Elisa Oyj Ord A

Good morning, everyone, and welcome to ELISA's second quarter 2025 conference call and analyst meeting. We have a very familiar team here again. I'm Vesa Sahivirta, head of investor relations, and we have here also CEO Topi Manner and CFO Jari Kinnunen. We follow normal practice in this event. Before we start, I would like to say on behalf of our whole team, to our group treasurer Juha Kervinen. Thank you for your incredible work at ELISA. Juha will retire now after these summer holidays. And Juha has also been working with IR since the company was listed. So Juha has even more interim reports behind him than I have. And that's pretty much. So thank you, Johan. It has been a pleasure and privilege working with you. So, but now we are going to the agenda of the day and we start with the presentation and I give a word to Topi, please go ahead.

Thank you. Thank you, Vesa, and good day, everybody. Welcome to this ELISA Q2 earnings call. And first of all, I would just like to echo what Vesa said about Juha and your contribution to the company over the years. I mean, there will be many speeches coming your way soon, but thank you for all of your work during the many, many years. So, When we look at our Q2, I think a good quarter for us in many ways. Strong EBITDA development fully in line with our mid-term targets being above 4%. New mobile offering introduced to the market and being well received by our customers. And then when we look at our cash flow, the cash flow development was strong. Actually, it was an all-time high quarter in terms of cash flow for us. Looking into the highlights of the quarter, the revenue increased by 2%, very much driven by international software services and the increase in mobile service revenue. When analyzing the revenue development, it is worthwhile to note that the equipment sales decreased 12 million euros in comparison to same quarter last year. And here in the comparison quarter last year, we had a one time deal of seven million euros in Estonia. The mobile service revenue increased 3.4 percent, and it is good to see that in terms of the growth rate of MSR, we are now back on an improving trend following the new offering that we introduced to the market in May. International Software Services revenue increased with 70% supported by the Bolton acquisitions. If we look at the organic growth piece of that, that organic growth amounted to 9.6% to be exact. very much in line with our ambitions of achieving 10% or more organic growth for the year on a quarterly basis. Comparable EBITDA stated was up 4.3 percent, comparable cash flow grew with dimension plus 20 percent. In terms of net ads, the postpaid subscriptions increased by 43,000 approximately, and this was basically on the back of improving net ad trends in consumer business and also customer wins in corporate business, for example, in public sector. The competitive intensity has been relatively tight in 4G market. During the quarter, we took a step toward right direction and the churn decreased to 17%. And I think that this is noteworthy because during the quarter, we also introduced this new offering. increasing the prices respectively, and clearly the churn development goes to show that the offering introduction to the market has been successful and the value provided by the offering has been well received by customers. On fixed broadband side, the subscriptions increased with 4,400. So the number of subscriptions both on mobile side and on fixed side are on an improving trend. Then, looking into the numbers a little bit more deeply, the revenue landed at 552 million euros, as mentioned. EBITDA was 198 million euros. If we compare the EBITDA percentage to the comparison quarter last year, we took a step up in the EBITDA percentage. Epita is pretty much driven by the mobile services, also the international software services, cybersecurity services, and then we start to see an increase in revenue coming from fiber business. And clearly, the efficiency improvements, the continuous improvement in terms of efficiency is contributing positively to the EBITDA and to the operating leverage. In terms of MSR development, I think that the most important development is really that we are back on an improving trend with respect to MSR on the back of the offering changes that we introduced on the market. And when we look forward, I think that the offering changes will be offering clear support to the MSR development going into the second half of the year and then further into 26. So our expectation for the full calendar year in terms of MSR is that we will be we will be seeing mid single digit growth. So we reiterate that guidance. RPU improved during the quarter and as stated churn decreased to 17.1%. The market with respect to 5G is competitive, but as stated, customers are also tuned to the value that we are creating with the 5G Plus offering. In 5G Plus, we see that customers are more satisfied with the 5G plus subscriptions that they are with the sort of traditional 5G subscriptions. And then also the security features are clearly valuable to customers. In the 4G space, we see some tight competition still out there in the marketplace. When we look at our business segment by segment, I think consumer business is fully robust at this point of time. Revenue plus 2.4%, EBITDA plus 3.6%. In corporate customers, the revenue decreased a bit, but here we need to adjust for the seven million one time deal in Estonia during the comparison quarter. Having said that, it is clear that the macro environment is creating some challenges to the corporate business. Customers have delayed their decision making related to IT services and cyber. Also in fixed services, in equipment sales, the macro situation is somewhat visible. At the same time, we do see improving trends in corporate segment toward the end of the year. not that much driven by macro, but driven by micro developments, namely us winning new customers during the course of the spring. And clearly, those customer wins are