Elisa Oyj Ord A

Good morning, everyone, and welcome to ELISA's first quarter 2025 interim report conference call and analyst meeting. I'm Vesa Sahivirta, head of investor relations, and here we have a very familiar team, CEO Topi Manner and CFO Jari Kinnonen, as well as some of my colleagues and audience. We start with the presentation, followed by Q&A. And in Q&A, we take first questions from the audience and then from the conference call lines. We are ready to start, so I give word to Topi. Please go ahead.

Thank you, Veisa. And good day, everybody here in the room, as well as those of you joining remotely. Welcome to ELISA's Q1 earnings call. Lately the Q&A part of these sessions has been taking quite a bit of time, so we have been shortening the presentations to give space for more Q&A this time around. And that is basically the reason of us taking the number of slides down a bit. So with that, let's get right down to business and look at the Q1 highlights. During the quarter, our revenue increased with 4%. That was very much driven by the international software services, especially SEDAPTA now being consolidated to the numbers, and also driven by the increase in mobile service revenue. The comparable EBITDA was up 4.6%, boosted by our continuous improvement measures in terms of efficiency. As they did, the mobile service revenue was up by 2.6%, and in the international software services, namely in ELISA Industriq, the growth amounted to 57%. The comparable organic growth for that part of the business was 2.1%. The churn on the market decreased to 18.6% from a little bit above 20% in Q4. The number of post-bait subscriptions decreased with some 17,000. Part of that was M2M and IoT subscriptions, roughly 6,000 of those. And then also majority of the decrease is coming from mobile broadband. subscriptions as customers move from mobile broadband to fiber and that move is visible in the market. That is not something that is only impacting ELISA and our numbers, that is very much visible for all players in the market as witnessed by the releases of various players on the market in Q4. With that, the fixed broadband subscription base increased with some 8,000, driven by the fiber connections. And then in our AGM a couple of weeks back, the dividend for the year was approved to euros 35 cents, and this indeed is the 11th consecutive year of increasing dividend in ELISA. So then, looking at the numbers a bit more closely, the revenue for the quarter landed at €556 million. I stated there was a 4% increase in that number. In addition to international software services and domestic digital services, mobile services, also roaming increased a bit. The revenue was weighed down by fixed services, especially copper PSTN revenue being on decrease a bit. EBITDA improved with 9 million euros and landed at 199 million euros altogether. The EBITDA margin, when we compared to the same quarter last year, improved with a couple of decimals to 35.8%. Mobile service revenue, as stated, 2.6%. The mobile service revenue, the increase was coming from the 5G upselling. That 5G upselling remains to be intact. Whenever we upgrade a customer from 4G to 5G, we get this average monthly billing increase of more than 3 euros. Going forward, we expect the mobile service revenue growth to increase. So when it comes to the full year, we expect mobile service revenue to increase mid-single digits. We have been doing a number of offering changes baking in digital security products to our mobile subscriptions such as mobile ID and DNS filter for consumers or denial of service attack protection for corporates and when we have been doing these offering changes for customers, we are creating new value for customers and we are pricing the new services accordingly, namely increasing the pricing. And that will be supportive of mobile service revenue going forward. And as stated, we have started that rollout already with the first cohort of customers. ARPU increased during the quarter with 5% and the GERN came down a bit to 18.6%. The majority of the competition we see in the 4G space. And then there's still some campaigning going on in that space. And as stated, we see some move from mobile broadband to fiber connections. So that will also be visible in the mobile journey number. This is the first quarter when we are reporting three segments, including the international software services, ELISA, industrial as a segment. This is done in accordance with our strategy to create better understanding for the three businesses and better transparency to the three businesses that we are having. If we are looking at consumer customers in Finland and in Estonia, the revenue increased with 1.9%. and EBITDA increased with 2.5%. EBITDA margin stayed on the same level as in the comparison quarter in Q1 last year at 41%. So it is a very profitable business that we are running with consumers. Related to corporate customers, the revenue increased with 0.3%. And that basically reflects the pretty challenging market that we have in Finland and Estonia for corporate services. If we look at the small companies and the micro companies, the number of bankruptcies in the market has been increasing a bit and that has been impacting our demand of services at the low end of the corporate customer base. And then when we go to the medium-sized companies, when we go to the large companies, these companies have been running cost efficiency measures, scrutinizing their service portfolios. So it has been a bit tough market, but on this market we have been faring well. So we are winning customers, we are winning business, we are winning market share, especially in the IT services and in the cyber security. So the growth of corporate