Elisa Oyj Ord A

Good morning everyone and welcome to ELISA's. We have a very familiar team here. I'm Vesa Sahivirta, head of investor relations and here together with me are CEO Topi Manner and CFO Kristian Pullola. We start with the presentation followed by Q&A. And in Q&A, we appreciate that you limit your questions to one due to our time constraints. We had a hard stop at 1 p.m. Finnish time, 11 a.m. London time. Thank you for understanding that. But now let's get started. So I give word to Topi, please go ahead.

Thank you Vesa and hello everybody. Welcome to this Q3 earnings call. And as stated, let's get right down to business so that we have time for questions. So the Q3 highlights. Revenue was flat during the quarter. Comparable EBITDA down by 1.8% against the strong comparison of Q3 2025. Telecom service revenue decreased by 1.3%, driven by mobile service revenue decline of 2.3%. At the same time, fixed service revenue grew with 1.6%. In international software services, we had a good quarter comparable revenue increased with roughly 11%. In Finland, the postpaid churn increased to 18.7%, which is the long-term average churn of Q3s during the last 10 years. Mobile postpaid subscriptions decreased by some 16,000, while the M2M and IoT-based grew with some 10,000. On the fixed broadband subscription base we saw a strong growth of more than 20,000 subscriptions both in FTTH as well as in FTTB. The transformation program is proceeding according to plan as we have communicated previously. and during the quarter we carried out operating model changes in our consumer business and initiated a similar process in international software services all being part of the transformation that we are going through. Our board of directors decided on the third installment of the dividend, namely 60 euro cents to be paid on 4th of November 26. During the quarter, mobile recovery continued at a more moderate pace. The revenue I stated was flat. The increases within the revenue number were driven by international software services, fixed services as well as equipment sales, while mobile services and to some extent consumer digital were decreasing and then also discontinuation of The landline copper, the PSTN network during the quarter after 140 years of service decreased the revenue with some 2 million euros and that same impact was also seen in the EBITDA number. EBITDA was pulled toward the better direction by the outcome of the transformation program and as stated the PSTN also decreased the EBITDA with the 2 million euro I mentioned. In terms of telecom service revenue we are still being weighed down by last year's mobile competition and Many mobile subscriptions being fixed for 12 months with low price points. However, during the quarter, we saw the mobile service revenue edge up slightly on Q&Q basis. The upsell of 5G continues and is an underlying driver for mobile service revenue. RPU was flat and that's 7%. When we look into the mobile KPIs more closely, Starting from the upper right hand corner, the net sales prices on Q on Q basis decreased a bit, reflecting seasonality and, as mentioned, slightly increased competition. However, it is important to note that the new sales prices were higher than they were in Q3 last year. And actually they were higher than we saw all through the four quarters of 2025. Churn 18.7%, as stated, reflects the 10-year average of Q3 churn, and mobile sales and marketing costs were stable. Within the composition of marketing and sales costs, we saw some changes, decreased sales, Cost around vouchers and kickbacks driven by our value-based actions on the market and at the same time we invested a bit more to sales force on the market and thus the stable development in sales and marketing costs. The segment results were mixed. Consumer customers were weighed down by last year's competition, as mentioned, and also the discontinuation of the PSTN network had a slight impact on consumer segment. Corporate segment had clearly a more challenging quarter. When interpreting the results of corporate segment, it should be noted that the discontinuation of the PSTN business impacted corporate segment with the 2 million euro negative that was mentioned. Also during last year's Q3 we had some bigger deals and we did not have corresponding similar deals during this quarter reflecting sort of a normal quarterly fluctuation. In international software services, as stated, return to growth was the theme of Q3 with comparable organic growth at roughly 11% and EBITDA change upwards 2 million euros. We see very solid progress in Estonia. The revenue increased with 5%. We are seeing EBITDA increase on quarterly basis, even better increase on year-to-date basis. And we see the customer numbers improving positively in Estonia while the churn is down on Q on Q basis. So very solid progress in Estonia. Looking into strategy just briefly, as witnessed by the numbers, we are being challenged in terms of growth as we speak. But looking into 27 and looking into telecom services of 27, we see that our entry point to 27 will be better than it was for this year. and on the fiber space in the fixed services we will have a new growth opportunity related to data center connectivity that is clearly tangible and growing quite rapidly on top of the FTTH and FTTP demand that we