showcases of our competitiveness. In this challenging market related to IT services and cyber related to corporate networks, we are clearly competitive. We are winning market share. We are winning new customers. And once we get those new customers and their services fully transferred to us, we will see support in revenue and we will be seeing support in profitability toward the end of the year in corporate segment. International software services revenue increased with 71 percent supported by acquisitions. And as stated, the comparable growth, the organic growth amounted to 10 percent. EBITDA still slightly negative for the quarter, but here we will need to remember that typically Q2 in software business is the weakest quarter. So when we look at the full year in terms of international software services, we do expect double digit organic growth for that business. And we do expect that business to be in positive territory in terms of full year EBITDA. Back in March, we communicated our new strategy, updated strategy in the Capital Markets Day in London, and they stated in terms of EBITDA, we are now fully in line with the midterm targets going for faster, profitable growth. the four growth areas of our strategy being 5G and fiber, home services, corporate IT and cyber, and international software services. And in all of these, we have been making steady progress during the quarter. So when we look into The mobile business and the fiber business, as stated, the clear success for the quarter was the new mobile offering. And the whole upsell to 5G continues intact, as shown on the orange trend line on the right-hand side of the page. What is also worthwhile to know is that while the new security features and embedding those to our mobile offering will be offering support to mobile service revenue development during the remainder of this year and during the next year, We also do see the next chapter of mobile service revenue growth coming with 5.5G development, as we communicated in our capital markets day presentations. And to create that competitive advantage in terms of our network capabilities, in terms of our commercial capabilities, we have now signed a deal with Nokia to extend our 5.5G network during the coming period in Finland and in Estonia. In Estonia also, it is worthwhile to note that our 5G network with Nokia equipment has now been rated the fastest on the market, and that certainly is already visible in our customer satisfaction numbers. During the quarter, an intriguing development was related to Moontalk. Moontalk Airi was launched and Moontalk Airi is effectively an AI agent, an app that enables customers to make summaries of their calls, list the action points out of the calls, and with APIs, those action points are possible to be transported to the CRM systems of customers. you know, improving the quality, for example, of sales personnel and improving the productivity of sales personnel. And these kinds of solutions are examples of what we could use to leverage in other parts of our customer base going forward with AI type solutions and with that strengthen our offering and provide more value for larger parts of our customer base. We also enjoy good momentum in fiber business, clearly strong revenue growth there, accelerated network construction, and also a new offering for multi-dwelling units, improving our competitiveness. So when we look at the rest of our growth areas in terms of strategy in home services during the quarter, we launched new Elisa Kotiturva, new home security solutions in collaboration with Evarn Security, a Finnish provider of security. security services. And now, as per our strategy, we have been launching the home energy solutions, home battery to the market, home security solution, and we'll start gradually to penetrate the market with these solutions, providing good value for our customers. In corporate and IT and cyber, as mentioned, several large customer wins, typically with some AI enhanced service angle in those competitive biddings. And for example, our digital workplace solutions are quite competitive in the marketplace at this point of time. During the course of this year, the number of workstations that we are managing with our AI-enhanced service will increase by 40%. So clearly an indication of the value that that service brings to our customers. Strong growth, strong demand for our cybersecurity services continues. In ISS, as stated, we do expect double-digit organic growth for the full year. And especially in the telco vertical, that being a stable, somewhat defensive sector, we are making good strides and have now signed several sizable multi-year contracts with our customers. Of course, this part of the business is not immune to the global geopolitical uncertainties and to the tariff related uncertainties. And we see some impact of that in the form of slower decision making with customers in certain verticals of that business. for example, in the semi-convertible of our industry business. Then one of the highlights for the quarter really was that the Time magazine, once again, together with Stadista, listed the most sustainable companies in the world. And this was now the second time around. Last year, we were the number 66 in the world, and now we improved our position and ranking to number 55. So good progress in in that one and definitely great to get this kind of an acknowledgement. We also were selected to the Financial Times list of best employers in Europe. So important acknowledgement related to our employee brand and the well-being of employees in the company. And this brings me to the end of the presentation. So we are reiterating our outlook and guidance for the full year. So revenue we expect to stay on the same level or slightly higher, and EBITDA likewise at same level or slightly higher than in 2024. CAPEX will be max 12% of revenue, and we are heading towards that number for the full year. So I think that that completes my presentation of Q2, and now I will hand over to Jari. Thank you.