is driven by mobile services, also by interconnection and roaming, including the domestic digital services where we have the IT services included. Fixed services, most notably PSTN, is weighing the revenue down. However, it is noteworthy that the corporate customer segment EBITDA increases with 4%, which is a good number. And that clearly tells the story that we have been streamlining the cost base in this segment. increasing the productivity of the business and with that improving the EBITDA quite notably. The EBITDA margin of this segment increased from 32% last year to 33% in this quarter. Then when we come to the international software services, as stated, the revenue picked up with 57% approximately driven by acquisitions, especially the consolidation of SEDAPTA. The comparable growth was 2%. We also saw quite a notable increase in recurring revenue. So the recurring revenue increased with 20% and basically tells the story that we are gradually taking steps toward a more SaaS based business model in the software business. The EBITDA for the quarter in ELISA industry was 2 million euros. So there was a 3 million euro improvement from last year. And this clearly underscores that for this year, we expect to be in positive territory in terms of EBITDA for the full year in this segment. As you would remember, we had our capital markets day at the beginning of March in London. There we communicated our new strategy, faster profitable growth. and communicated also our new mid-term targets. More than 4% growth in terms of revenue, more than 4% growth in terms of EBITDA. And now, especially when we zoom in to the EBITDA number, clearly you will see that during Q1 we are we are delivering according to these ambitions. So the implementation of the strategy has started out well and we are progressing in accordance with our plans, according to the path that we have been plotting for ourselves. The four spearheads of growth that we have are 5G and fiber, home-related digital services, corporate IT and cyber, and then the mentioned international software services, namely ELISA industry. Simplicity and productivity is a significant part of the strategy. The strategy is about faster, profitable growth, but it is enabled by simplification and productivity measures. And when you look at the Q1 numbers, the continuous improvement in terms of cost efficiency is visible in the numbers. And therefore, it is important to underline that this is indeed part of our plan as well. When we look at the 5G and fiber more closely, clearly the 5G upselling continues. When we look at the penetration of high speeds above 200 megabit speeds, that linear trend continues to be intact. And yet again, whenever we upgrade customers from 4G to 5G, we get the average monthly billing increase of more than 3 euros. As mentioned, we have now started to, we have made changes to our mobile product offering, embedding mobile ID and DNS filter for our customers. And that rollout has started with the first cohort of customers with very encouraging results. A notable development during the quarter was that as the first telco in the world, we introduced 5.5G for our customers. So as the first telco in the world introducing 5.5G for our customers in limited commercial deployment for consumers. This is yet again a showcase of us being a technology leader in this industry. We are also differentiating ourselves on the market by offering 5G standalone to our customers, what we call 5G plus to our customers. And now we start to have critical mass for the 5G customers. If we look at our total customer base of 5G customers, the 5G plus penetration out of all 5G customers is already above 20% and increasing quite fast because all of our new sales to customers is 5G plus. And an intriguing data point is that customers are clearly seeing the value in 5G plus They experience the faster speeds. They experience better quality network and more resilient network. They experience better energy consumption, which is visible to customers in the battery life of their phone. And with that, the customer satisfaction of 5G plus customers in comparison to non-standalone 5G customers is more than 10 points better measured with Net Promoter Score. So Net Promoter Score of 5G plus customers is 10 points better than the earlier generation of 5G customers. And this is an intriguing data point in terms of the customer value that we are creating. With that, we have now also decided to roll out 5G standalone, namely 5G+, to Estonia to have that differentiation for our customers also on the Estonian market. Quite many things are also happening on the fiber space. good steps being taken forward in that category of services. We, for example, introduced 10 giga fiber connections to our customers. And we also announced a regional collaboration with MPI Telecom, a joint venture with which we are accelerating the fiber belt in the country. We are expanding our footprint of the fiber market. And with that, we have now announced that we have started to built fiber on 200 regions, micro markets around the country. So a lot of activity in the fiber business as of now. Then moving into the digital and software services, in the home services, We have introduced a couple of new ELISA entertainment original series. One of them is Ivalo, the fourth season of the series. very well received by the customers. This is the blockbuster of our original series, as stated, the fourth season and the most viewed of our original series, both here in the home market as well as in international export market. Another new series, another new launch is a series called Sunset Grove. In the energy services, in energy solutions for homes, now we are talking about ELISA