Freenet Ag Unsp/Adr

The conference is now being recorded. Hello, ladies and gentlemen, and welcome to the Freenet conference call regarding the Q1 2023 results. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand the floor over to Christoph Wilanek.

Hello, everybody. Good morning. Thanks for joining this session. Formatted and everything very very much the same very much as you all know it We're very happy to present first quarter results, which came in strong very happy about the the overall development of the company in financial as well as operational KPIs and I would like to start as always with the development of the customer base you can see that Year over year, we have a real nice development in mobile net ads of plus 166,000 and TV plus 182. I think it underlines our ambition to equalize these two businesses. There is still in absolute terms of subscribers a big gap to be closed, but you can see that on the net ad side. We're doing really well on both ends. I think it is a result of a strong quarter as such, a good ambition with the team, a couple of changes that we have done on the sales side, also in retail. There is not a single event that was changing the picture, but I think it's a lot of little improvements that pay back these days. If we take one step deeper into the mobile business, you can see that we have a total plus of 60,000 during the quarter and plus 51 with the pure post-paid. There is a strong development in unlimited, a strong demand on unlimited contracts and also fixed mobile substitution, internet access. They are incorporated here, and they are doing really well. I think they're going to be a little bit of a pushback in the second quarter because we need to limit the ultra-high usage. So we will clean out a little bit, but we're talking about 2,000, 3,000 customers. But that is the basic driver is Simulant Unlimited. The second topic, which is more on the qualitative side, you know that we are constantly trying to improve our customer service. There's three elements to it. One is to push more and more of these contacts away from manual to digital. The current ratio of digital contacts is 38%. And we're trying to improve on a constant basis. A second key topic is to make the people not even call. We have seen a reduction of contacts during the first quarter compared to previous year by about six, seven percent, which is a result of improvement on processes such as mobile number portability and the like. And overall, we were quite excited Connect has tested the hotline services and we've done pretty well there, which is also good in terms of communication to the outside world. On retail, the major changes during the first quarter was that by the 1st of January, we have limited the way of paying bills in in the stores we have excluded any cash payments um there from first of january and we have done the same first of february with the free net shops um to be honest this was um it was a big panic on the uh on the side of our sales reps and shop managers but it turned out that it did not hit the bottom line at all. People fully accept that we are asking for EuroCard, MasterCard or any non-cash payment method, which is pretty well and there is more to come. That's what we can say. We are working on a new concept to fully align on and offline to delete any differences between the existing channels. We want our shops to be very focused on real demand driven sales and going away from still supply driven sales that we are doing right now. I guess that in the next call in August, we will elaborate a bit more and we will also share with you what the impact will be on the business side. FreeNet Internet, we have kind of like added to the portfolio. As you know, by the end of January, we have then beta tested the sales and activation in February. Real sales only started now in April on some of the other pages. But we also mentioned that we will increase the price from 29 to 35%. This basically it's driven by the market over all the market conditions and the commission demand that third-party sales partners want from us, so we will increase prices to have more money to spend as commissions to third-party dealers, which we did not include in sales so far. Next page, page number six, is a bit closer look at On the TV side, I think the outstanding number is that WIPO TV has a net ad number of 83,000 during this first quarter. I expect a similar or even slightly better net ad number for Q2. What is the drivers? Well, I think it's a great product on the one hand side, but on the other hand side, it's the partnerships. In the Q1, we did not include any numbers from Deutsche Glasfaser so far, so this comes in right now. First analysis on the April looks at these people that adapt or change, migrate to Waipu, have super high engagement of over 90%. So we're doing really well there. These numbers really mainly come in in Q2 and Q3. So this is why we're expecting well, anywhere between 80 and 100,000 net ads for the second quarter. There's a continuous range of new partnerships, which I will not elaborate, but I think it's just showing that the product is also improving. We're currently holding 248 channels, 185 are HD. I think it's the widest and most attractive portfolio in the market. It's even bigger than the one from cable and Magenta TV. I think this is not really an attractor, but more a hygiene and communication factor that we have a super competitive product. On 3.95, vice versa, we still see a decline, which is expected. We keep the revenues on a stable level due to the price increases that we have Very silently implemented in end of next last year and this year Still we do a lot of interviews with people that are leaving and I even personally spoke to a couple of customers and they basically tell us that they switch technology typically to IP either when they are upgraded with a class fiber connectivity or an improved internet service and And this drives us to test now hybrid offers, meaning that Freenet TV customers will get a Vaipu either on top or in a hybrid stick version in order to make them kind of like seamlessly migrate to the new technology and not stepping away then from Freenet as a total company. On media broadcast, B2B is doing everything. is doing really well. We have also, I think we have mentioned last year that there is a couple of risks on carriage fees. We have signed extended long-term contracts with public television also in Q1, which will give us stability way beyond 2027. And radio is doing really well. So I think overall you can see that I'm I'm very positive. I'm happy that we've done. I think the financial is a bit better than we even thought. There are not one time effects, but a combination of positive effects that Ingo will give you more detail. So what is the outlook for the for the full year? We remain bullish and positive on the overall result. We will focus on implementation of AI and chat GPT functionalities. We have an internal group working on this. Specifically, we expect mid-term very positive impact on the customer service side. As I mentioned, assisted personalized shopping is a big project which we have kicked off these days within the company, and I will give more details in August when we talk about Q2. And free and internet is up and running and we will increase price to 35 euros on the TV side now fully integration and implementation on budget glass father side we have also seen demand from other p2b potential b2b partners to talk to us and None of those conversations at this stage are ready to be either disclosed or concrete enough to be mentioned, but we see that the IPTV market has really kicked off and anybody in Germany who is in the TV access business has a WIPO on the radar and gives us the strong impression that we will find more partners such as Deutsche Glasfaser still this year. And the hybrid stick I've mentioned as well, we will I have a meeting tomorrow where we will start talking about the implementation and the volume. And I'm very, very positive that in Q4 we will see first results, which we will again share with you at that stage. Having said that, I'd like to hand over to Ingo for the EVDA details.