see on the market. In ELISA industry we initiated an operating model change that will be resulting in a significant improvement of profitability in that business during during 27 and then we will certainly continue with continuous improvement efforts around productivity and efficiency thus progressing with our strategy implementation. Looking into 5G up sales, that clearly continued in a trend-like fashion as before. As of now, our 5G penetration stands at 61%, with 3% pickup during the quarter. Strong fiber growth, I already mentioned. In the home services, Perhaps the most notable development during the quarter was that we renewed our contract, a long-term contract with MTV, a Finnish commercial TV company, and brought their streaming service, Katsomo Plus, to our Elisa Viihde, Elisa Entertainment customers as a very tangible customer benefit. On corporate and IT and cyber businesses, we won some good deals. Kempower is one of the examples, a Finnish international company. And also in Estonia during the quarter, we acquired Pro IT, a small IT firm. and with that we are strengthening our IT offering for corporates in the Estonian market. Then in international software services the main headline is that we initiated the operating model change. During the quarter after slow Q2, we saw activity picking up in the software space and we were very happy to receive several major orders from new global customers. including three leading chip makers globally in the Semicon industry. These deals had a small impact on Q3 revenue, but most importantly, these deals will be supportive of the revenue going forward, especially going into 2027. With the operating model change, we are planning to integrate our individual software businesses within ELISA industry fully into one ELISA industry. And in the course of doing so, we will be realizing efficiencies. And now the respective The operating model change is targeting a significant improvement in profitability for the full year of 2027. As part of the operating model change, We are planning to introduce two business areas within Elisa Industries, one being manufacturing and the other being critical infrastructure, where we are serving telecommunications and energy industries. We expect in ELISA industry that the organic revenue for the full year will be within the bracket of 5 to 10 percent and as stated going forward we expect to see gradual improvement in EBITDA in this part of the business. Data centers. and data center connectivity business is now rapidly expanding in Finland. Finland is experiencing a data center boom. During September alone, Data center investments in the order of magnitude of tens of billions were announced in the country. The most notable was Google's announcement of them investing 13 billion euros during the course of next two years to data centers in Finland. And we are very happy that Google has been choosing us as their main partner in building data center connectivity, high capacity, reliable connectivity for all of their four data center campuses in Finland. As an indication of the market size, the Finnish electricity grid operator Fingrid has now been forming electricity contracts with data centers that would amount to 5 gigawatts of capacity once realized. This is indeed an indication of the potential size of the market in the coming years. Our year-to-date cumulative order intake in this part of the business now amounts to approximately 100 million euros. And as stated, this order book has been building very rapidly. The orders mainly came in during the third quarter. Going forward, we will also look into other types of opportunities within the data center space, looking into optics, looking into managed services with campus-ready service packages and thereby exploring adjacent opportunities in this space as well. While the revenue recognition related to data centers will commence mainly from 28 onward, once the construction of the connections has been completed, it is important to note that the cash flow characteristics of this business are positive. During the quarter, we spent on capex related to data center connectivity, but for the full year, given the advance payments of customers, we expect positive net cash flow. Then some words about the AI RAN partnership with Nokia and NVIDIA. In March, we announced that we are looking into a proof of concept together with Nokia and NVIDIA around AI RAN. And now we are moving to implementation in this one. As one sign of this collaboration and Closer cooperation, especially with NVIDIA. We launched a beta version of our Moontalk AIRI personal real-time AI assistant which is using NVIDIA's Nemotron open models and distributed infrastructure in terms of compute. Distributed sovereign infrastructure in terms of compute. And now we are Looking closely into this, we are developing further solutions together with Nokia and NVIDIA and we expect to see very soon announcements related to even closer collaboration around AI RAN. And then finally, just to wrap up, our outlook and guidance for the year remains unchanged. While we see slightly increased competition in the mobile space, we are targeting to be well within the guidance range in terms of comparable EBITDA. With that, I will hand over to Kristian to go through his part of the presentation. Thank you.