Yes, thank you, and I will start continuing and echoing Vesku and Topi. Big thanks to Juha for excellent years and high contribution to the company over the years. I think the whole team really appreciates your professional work, but also appreciate you as a very valued colleague, and definitely you will be missed after you retire, but all the best for that when that time comes. Now, second quarter continued good development after Q1, especially Epida growth. more than 4%, so in line with the medium-term targets as well. But let's first look at the revenue change. 11 million increased 2% compared to last year. There was negative impact from equipment sales, 12 million, and that includes this 7 million one time deal in comparison year. International software services strong growth, 16 million. Acquisition first consolidation impact is approximately 3 million. Comparable organic growth at 9.6%. Domestic digital services growth was one million. Corporate IT services growing in fixed services. Inside that, minus two million, there are different... trends, voice, traditional voice continuing to decline. Also, corporate network services were declining compared to previous year. However, fixed broadband services are growing very much driven by fiber. Mobile service revenue growth trend improved from Q1, from 2.6 to 3.4%, and in euros, 9 million increase. Total service revenue growth altogether was at 5%. And that together with continuing cost efficiency and productivity improvement measures led to EPIDA. 4.3 percent growth, 198 million. Also, margin improved, 0.7 percent points to 35.8 percent. In EBIT, growth was somewhat lower than EBITDA, impacted by depreciation increase, 5 million. compared to last year, the same change was also in Q1. Now, going to second half of the year, depreciation change, year-on-year depreciation change will be less negative, so there will be improvement in that sense for that line. A bit... margin was 22.5%. Financial expenses net, including also share of associated company profits, change was negative 2.9 million. Now, this comparison includes Comparison year, temporary good share of associated company profit, and therefore, year on year, negative change, 1.8 million, which again, going to the second half, is something that is not going to repeat. So, net interest expense change in Q2 was approximately one million. Then moving to Estonia. In revenue, already a couple of times mentioned one time deal. In comparison, year impacted to revenue, excluding the seven million, revenue increase was two percent. Mobile service revenue was developing and continuing to... Developing positively and continued to grow. And together with MSR growth and cost efficiency measures, EPIDA increased 4%. In subscription base in Estonia, positive postpaid increased 3,800. Prepaid was negative 4,100. Churn reduced from previous quarter to 8.6%. CapEx in Q2 was reported CapEx 89 million, guided CapEx excluding licenses, lease agreements and acquisitions 76 million, so that is 5 million lower than a year ago. All in all, guidance for the full year, 12% from revenues, is unchanged and intact. Main investments continue in mobile networks, 5G coverage increase in fixed-site fiber and other networks and IT investments. Q2 cash flow was strong, comparable cash flow, 130 million, 20% increase against previous year, positive contribution from higher EPIDA and lower CAPEX, as well as networking capital change, which was... more positive than a year ago, and accounts payable contributing as well as continuous improvement in inventory efficiencies. Negative change, slight negative change in paid interest as well as paid taxes. First half, comparable cash flow is 196 million, 16 million higher than a year ago, and 9% increase against last year, and higher EBITDA and net working capital change contributing negative impact from financial expenses, interest expenses, and capex. Operating cash flow, EBITDA operating cash flow conversion, was improving from last year was 62%. Then looking at the balance sheet and capital structure, solid capital structure continuing in line regarding net debt to EBITDA in line with targets 1.9 times equity ratio, slightly below the medium term target at 32.7%. Both of these are impacted by by the dividend in the second quarter, and going forward, net debt will reduce as well as equity ratio will increase. Return ratios, continue at a good level, return on equity 30.4 percent, and return on investments 18.7 percent. The second quarter, we did liability management transaction issues, 300 million five-year bond. order book was more than three times subscribed, and you were able to reach good terms, coupon to 0.875% for the loan. As part of the transaction, we also purchased back part of 300 million debt due next year. 115 million out of that was purchased back. And average interest for the interest-bearing debt currently, also after this transaction, is 2.5%. And now, I will give a word to Vesa, please.