Freenet Ag Unsp/Adr

Good morning, ladies and gentlemen, and welcome to the Freenet AG conference call on the Q2 2025 and half-year results. Currently, all participants are in a listen-only mode. After the presentation, there will be an opportunity for you to ask questions. I will now hand over to Robin Harris, who is leading this earnings call for the first time as the new CEO of Freenet AG.

Good morning, everyone. My name is Robin Harris, and I'm honored to speak with you today as the new CEO of Freenet. I joined this exciting company at the beginning of June, and it's been a dynamic and inspiring start. Prior to Freenet, I served as CFO of Trivago, a company. Before that, I was board member at 1&1, where I led marketing and sales for over five years. So I'm no stranger to this industry, and it feels very familiar and energizing to be back. I would like to begin by sharing some of my impressions of Freenet after these initial two months. What stands out immediately is the agility of the company. We have a strong competitive position in both mobile and TV, supported by powerful and well-established sales infrastructure. We are proud to have nearly 500 retail stores, which allow us to maintain daily direct contact with our customers. In addition, we benefit from numerous strong partnerships and a broad market presence, which gives us an excellent position to market our offerings effectively and with impact. Technologically, Freenet is well positioned. We are already leveraging AI in key areas like pricing, customer management, and , and the corporate environment is dynamic and full of potential. The team is highly motivated, and there are numerous opportunities to further develop the business. Culturally, Freenet is built on openness. a willingness to change, a strong desire to grow and deliver. I can feel a lot of entrepreneurial passion in the company, and I really like that. I can tell you that I met a lot of talented, motivated, and hungry people. Financially, we are in a solid position with high cash generation and low leverage. Our guiding principles being customer-centric, demand-driven, and AI first are more important than ever and will continue to shape our strategy moving forward. Looking ahead, we've defined several key focus areas for the future, and I see many opportunities. But first, we are committed to maintaining clear guardrails for change. This includes our 25 guidance, our 28 ambition, shareholder remuneration, and our financial policy. We stick to that. In mobile, our goal is to keep growing. Brick and mortar will remain a vital sales channel but we also changing our online approach. We are proving our user experience and conversion rates on our website. So far, we see a lot of potential here. For example, when it comes to page speed, our websites are at the moment not fast enough. So, for example, when you go to MegaSim and want to order something, you see, to slow loading times. And this also affects our other websites. We are working on that. We will improve that. And when it comes to user experience overall, the conversion rates on our online websites are not good enough. So the market standard is higher and we see huge potential here to further improve. We are preparing for performance sprint performance-based brand marketing. So, we are in the process of that, and we are working on improving our churn rate, especially through AI tools. It will take some time, but we are seeing nice potential down the road. We are strengthening our own marketing channels. We have just restructured our leadership team in the telco pillar, and I'm truly excited to take this step into the future together with the management team. I believe we make a fantastic team and working together has already been a real pleasure. I'm glad to be working alongside some of the most capable people in the industry. Related to TV, we are continuing to support strong B2C growth. We have strong products that customers like a lot and we have amazing teams that will further strive for success. Also here we see a lot of potential and put focus on it. Internally, we are fostering a cost-conscious culture that is focused on performance, experimentation, and scalability. We are empowering our people to take ownership and make decisions. We've been building a flat organization structure with minimal bureaucracy, which supports this and gives us the agility to move fast. Our vision is clear. We want to be the fastest player in the market. In the long run, this will only be possible with the help of AI. And AI is not only the future at the present. At Freenet, we are fully committed to becoming the flagship AI company in the tech industry. This is one of our top strategic priorities, and I can already feel a strong appetite for change and innovation across the organization. We're still at the very beginning of our AI journey, and it's too early to quantify the full impact. But one thing is crystal clear, we see tremendous potential ahead. Now let's look at our performance in the first half of 25. Financially, we are fully on track. Postpaid and TV service revenues