase the share of wallet of ELISA in our consumer customer base with all kinds of value added services centered around home in our customer base. So with that sort introduction, let's look into the highlights of Q1. The headline revenue of ELISA during Q1 decreased by 1% or 5 million. And this was predominantly due to business disposals, decrease in equipment sales contributed with some 7 million euros, and also the interconnection revenue needs to be taken into account. The business disposals, namely divestment of Vidra and the discontinuation of Viaplay cooperation, and then, you know, a very small increase coming from a Romarek acquisition. The net disposals amounted to some 8 million euros. So, eliminating that, we saw a small increase in revenue. The interconnection revenue that amounted to 4 million, related to that, we need to remember that that is EBITDA neutral. So the comparable EBITDA was the highlight of the quarter, developed well with 4% amounting to 190 million euros. The mobile service revenue was strong and increased by 6%. In international digital services, we turned to small growth after a couple of challenging quarters. The overall economic situation in the international markets is still impacting this business. We have a strong order backlog, but customers are still somewhat delaying their projects. But toward the end of the quarter, we started to see things picking up. In Finland, postpaid journey improved and was around 15%. The postpaid subscriptions grew to 18,000. grew by 18,200 and that is including the machine-to-machine and IoT subscriptions that rose by 30,000 approximately. The fixed broadband subscription base increased by 3,300. We enjoy good momentum in 5G business. The network has the best coverage in Finland. The population coverage now amounting to 93%. In Estonia we are looking at a number of 76%. And last week we had our AGM and the AGM decided of 2.25 euros dividend distribution per share and with that we have now 10 consecutive years of increasing dividend. Looking at the numbers in a bit more detailed fashion, I think that we already covered much of the revenue story. So when we look at the business disposals, when we look at the service number regulation change that amounts to 1 million euros, the equipment sales decrease that is very much driven by the overall challenging macroeconomic environment and consumers and corporates being careful in their purchases and then the interconnection of 4 million euros. All of those decreases amount to 20 million euros and that needs to be taken into consideration when interpreting the revenue development. The increases came from the mobile service revenue and from IDS. improving the mix of the business that is visible in the EBITDA and the operating leverage. So the EBITDA improved, the margin improved to 35.5%. And I stated that was driven by the mobile services, mobile service revenue, and also the efficiency improvements that we have started to do, started already in the beginning of the year. We see some of the impact in our numbers right now, but the bulk of the efficiency improvements will be visible in later quarters. The business disposals, while they decreased the revenue, they improved the EBITDA and the EBITDA mix. Mobile service revenue, I stated, was strong at 6% and that was driven by ARPU, an increase of 6% in ARPU. And when we look at that, the ARPU is really coming from 5G up-sales. So from 4G to 5G, that is the main driver, but also up-selling within 4G is contributing nicely. The competitive situation remains keen. In 5G space, the competitive situation was largely unchanged. In the 4G, we started to see some campaigning from our competitors and some below-the-counter offers in that space. Our long-term approach, however, remains intact, and that means that we will be keeping our market shares in the connectivity business. So looking at the segment reporting in consumer customers, when we interpret the revenue, we need to take into consideration the via play end of contract, the equipment sales and the interconnection and the traditional fixed line services. Epita growth of 7% is certainly noteworthy. So profitability in this segment picking up nicely with the margin of 40, 41%. In corporate business we saw a notch up in terms of the margin to 28%. EBITDA experienced some headwinds with 4%. Some of that is coming from the regulatory change related to the corporate numbers and then the rest from the IDS business. So, as stated, our strategy has been distinct and at the core of it we have our mission, sustainable future through digitalization. We have our three strategic focus areas and they remain intact. We want to increase our mobile and fixed service revenues in our home markets of Finland and Estonia. We want to grow in digital service businesses, both in Finland and Estonia, as well as internationally. And then certainly the continuous improvement culture that contributes to continuous improvement of efficiency and quality is a significant strength of the company. And that certainly needs to be nurtured going forward. So the migration to higher speeds continue. The overall message here is steady as she goes. So 52% of voice subscriptions are at speeds above 200 megabits. Customers value speed. and they are willing to pay for it. So the average billing increase when moving from 4G to 5G is 3 euros per subscription and that has remained as it has been. So linear growth in this. We continuously see more and more phones being 5G devices and that means that there is a lot of potential in the upselling story to continue going forward. So in terms of 5G capabilities, we already covered the network coverage. We already covered the billing increases when moving from 4G to 5G. What is noteworthy during this quarter is that we launched first services utilizing 5G standalone network. So the 5G standalone network as such We already launched a couple of years back as the first operator in the Nordics. But now during the quarter, the first end devices that are capable of using the 5G standalone came to the market. And we immediately launched new services, 5G standalone subscriptions to the market. We have two subscriptions, 5G Plus with the price point of €49.99 and 5G Premium with the price point of €60. I stated customers value speed and they are willing to pay for it. For the time being, these are not volume products because there are not that many end devices that are able to use the standalone network. but this still represents a continuum in our 5G upselling story and future potential. Customers