Thank you, Topi. Let me take you through the financial performance. In Q3, group revenue was flat on a year-on-year basis at 561 million euros. Within that, we continued to see the expected mix shift. Mobile services, consumer digital services and the discontinuation of the traditional fixed PSTN weighing on revenues while international software services, equipment sales and fixed services supporting growth. Comparable EBITDA was 210 million euros down by 1.8% or approximately 4 million euros from last year. The transformation program continued to support productivity. However, the benefits did not fully offset the impact from lower telecom service revenue and the discontinuation of the PSTN business. Below EBITDA, higher depreciation and slightly higher net financial expenses also weighed on earnings. Comparable earnings per share were 59 cents compared to 64 cents last year. As Topi explained, the mobile recovery is continuing, but at a more moderate pace. The impact of the improved net sales prices is coming through with a delay and will be more visible in 27. Our focus remains on improving service revenue development and delivering transformation benefits, while maintaining disciplined cost control and looking actively for opportunities to improve earnings. Moving to investments. CAPEX excluding licenses, lease arrangements and acquisitions was 77 million euros in Q3 compared to 65 million euros last year. This represented approximately 14% of quarterly revenue. The key point is that year-to-date CAPEX excluding data center investments remains in line with our guidance of 12% of revenue. Just a reminder, the 12% guidance for CAPEX is valid for CAPEX excluding licenses, lease arrangements, acquisitions and Data Center Investments. The CAPEX allocation remains consistent with our strategy. Our main investment areas are 5G coverage expansion, fiber build-out, and IT systems that support consumer experience and productivity. Alongside these established investment areas, data center connectivity provides additional growth opportunities. As Topi said, the year-to-date order intake was approximately 100 million euros, mainly being secured during the third quarter. We assess these opportunities together with their investment requirements and cash flow profile, and we expect positive net cash flow from the data center connectivity for the full year. And when we talk about net cash here, we take into account both the capex as well as the inflows, including the advanced payments received. We will not provide exact capex numbers on a quarterly basis for the data center investments due to competitive reasons. However, we will report this number on an annual basis in conjunction with our full year results. All in all, we are maintaining investment discipline while funding the infrastructure and capabilities that underpin future growth. Turning to cash flow. Comparable cash flow in Q3 was solid at 160 million euros compared to 125 million euros last year, a decline of approximately 7%. There were three main drivers behind the development. First, lower EBITDA reduced cash generation. Second, higher capex and higher paid financial expenses weighed on capex. Third, working capital provided a positive offset contributing approximately 20 million euros compared to 6 million euros last year. So working capital supported the quarter, but did not fully compensate the lower EBITDA and investments and financial expenses. Our priorities remain unchanged. Maintain investment discipline, manage networking capital actively, and improve the conversion of earnings to cash. All in all, Q3 delivered solid cash generation while improving the year-to-date cash flow performance remains an important focus. And as said, we expect positive net cash flow from the data center connectivity opportunities for the full year with inflows mainly coming during the fourth quarter. Finally, on capital structure and returns. Net debt at the end of September was 1.5 billion euros, slightly above the year-end level. Net debt to EBITDA was 1.9 times within our target of 1.5 to 2 times. The equity ratio was 38% above the minimum target of 35%. Our capital structure therefore remains within our financial targets. On financing, we progressed on the proactive refinancing discussed last quarter. In August, we signed a committed 300 million euro credit facility to cover the bond maturing in 27. The facility matures in 29 and was fully undrawn at the end of September. This gives us flexibility in managing the upcoming maturities with committed financing already in place. Return ratios are at good levels. The comparable return on equity was 28.3%, and the return on investment was 17.4% for the first nine months. All in all, our balance sheet remains solid. Refinancing for the 28 bond is secured, and we continue to focus on disciplined investment, cash generation, and returns to shareholders. With that, I'll hand back to Vesa for Q&A.