Freenet Ag Unsp/Adr

Good morning, everybody. Thanks for joining today's call. Highly traditional, I'm going to start with some qualitative assessment of the last quarter, and Ingo will then go into financial details, followed by hopefully interesting Q&A. Page number one, we believe this is a good start into the year. We call it the sound start. with solid key financials revenues grow as expected adjusted EBITDA on mobile is stable whereas the TV and media is growing significantly we'll comment on that in a second and free cash flow is also in line with the guidance and our internal planning on the pure operational KPIs customer growth in both segments is okay I think that is definitely to the point where everybody was maybe a bit disappointed. I'm not at all disappointed, to be honest, because I think all the entire market has seen a little fatigue. We have all seen uncertainties in German consumption, private consumption during this first quarter, the new elections, the building of the new Regierung and government staff, I think that all led to uncertainties that we also see. And we have therefore consequently taken out money off the market. I think that was the key. Ingo will explain a bit more. We took out money out of the market with our offers. Obviously, you can see it immediately because it then expanded over 24 months. But that's what we did. So we did on purpose. take down the numbers a little bit going. One step deeper, let me start with mobile. You can see that post-pay growth is 53,000 units. It's almost tripled from previous year. So we are no doubt expanding and building up on our new tariffs, but also on our new agreements with Telefonica, Vodafone and DT. But still, we are reluctant to overpay. We see very strong performance in Mediamarkt Saturn. We see very strong performance in our own retail and all captive channels. The thing that we are missing a bit is on the low price. On the low price, SIM only is online, pure online, which would be e.g. Check24. This is where we were reluctant to overpace and not to pay as much as others that obviously defend this piece. We all have seen a couple of tariff changes. The good thing about it is that the changes are, at least when we look at our migration data, They are on the upper end of the market. The new offering of DT with 35 euros with a combined card. It's not their first SIM, but if you have combined cards, unlimited is a good offer. Even though 35 is a good up view and we can also offer that to the customers and that is strengthening the portfolio. We have also seen N26 last week. I think big announcement, but small impact. tariffs are not attractive. And with all my respect for online banking, I think all their customers will have or should have a SIM card yet, because otherwise they couldn't handle the app. So why would you now change to N26? And again, the offer is not a super attractive one. So in summary, we could have grown more, but we decided based on the competition on the low-end markets that would not outspend the market and wait a little bit during the course of the year because we think it's enough time to catch up with our guidance that we will have moderate growth. Even though, or in parallel, and we seldom show funny pictures on branding, but I thought this week or this time it makes sense. We used the time. We did a lot of sports sponsorship and as you can see on the right hand side brand familiarity with brand recognition getting into the relevant set and also the likelihood of purchase was increasing significantly. This is not impacting net ads overnight, but it's building the interest for the future And this is why I think it is important in periods like this where the market is heavily stagnating that you reposition your brand and you spend a bit more money, smart money by the way, on these kinds of things. Sponsoring is way cheaper than typically TV media buying. Moving on to the TV segment, on this page you can see that the subscriber development Waipu net ads are up by 60,000. This is internal planning. I know that everybody will now ask what is the impact of the missing acquisition and the journey out of the Telefonica customer base. We have agreed with Telefonica not to disclose this in detail, but order of magnitude, it's approximately the same number that our net grows. talking about 50,000 roundabout per quarter. So if you would add them, then you would see that that would be a fair comparison to previous year. Overall, we think the 60 is a good number. I compare it always to Magenta. You know that Magenta was doing 37 like for like, as we always compare without their OTT. And they are down from 73. So they have halved it. And if we clean out the effect from Telefonica, we are almost on the same level as previous year. Very important, and I think we've shared that as well with you, so far we are selling CTV advertising on the smaller and so-called fast channels only. This represents about 16% of our current usage. We have tested with Proceedingsat 1 to market their viewership on our VipoTV base separate from their own. It was a successful test, but after the test they said that they would want to take that technology and deploy it on our viewership, but they want to do the ad sales themselves. We have now finally signed a deal with them. It's up and running technically now in, was up and running in April. And by now, mid-May, we see the first revenues coming in. I think that is a, I think it's a breakthrough, even though the first couple of months, it will not have a huge impact, but I think it will, it proves the concept and we are quite sure that RTL and some others will join into the same logic in the near future. So, It's great since we can now market almost 30% of the usage as own inventory to the advertising market. On Freenet TV, we had a churn of minus 20, which is in line with what we have seen before. But we're still waiting for like seven, eight years, waiting kind of like for the For a stop-loss line, it's not going to happen, but the shrinking is decreasing. Also, I think that is very much in line with what we've told you before. What is the progress on waifu TV? Well, looking at hardware, it's not really our style. Still, this time, I wanted to share with you. The one thing, this is a new form factor. It looks basically like an Apple TV from a form factor and size. It was a result of a lot of research which we've done and a lot of questionnaires with our customer base. People feel that the Wi-Fi connectivity would be better if this is a separate device which is visible and not hidden behind the TV set. Yes, it's partially true, but more importantly, it's a psychological element. Also, people asked us whether we could put an LED so that you can see whether it's on or off. It's really seen it like old learnings and legacy attitude is kind of like non-deleteable. But nevertheless, now you can do faster sapping. The remote control is illuminated. There's a lot of other stuff. But most importantly, the welcome screen is now finally fully owned by us. So we can do the details with DAZN, with Netflix, with Sky, with our own archive, etc., etc. So far, all the older generations, we had to take the Android kind of menu, and this now is a separate one which we can fully manipulate, and we will in the future also customize based on the individual usage of our customers. Overall, we think that the shift to IPTV is continuing. But you also have seen and heard from Vodafone that they have switched off a lot of stuff, but those people are now watching without paying. I think this situation will remain for the next couple of months. Sooner or later, Vodafone will have to react, and we expect then that this will be the second wave of impact of the Nebenkostenprivilege. And then I'm also already coming to my last chart. We've told you before that media broadcast, we're trying to leverage media broadcast co-competence. One is the field service, and that is a great one. They are servicing today the DAP and the DVPT antennas. Those people are obviously, since they do maintenance and incident resolutions, They're not busy all day, so we have started to find other customers for the same field service. So we have like EDA costs, as we say in German, existing costs that we deploy now in an extended way. We have won three customers on the electric charging infrastructure in Q1. We have another three now coming in Q2. We have 18 qualified leads. And to give you a flavor today, These kind of charging boxes, it's about 150,000 in Germany, and it's supposed to grow to over a million. The majority will be in private garages with private companies, and that is exactly the field where we think we can be successfully supplying service, construction, maintenance, and incidents management. Still a small piece, but I think it's growing and we're quite happy that we have found a new field that is definitely creating an opportunity. And we are not in a defense, but in an offense there, which is great. Having said that, I'd like to hand over to Ingo.