benefit from the standalone network, 5G standalone network, in many ways. More speed, better quality of the network, less energy consumption, and thereby improved battery life in customers' phone. But one of the capabilities that the standalone network introduces is also so-called slicing capability. And for that purpose, we introduced a new product called 5G Omakaista, own broadband, which effectively means that the customer gets their own slice of the network, which is congestion free and therefore not impacted by any other traffic in the in the network. So also getting and receiving good feedback from the customers for that product. These product launches are yet again underlining that we have a front runner position in terms of utilizing customers and bringing utilizing technology and bringing value to customers. Expansion of fiber continued and we also brought GFAST technology available for residential properties. So this is a local loop technology for very short distances and allows speed of buildings copper indoor network to be upgraded to the speed of fiber. Then looking into the ideas business as stated, so we came back to growth on year-on-year basis during the quarter, small growth of 2%. Customers are still delaying the projects, but toward the back end of the quarter we started to see things picking up in important verticals like Semicon industry and high tech industry, which is especially important for our industry software business. We have a strong order backlog and therefore we are able to repeat now the earlier stated view that we think that in the IDS business, the first half of the year, will be still somewhat soft, but the second half of the year will be better in terms of revenue growth and on full year basis we are expecting double digit organic growth. In ELISA Polistar business, we saw a strong order intake during the first quarter. Also, a couple of interesting customer deals in Saudi Arabia with the local teleoperator called SANE KSA. They took some of our analytic software into usage, utilizing that in their 5G monetization and then cross-selling. 4IG Group is a Hungarian teleoperator. They have been purchasing the previous Vodafone Hungary business and they are taking our whole network automation suit into use. In the industry business, we continued with the organic growth strategy, but also with bolt-on acquisitions, buying a small company from US, from Salt Lake City, called Romaric, strengthening our foothold in US and also our product offering. And then we have now signed another acquisition, Leanware, in Finland. Assuming that that deal will be closed after the competition authority approvals later in the spring, we will be getting around 100 more colleagues from that business to ELISA. And the rationale of that acquisition is twofold. To strengthen our product offering in the industry, especially with warehouse management software. And secondly also bringing in some Finnish customers because in the IDS business we haven't had many Finnish customers so far. Our DES solution, distributed energy storage solution, receives quite a bit of interest from telcos around the world. And we have now signed the first deal in this, the DNA Tower in Finland. part of Telenor Group announced their rollout of the solution. So therefore we are seeing the first commercial deals in this space. We are in the startup phase with this solution, but we see good potential going forward. In the digital services, when we look at domestic digital services, entertaining video services, there with ELISA entertaining original series, we are getting quite nice international attention with some of our series from Cannes series and MIP Drama. The names of these series being The Icebreaker, Valhalla Project and Money Shot. And then in the IT services solution, I think that it's worthwhile to mention that in the IT services space, our journey started some 10 years ago. And now when we look at the market where we are offering solutions for our customers, hybrid cloud, workstation management services, cybersecurity, AI, and so forth, in that market, our market share in Finland is approximately 10%. So that basically tells two things. First of all, we have established our position on the market. Secondly, it clearly indicates that we also have possibility to grow in that market. with the kind of concept that would be generating clearly above average profitability for the market. So therefore we see growth opportunity in this space. Finally, related to sustainability, I mean, this is very much in the core of our strategy. We have ESG indicators that we are following closely in our business. The baseline is set for the end 21 level. And now when we look at how we are proceeding towards the targets in terms of energy consumption, clear, positive progress. in terms of population coverage of our high-speed connections, basically the same. Proportion of female supervisors stable, so clearly we have more to do on this space. What is noteworthy also is that our patent portfolio is developing nicely. We have been receiving quite a bit of recognition during the past months related to sustainability. Corporate Knights selected us as one of the top 100 companies worldwide around sustainability, and now recently CDP. that was originally established as a carbon disclosure project and now runs this environmental disclosure system, they A-listed us. So this is the best category in their rating that we have received. After the quarter, now in April, we received a 100 million loan, sustainability-linked loan from Nordic Investment Bank, and that further accelerates our sustainability goals. So with that, I think that it's fair to say that it was a good start for the year. The highlights being the well-developing EBITDA and the mobile service revenue. And we are able to repeat our guidance, meaning that we expect revenue to be at the same level or slightly higher than in 2023. And the same goes for comparable EBITDA, we expect that to be on the same level or slightly higher than last year. In terms of CAPEX, we expect CAPEX to be 12-13% of revenue. And here it is important to note that our mid-term target is to come back to the level of 12% of CAPEX to revenue. meaning that we will be keeping our very focused and carefully prioritized way of doing investments also going forward as it contributes positively to free cash flow and cash conversion. So with that, I think that I'm able to stop here and hand over to Jari to go through the financials and then we can take questions afterwards. Thank you.