are growing. Weibull TV is contributing notably to EBITDA, and we also delivered strong quarterly free cash flow. On the customer side, growth is in line with expectations. Freenet TV is slowing its decline. Weibull TV continues to grow strong in several marketing channels, and postpaid had a particularly strong second quarter. So here in mobile communication, we are seeing a nice development and accelerated growth in postpaid. We added 130,000 postpaid customers in H125 compared to just 25,000 in H124. Q2 added around 80,000 postpaid. This growth reinforces our strong market position. However, we remain focused on profitability, not growth at any cost. Our next steps include scaling online challenges, including scaling online channels, refocusing brand marketing on performance, and continuing to reduce churn. I talked about it earlier. For 25, our guidance for postpaid subscribers remain moderate growth. Turning to TV and media. Waibu TV continues to show strong B2C development. Net ads were impacted by churn from the O2 TV base, but we expect rows to recover in the second half of the year. Our guidance remains unchanged. FreeNet TV saw a churn of just 3,000 in Q2, which gives us hope that we are approaching a stable base. Our next steps include retention and upselling of Waibu TV customers. from the 24 growth phase and the price increase for Freenet TV. For 25, we still expect noticeable growth in buy-through TV subscribers and noticeable decrease in Freenet TV RGUs. With that, I'm happy to hand over to Ingo.

Thank you, Robin. So, good morning, everybody, from my side. So, if you allow me, I will start with a few personal words. because I think it was a very successful time what we had together with Christoph. Now a new era starts here. And just to give you my first impressions after two months, I think, again, the organization Freenet was very welcoming, I think. And I think from the first day when Robin started here, he was something like part of the organization. And therefore I'm thankful to all the people working here. And on the other side, I think, yes, life is faster than it was before, clearly. So we see some very fast changes here. I think we gained pace again, which was necessary for the company. We have different views now and a totally different drive. Yeah, I'm very happy that the supervisory board decided here to appoint Robin as the CEO of the company. And I think we are already really a good team here. And so I'm very optimistic that the new era will be as successful as we were before. It will be different, but definitely good. After these words, I would like to start with an overview about the group results. I think everybody saw the share price this morning, so I think some of you or some of the investors are disappointed, but definitely from my point of view, I was not disappointed about the results. I think we are totally on track to reach our guidance for the year and we stick to what we promised and we will not change it. So if you look into the revenues, we see a slight increase only in the revenues, but on the other side, and we are focusing on this every time, this is based on higher margin revenues, we increase the higher margin revenues, and we decrease the lower margin revenues. And as a proof of concept, what you can see if you look into the gross profit, you see for the half year, there is an increase of gross profit by 3%. In the second quarter, there was an increase of 3%. So still, the increase of gross profit is much higher than the increase of revenues, and therefore still, The revenue development is important for us, but it is not as important as the margin what we generate. And this is with 39.8% still very high and higher than before. Looking into the EBITDA, the adjusted EBITDA, it is 257.4 million up to June for 25. Yeah, there is some work to do to reach the guidance, definitely. But because if you multiply the results at the end of June, if you multiply it by two, then you have only 550. This is obvious. But I think what we did in the first half of the year, we did a lot of marketing, spending, in mobile, so 8 million more than last year. If we would just reduce it in the second half, then we are already in the guidance range. So therefore, I'm still optimistic that we will reach the guidance for the group. Moving to the mobile results. I think we stick here to what we published here in the earlier quarters. But we changed it a little bit on the next page because if you look into the revenues, yeah, you see a slight decline of service revenues in the second quarter. For the first half, it is still growing. But I think it is misleading to follow these service revenues here. because we focus our whole business on post-paid, on contract business. And what is here part of these figures is also the prepaid and the no-freeze business. And there we generate low, sometimes negative margins. Therefore, we cleaned here a little bit up. with the lower revenues, and this is what you can see if we move to gross profit, the lower revenues does not translate into lower gross profit. The gross profit is quite fine. We