battery. namely Elisa Kotiakko. We have been increasing the footprint of that solution being available to customers, to Finnish houses, single dwelling units. And now we can offer that solution for half of the Finnish single dwelling units. This solution is creating quite a bit of traction on the market, very high customer interest. And for those early adopters who have been having the solution for a couple of months, we have very high net promoter scores, so very high customer satisfaction. So this is very encouraging for the subsequent steps of penetrating the market further. In corporate and IT, actually quite a bit of customer wins in the large segment, in the medium segment. Clearly, we are competitive with our IT service and cybersecurity solution. Here we have a couple of public references, but we have been winning also other customers whose name we cannot mention for confidentiality reasons. So good deal pipeline, good hit ratio for our IT services as well as cybersecurity services. Then when we come to the international software services and ELISA industry, the organic comparable growth for the quarter was 2%. There was some move of deals from Q1 to Q2, as would be relatively typical for this software business. Some of these deals were related to deliveries. So we have sold to customers already earlier, and now we're delivering the deals. And there was some delay in the deliveries, and therefore we can account for the revenue only in Q2. So move between quarters. Also some deals that were moved from Q1 to Q2 but already now in Q2 during the first 15 days we have been signing those deals and that's why we see this move between the quarters and the bottom line of this is that when we look at the full year and the full year revenue estimate, we see the growth continuing in double digit levels during the full year. And this is indeed backed up by strong order intake during Q1. So our Q1 order intake comparable growth on that one was 16%. Also some intriguing product development in this space. We launched a new AI powered virtual manager for production planning in ELISA industry. A virtual manager called Lumi that we will be offering to customers from here onwards. And then we come to the final page of the presentation, which is the outlook and guidance. Our outlook for the remainder of the year stays intact, so no changes in the guidance. With that, I will hand over to Jari.

All right. Thank you. And good morning from my side. Let's start from profit and loss and mainline lines. Good development in all earnings lines and development, although somewhat challenging environment, macro wise, and a lot of uncertainties in the marketplace. So 4% revenue growth or 21 million. And if we go in that 21 million interconnection and roaming and equipment sales both growing 1 million. In service revenues, international software services, 40 million increase acquisitions impacting there. Domestic digital services, 1 million growth. Corporate IT growing, small decline in consumer digital services. Fixed services, minus 2 million. Growth in consumer fixed services very much driven by fixed broadband growing. Fixed broadband subscription base growth was almost 8,000 in the quarter. Negative impact in traditional voice both in consumer and corporate customers. Mobile service revenue 6 million crore both consumer and corporate customers growing. Epida growth was higher than revenue at 4.6% service revenue growth contributing to that also the continuous productivity improvement and cost efficiency measures what we did also last year and continued in this quarter contributed to that. EBIT growth was 3.1% to 125.7 million and EBS growth 2.3% to 58 euro cents. Also in Estonia, positive development and revenue return to growth trend, 4% growth, mobile and fixed service revenue growing and that also contributes together with productivity improvement measures to EBITDA growth, which was 7%. We did some price increases in Estonia that had some impact in the subscription base. Postpaid was declining to 2,500 and prepaid 3,400. CAPEX was reported, CAPEX 72 million and guided CAPEX excluding licenses and IFRS 16 leases was 65 million. in line with the guidance 12% capex to sales main investments continue in 5G coverage increase in fixed fiber investments and IT investments. Comparable cash flow was 82 million. Slight decrease, 4% compared to a year ago. Positive impact from higher EBITDA, as well as positive net working capital change. Also paid taxes were were lower negative impact through higher capex and higher paid interest. And the both of these had some timing impacts. Comparison year capex was somewhat lower level than normally and The same with interest expenses or in paid interest, the comparison year had some loan interest, the interest for sorted and normal typical one year time period. So, these impacts are not repeating going forward. EBITDA operating cash flow conversion continued at high level 67%. Also capital structure and balance sheet position continues at solid solid way and in line with our medium term targets net debt to EBITDA 1.8 times and equity ratio 1.6%. The same with return ratios, return on equity 30.3% and return on investments 18.2%. 8%. In terms of interest-pairing debt, the average interest currently is 2.4%. Then about the dividend, two weeks ago AGM decision was 2.2 euros 30 35 cents per share dividend to payments. First payment was done last week, one euro 18 cents and the second payment will happen in 24th of October. And this represents dividend yield of 5.6% against the share price end of Last year growth 4.4% and 11 consecutive growth year. Underlying a strong commitment to competitive shareholder remuneration. And now Vesa will continue, please.