Thank you. Good morning, everybody from my side. I started on page eight with a group. I think Christoph already summarized a little bit. I think it's very promising what we saw here or what we see. And I think it is, yeah, I think Christoph is right. In all dimensions, no extraordinary effect, but in all dimensions, slightly more positive than expected. So it's not the big effect, but a lot of very small effects And these positive effects lead to the EVTA growth of 8.5% here. What is also very positive, I think, is that the performance is not based on cost savings, but it is based on better quality of the business. And I think this is shown in the gross profit growth of 10 million and this is very equal to the 10 million of growth in the ebta what is also positive is that in both segments in the tv and media segment and in the mobile segment there is a strong development And so I think all in a very positive picture, also driven by an increased revenue, which is not so usual for us, but it was also in terms of revenue a very good first quarter here. Moving to page 9, to the mobile view here. yeah and here we speak of a steady growth of ebta which is totally correct if you compare it with the last quarter in in this quarter yeah it's it's even bigger the positive effect on the one hand and this is also very positive it is driven by the higher service revenues which is the most profitable part of our business and the share of the of the service revenue is again near to 75%. So the quality of the revenues is quite fine. We see the positive gross profit effect and on the EBITDA side the effect is relatively comparable to the gross profit because we have a strong cost control, which keeps the cost on the level where they were last year, even with all the inflationary effects and so on. Moving to some KPIs of the mobile business on page 10. Yeah, we are happy that DLS revenues are still on track. We saw some increase in the third and fourth quarter last year, and As usual, the first quarter of the year is slightly lower, but it's definitely much, much higher than the first quarter of 22. So I would say, yeah, we are back on track since Q3. And this is something which shows it here again. RQ stable and the subscriber base growing as Christoph already described. Moving to the TV and media business, I think a comparable picture to mobile, we see the increasing revenues based on the growing customer base at Waifu TV. And I would ask you not to forget that in Q4 22, where the revenue was even higher than in the first quarter now, we had some extraordinary revenues from barter deals and from some sticks, what we sold separately. So I think this was definitely extraordinary. The 80.8 million revenue in the first quarter are very strong. Moving to the gross profit, it is an increasing gross profit, mainly driven by WIPO TV. again because of the growing number of customers and the service revenues what we generate here. On the other hand, Freenet TV, it is stable and this is the target to keep it stable because we see the decreasing number of customers in Freenet TV. But on the other side, we increase prices during 2022 and this is what we promised that we try to keep it on a similar level And I think here we deliver what we promised. On the B2B side, media broadcast, maybe a little bit surprisingly strong, but this is driven especially by the digital radio business. I think we invested a lot in CapEx also last year into the infrastructure of digital radio. So therefore now we generate the gross profit out of the network, what we built there. And on EBITDA terms, what is obvious here, pre-net EV still on the same level as gross profit. On the B2B side, also a very good cost control. And in BIPO TV, I think this is not surprising that the EBITDA growth in WIPO TV is lower than the gross profit growth, because if you want to grow the business, then you have to invest into marketing. And this is what we did in the first quarter. And this leads to a low EBITDA effect on the shorter time. But on the long term, this will pay in also on an EBITDA level. Moving to the pre-cash flow. I think what is important to do, if you compare it with last year's free cash flow, last year we received this economy dividend. So if you normalize the free cash flow of last year, it was only 57.2 million. And if you compare the 64.6 million of the first quarter, 23, this is an increase of 13%. And therefore, the free cash flow even outperforms the EBITDA growth. If we look into the buckets here, a change in networking capital, this is influenced by a further decrease of factoring from something like 26 million at the end of the year to 13, 14 million, something around this at the end of the first quarter, 23. And therefore, this is This is something why the change in networking capital is bigger, the negative effect here than last year, because the factoring reduction last year was much lower. Tax payments, comparable level than last year. CapEx, higher than last year. Here again, some investments in digital radio. What we did in the first quarter, I think we could see from the media broadcast B2B figures that this makes a lot of sense because we get the money back afterwards. In the other, I think interest payments slightly lower, so nothing surprising in the other buckets here. Moving to KPIs on page 13. Yeah, I think here in the headline, I think the balance sheet is under control. It is still very healthy. I think we will have a usual effect because in May we will pay out the dividend. Afterwards, the leverage will be higher again, but definitely still on a very low level. And the balance sheet will stay on a very healthy level with an equity ratio above 40 percent. My last page, 14, is the guidance. We reiterate it. I read in some of your comments that maybe the guidance is too low and maybe it's too conservative. I think today, definitely, it is much too early to discuss the guidance here. I think we are early in the year. We have to see what happens. And therefore, we reiterate the guidance today. And then during the year, we have to see what happens and what will be possible. So therefore, I hand over to Christoph again.