see the increase of 2.4% in the gross profit. And what you also see is that we have a lower RPU. And the whole market does have a lower RPO. You can compare it with all the others. But the difference here in our figures is even with the lower RPO, it translates in a higher gross profit. So from my point of view, this is still a very healthy business, what we do have here. And therefore, I'm quite happy with these results. If we move to the EBITDA, to the adjusted EBITDA. We see the slight decrease in the second quarter and also in the first half of the year. But I would like to repeat what I said on the group level, these nearly 8 million euros, what we spend brand marketing in the first half with no relation to gross ads what we did. So if we could reduce it in the second half, then we would be back to see an increase here. So it is based on this football advertising and so what we did. So I think we cannot stop it totally in the second half, but we will definitely reduce it. Moving to some KPIs from the mobile area, on the postpaid side, I think it was a very, very successful quarter. So we could increase the number of postpaid subscribers by 77,000. If you compare it with the second quarter in 24, It is something like 11 times of what we did one year ago. So I think very successful in the second quarter. On the other side, and this is the negative, what you are, well, yeah, where we have to, what is obvious on the other side, you see the ARPU, which is decreasing. I think after in the call after the first quarter, we were still a little bit more optimistic to generate a stable auction during the year. I think there's some truth and there are some real figures. So therefore, I think to be open here and To be fair, this will not be possible to have a stable RPU. Therefore, we changed the guidance. But we are optimistic to find a stabilization on these new levels here. And I think this is what we are working on during the year. Digital lifestyle, back on track. I think we had some problems with accessories in the first quarter. Now we are back on track. So the second quarter was quite fine. Therefore, we are happy. Moving to TV. Yeah, on the revenue side, I think it is still... maybe a little bit misleading that we mix the media broadcast, the antenna TV business and the IPTV business, Vaipu TV, because therefore you do not see the good development clearer from the Vaipu TV. What we plan to do is with starting into the year 26, we plan to separate it to make it more transparent for you. So during this year, We will still report both parts together, but I will give you some hints what is based on the WIPO TV on the IPTV development. So, in the revenue area, you see an increase of 6.5%. Only from WIPO, it is a revenue increase of 25%. I think this is important to know. If we move to gross profit, here we still have a margin of 60%, which remains as high as it was before. Moving to the adjusted EBITDA, here we do see an increase in the first half of the year by nearly 14%. If we would only watch into BiPoTV, There it is an increase, there's an all-in in EBITDA of 15 million in the first half, 15 million higher than last year. So I think all-in very successful still here. Definitely it will not be the big topic to reach the guidance. as we do focus also in IPTV more on profitable growth here. Moving to my last slide, which is the cash flow bridge. As usual, I do also give you some ideas of what I see up to the end of the year. Working capital, we see a need of working capital by nearly 17 million. This is much lower than the figure what we saw last year. But I still stick to the guidance for the full year of 45 million minus year from working capital because we have some provisions to be paid during second half of the year and we are just in some discussions internally if we should do more hardware bundles, which would, well, we would need some working capital. So still $45 million from working capital. On the other hand, in Texas, we guided for the full year minus $50 million. At the moment, we have $22 million, and we have one big effect which we expect to see in the third quarter. It is a tax payment, a post payment, what we do have to pay for the years 2015 to 2018. It's value added tax, what we have to pay here. It was already part of our guidance for the full year. So therefore, we still stick, maybe it is, 55 million at the end of the year instead of the 50 million what we guided. But on the other side, in CapEx at the moment we only spend 16.5 million. There is some phasing, but typically during the year it is not possible to do all the projects which are postponed. So therefore, definitely, I think last year we, or before year, we had a capex of 38 million. And so therefore, I think something around 40 looks possible for me. So I think we have even some room in our free cash flow guidance here. So I'm totally happy with what we have. And on the other side, We have the 13 million what we expect from the sale of some IP addresses. So I think I'm very comfortable here. And therefore, I would hand back now to the operator to start the Q&A.