Orange Polska Sa

Hello, good morning, everyone. Welcome to the Orange Polska conference summarizing results of 2024. We'll also summarize our dot-grow strategy. The format of the presentation will be a management team presentation followed by the Q&A session. Let me introduce speakers for today, starting with Ludmila Klimok, our CEO. Bożena Leśniewska, Deputy CEO in charge of business market, Jola Dudek, Deputy CEO in charge of consumer market, Jacek Kunicki, CFO, and Maciej Nowohoński, Management Board member in charge of wholesale market. And we have also with us Witold Droszcz, responsible for corporate strategy, who will join us for the Q&A session. Let me now hand the floor to Ludmila to begin the presentation.

Thank you, Leszek. Good morning and welcome everyone to our today's event. And we will start with key highlights for 2024 results. I have a pleasure to report on a very solid performance for Orange Polska for last year as we have delivered on all our objectives. And there are three areas of our performance which I would like to underline. starting with strong commercial performance. For 2024, we are reporting again the simultaneous increase of number of customers on all key telco products and of ARPO, particularly good in consumer segment. And it is fundamental as it brings the main contribution to growth of our revenues and growth of profits. On the enterprise segment, we were coping with challenging macro environment. We are looking to gradually rejuvenate the growth in ITNS area as we speak. In wholesale, we made full opening of our fiber network to our operators. This will boost monetization of our network and will limit the risk of overbuild. I am particularly proud that our customers have rewarded our efforts. In 2024, Net Promoter Score improved across all segments, allowing us to secure the top position on the market. This reinforces our dedication to a customer-first approach in everything we do. Secondly, we made important steps to secure our leadership and connectivity for our customers. After the first year of rollout, 5G network on newly acquired C-band spectrum is already available for 40% of population in Poland. This enables our customer to enjoy best of 5G with faster response and higher speeds. In parallel, we are advanced with renewal of our radio access network. This project will be completed this year. And as we deploy new radio, it brings immediately the improved quality to our customers. And also it is enabling us for better, more effective use of spectrum. In fiber, we have simultaneously expanded the coverage and brought the service quality up to a new standard. Thanks to XGS pond technology launched in 2024, we address the needs of the most demanding customers. As a result, Our financials were very solid. Growth of revenues from core telecom services, which has been exceeding 5% for full year. And this was the major driver for 4.6% of EBDA growth, which further was translated into the higher net income and close to one billion of generated cash. Let's make a zoom now on commercial performance. Commercial success is the essential driver for our profit generation, and namely, simultaneous growth of customer bases and our poor on key telco services. In convergence, which is the core of our strategy for household, we maintained a strong 5% year-over-year growth of the customer base, even with the improved dynamic of net additions versus a year ago. It confirms our right marketing approach to address the diverse competitive landscape. Our PO has been accelerating to more than 4%, reflecting our value approach in pricing, but also good demand for TV content and higher options for fiber speeds, which are now more and more popular among our customers. Growth in convergence is supported by continued growth for fiber. Fiber customer base has been increasing 16% year over year. It also includes 42,000 customers added from acquisitions of local fiber operators. We were more active in this area in last year. In mobile, we expanded customer base by a quarter of a million. Thanks to contribution of all brands on the consumer market and solid performance on SOHO segment in business. Here again, it was another year with ARPO growth as we are consistently executing on our value strategy. Going forward, we target to keep this good momentum. And I want to thank you for now and hand over the floor to Jacek.