All right. Thank you. So, Let's start with profit and loss. Year started well, especially in terms of earnings, and in fact, the best ever Q1 EBITDA in the history. But let's first go to revenue. Headline slightly down, minus 1% of 5 million. However, there are several impacts that had to, well, less impact in the EPIDA, starting with the interconnection price change beginning of the year. and that impacting 4 million in interconnection revenues. Approximately same in interconnection expenses, so EBITDA-wise no impact. General economic situation somewhat impacting to equipment sales and there was 7 million negative change in equipment sales revenue. In corporate segment, service revenues, positive development in mobile and both domestic and international digital services, However, that was sort of neutralized through Widera divestment impact. Also, there was a continuation of traditional fixed voice decrease, and also regulation change in corporate numbers impacted negatively. Consumer segment, strong growth continuing with mobile service revenues and very much upselling into 5G. Also, as mentioned by Topi as well, also inside 4G. Divestment or ending of Viaplay cooperation agreement last year had a negative impact in domestic digital services in consumer segment, also traditional fixed voice continue to decrease. Epida, Growth 3.6%, well in line with the mid-term financial targets, higher than 3%. Growth and margin improved clearly to 35.5%. Reported EBITDA included 10 million one of restructuring charts relating to personal reductions, and like we said in Q4 report that we did some accelerated cost efficiency measures in the first quarter. EBIT, comparable EBIT, increased by 4 points 3% also EBIT margin improved to 22.8%. In financial expenses, there was change by 3.2 million euros and that includes beside Interest expenses also share of associated company profits, which impacting 1.2 million to that change. So the change in financial direct interest expenses was 2 million. EPS, comparable EPS was same level as last year. 57 euro cents. In Estonia, general economic situation had some impact in the revenue. There was a 5% decrease or 2.7 million decrease in revenue that was completely coming from lower equipment sales and also in Estonia lower interconnection price impacted in Q1. Underlying service revenue, especially mobile service revenue is also in Estonia growing and developing well. Even though this Decline in revenue EBITDA progressed positively and increased by 1.2%. Also, margin improved quite clearly to 31.4%. Operationally, good positive development in the mobile post-paid continued and 2,400 increase in the BOST base. And churn continued at low level, 9.5%. Then moving to Investments and guided CAPEX excluding licenses, lease agreements and acquisitions was 58 million in line with guidance and main investments continuing in a mobile in 5G coverage extension and in the fixed site fiber and and IT investments. Cash flow was developing positively and continued to grow. Comparable cash flow, 21% increase to 82 million. Positive impact from networking capital chains and This is now fourth consecutive quarter with positive networking capital chains rolling four quarter change positive 30 million. Also lower license payments impacted positively and negative impact from higher paid taxes and interest and lower reported EPIDA. Gas conversion or EPIDA, comparable EPIDA gas conversion was improving clearly and was 69%. Balance sheet and the capital structure continues to be strong and solid. Net debt to EBITDA at 1.7 times in line with the target range and equity ratio of 43.8% in end of the quarter. And return ratios, continued good level return on equity 30.6% and return on investments 18.3%. In terms of financing, in March we did repay 248 million bond and in this month agreed with new 100 million seven year sustainability linked loan. And the current interest expense is at 2.8% to interest bearing debt. And HEM decided on 2.25 euros dividend paid in two installments and representing 4.7% growth against last year and being 10th consecutive growth year in in dividends and payout ratio 95% and dividend yield 5.4% against the share price end of last year. Additionally, there was authorization for maximum 5 million shares buyback and all this confirming a strong commitment to competitive shareholder remuneration. Now I give word to Vesa, please.