Thank you, Christoph. Good morning, everybody. I start with the group overview on page 11 of the presentation. I think revenues increasing, and it's based on both product-oriented segments, so it looks quite fine on the gross profit side. an increase of 6.5 million and an increase of the gross margin to 39.1%. So also fine. I think maybe a little bit disappointing from an outside view is the development of the adjusted EBTA, which is shrinking from 127 to 126 million. I think you have to put into consideration, and it's a little bit linked to what Christoph presented before, We spent 4 million additional on marketing in the mobile segment on the brand marketing side. And I think it was our intention to do so. So therefore, I think we missed a little bit here to increase the adjusted EBTA. But this is an effect for the first quarter. So we did some front loading here in marketing segment. So I think from my point of view, the adjusted EBITDA is still fine, and definitely we confirm the guidance for the full year of 520 to 540 million through the range. Going to the mobile segment, what we can see here on the revenue side, we see an increase. But, and I think we have to be consistent here, the increase is based on the hardware revenues, which are low margin and so therefore not that important for us. The increase of hardware revenues was done because we sold some more packages on the post-paid side, some more bundles on the post-paid side. I think this is also linked to what Christoph said. We did not that much SIM only on the discount side. We did more bundles on the higher end of the market. I think this is not translated into service revenue now and into ARPU now, because this is too early that we changed here. So therefore, yeah, we see a slight, very slight decrease of the service revenues, which are high margin. But I think what is also very positive, if we translate it into gross profit, we do see an increase here in the gross profit. So even with a slight decrease in service revenues, we could increase the gross profit. I think this is what we try to teach you since years is that our gross profit is not directly linked to the ARPU. So here it's a difference to a normal mobile network operator. So we are different here. And I think this is proof of what we told you more than once. On the adjusted EBITDA side, I think the same comment what I did on the group level, we spent additional 4 million on marketing in the first quarter here. Without this, the gross profit would be also translated into the EBITDA. So I think we are still bold here to confirm the guidance for the end of the year. Moving to the KPI side, And I think it is just math here. If you lose in the RQ 1.8%, and if you gain customers by 0.7%, there should be a decrease of the service revenues. This is what we already saw. But I think we are happy that we are able, with the new network operator contracts that we have, that we are able to increase the customer base further. and with much more pace than in beginning of 24. Digital lifestyle revenues, we had on the supplier side of the accessories, we had to change. because one of the suppliers got bankruptcy. So I think we have some phasing here, but definitely there will be a catch-up in Q2 in the DLS digitalized revenues. Moving to TV. I think all what we see is that Vaipu TV is growing. We see the higher revenues based on more subscribers at Vaipu. We see a higher gross profit based on the higher number of customers at Vaipu. All in the media segment, we still see a margin of something like 60%. And in the adjusted EBITDA, most of the gross profit is arriving. So there is also an increase by 2.3 million in the adjusted EBITDA. So I think, yeah, on the SG&A side, there are some headwinds because we have more personnel now at Vaipu TV also to handle the customer base. We have not yet started to decrease the marketing spendings here. We will do during the year, but we had another campaign which was already planned for the first quarter. I think also here we confirm the guidance for the full year. Moving to the free cash flow, I think all in, better than consensus here, better than what we expected. So it was a very good quarter on the free cash flow side. Change in networking capital negative. This is typical because you have some deferred payments from the Christmas business. But it's better than last year. And here for the full year, we guided 45 million. And I think this is something what I would still guide today. On the Texas side, only minus 8.2 million in the first quarter. We guided for the full year minus 50 million. But I think we already announced with the publication of the guidance that there will be, that we have to release some tax provisions expected in Q3. So I would still stick to the minus 50 for the full year here. CapEx is 8.6. At the end of the first quarter, I think, yeah, maybe it is phasing. But in capex, I think it will be even difficult to spend the 55 million, what we guided for the full year. So definitely here could be a chance. On the lease side, 15 million normal pace, what we see. And on the interest payment side, I think this is based to the interest payment dates. from the promissory note. So we also here stick to the 23 million for the full year. So I think we are fully in line with the guidance here. So this from my side to the financials. So I would hand over to the moderator again to start the Q&A session, please.

And we're starting with the first questioner. It is Ulrich Raate from Bernstein. Over to you.