Thank you, Ludmila. Good morning, everyone. Our financial results were strong as we visibly increased profits and delivered almost one billion zloty of organic cash flows. The headline revenue figure decreased year over year due to a drop of low margin product lines. However, revenues from value-accretive core services grew by more than 5%, driving up our overall direct margin. We maintained a high operating leverage and converted this direct margin growth into profits. As a result, our EBITDA increased by over 4.5%. We exercised discipline in capital expenses and translated the EBITDA to a solid net income and organic cash flows. Finally, We've further increased the return on capital employed, a key measure of value creation and capital efficiency. Let's now take a very quick look at how we performed versus our guidance. As you can see, we've achieved our 2024 financial objectives. with a low single-digit contraction of the top line, with a mid-single-digit growth of the EBDA, so at the higher end of the guidance, and with the e-CAPEX right in the middle of the guidance range. Obviously, the very good 2024 results create an elevated point of reference for 2025. But as you will hear from Ludmila later on, We're happy to take this challenge and continue the growth journey of Orange Polska. Let's now review our results in more detail, starting with the top line. Here you can see the revenue evolution in the last quarter of 2024. What is really important is that 6% growth of the core telecom services, which are absolutely key to our direct margins. we're constantly improving their growth trajectory through a simultaneous increase of the customer bases and the ARPUs. This is possible due to increasing fiber base, due to additional services upsold to our customers, and due to smart customer value management in our commercial activities. Now on to revenues from IT and IS. These have increased quarter over quarter by over 50%, or 180 million zloty, as we closed some important projects before the year end. It was not enough to match their level in the last quarter of 2023, but we definitely entered 2025 with a better sales momentum in this line. To sum up on the top line, We're very happy with the pace of growth of core telecom services. We're satisfied with the progress made in IT and IS services as we observe a better momentum here. Let's now turn to profitability. Our EBDA increased by almost 7% year on year in the last quarter of 2024, driving the full year results to a 4.6% increase. We are very happy with this performance. The increase was driven by higher direct margin stemming from the consistent growth of our core business. This was coupled with a slight decrease of indirect costs in Q4. On the one hand, costs were driven up by inflationary pressures and growth of the minimum wage. On the other hand, they were contained by cost savings and higher income from the fiber rollout that we do for the fiber. This last element brought us significant benefits in 2024, and we anticipate further solid margins from this going forward, both in 2025 and beyond, as we plan to further extend the footprint of Światłowódz Investition. To recap on the EBITDA, we delivered an excellent growth in 2024, over 4.5%. It was achieved by growth of core telecom services, so it's sustainable in nature. And we mitigated the impact of key headwinds with savings and with fiber rollout margin efficiency levers that we will also use in the future. Let's now take a quick look at net income. we achieved over 900 million of net income in 2024 as it increased by 12%. It was driven up by higher EBITDA and by lower costs of employee termination programs as we provided for the current social plan still in 2023. These gains were offset by higher financial costs and by higher depreciation linked with the new 5G license. Let's now move on to capex. Our economic capex amounted to 1.8 billion zloty in 2024. We invested into critical value creating assets. These include almost 230 million zloty investments in fiber, including EU subsidized rollout in the white zones and connections of retail customers. It also includes over 500 million zloty of investments in mobile. Here we reached a full run rate of 5G deployment and progressed well with renewal of the radio access network. This latter part will be finalized in 2025. These areas are key to our development and we're absolutely confident about the returns that we will be able to generate on these investments. Let's conclude the financial review with a quick look at cash flow. We're pleased with almost 1 billion zloty of organic cash loss last year. It was generated by a significant growth of cash from operating activity, driven predominantly by higher EBITDA. This was then offset by a different evolution of working capital requirements between the two years with a normalized level in 2024 as compared to an exceptional reduction of working capital requirements in 2023. My takeaway for organic cash flow is that we're happy with cash generation, close to the one billion Zloty mark. We're pleased that the growth of the OCF comes from operating activity, making it sustainable for the future. As you can see, we've also presented the free cash flows. It is important, an important measure, as it shows the all-in cash generation of Orange Polska. It includes fees that are less recurrent by nature, like Spectrum payments or EU subsidies. So we will continue to focus predominantly on the organic cash flows, but will also include the free cash flow in our regular reporting from now on. With this, I will conclude the review of 2024 results and hand the floor back to Ludmila.