Orange Polska Sa

Good morning. Thank you for standing by and let me welcome you to Orange Polska results conference for the second quarter of 2025. My name is Leszek Iwaszko and I'm in charge of investor relations. The format of the call will be as usually a presentation made by the management team followed by a Q&A session. Speakers for today will be Ludmila Klimok, the CEO of Orange Polska and Jacek Kunicki, CFO. I'm passing now the floor to Luzmila to begin the presentation.

Thank you, Leszek. Good morning. Welcome to our conference summarizing second quarter of 2025. And I start with slide four, key messages. So first of all, I'm very pleased to say that performance on our core telecom business maintained its good momentum in the second quarter. Our commercial results are strong and especially on the consumer market where customer bases are poor, where it continues to grow at a very healthy pace. Our commercial success is underpinned by continuous investment in mobile and fixed infrastructure that we develop for our customers Fiber, I will address more in a moment on a dedicated slide. On the mobile front, we are progressing with 5G deployment for C-band spectrum. We already cover nearly 50% of population in Poland, and this month we have launched first base stations on newly acquired 700 MHz spectrum. and with this spectrum we expand the coverage beyond big cities. In a result, our commitment to delivering the best connectivity at home, at work or on the move has been validated by independent test benchmarks where Orange 5G and Orange FTTH fiber networks again were ranked as number one in the first part of 2025. And as well, I'm very satisfied with our sales deal of Orange Energia. On one hand, it confirms focus on co-business, which we outlined in our Lead the Future strategy, And on the other hand, Orange Energia is taken over by the renowned industrial player who will ensure its further development. And finally, our financial results were very good in the second quarter on all levels with growth of revenues of EBITDA, net profit and cash generation. And as usually, let's zoom on our commercial activity on the next slide. So talking about commercial performance in Q2, it was very strong across all key telecom services. Reflected in a consistent healthy pace of growth of our customer basis. In convergence and fiber, basis has increased with 5 and 13% respectively, with a sustainable rate of increase which we are reporting quarter by quarter. We achieved it despite fierce competition, as some market players attempt to win the market with aggressive volume-oriented strategies. And we are coping well in this environment, and continue to gain share in a very high broadband market. We are successfully addressing local geo-targeted competitive battles, responding to the need for higher speeds and for TV and for the content. In mobile NetAds, customer additions were really outstanding in the second quarter. We delivered the highest NetAds in the last three years, with both consumer and business segments contributing to this achievement. We're also benefiting from wide portfolio of brand and personalized AI-enabled offering, which help us to strengthen customer loyalty. On ARPO side, in convergent and fixed broadband only, our offers maintain strong between 4% and 5% growth rates as well as we are keeping very good balance between volume and value in our commercial strategy. So as you can see, ARPU and mobile is flat year on year in second quarter. This is a combination of two factors, good growth in B2C, in consumer, and the decline of ARPU in B2B. And let me dig more into the details. In B2B, we are dealing with a tougher competitive environment. Orange is the leader with the highest market share in this segment, and we are defending against very intensified price competition. On another side, in B2C, in consumer, our PO is growing. In the main orange brand, this growth exceeds 4%, benefiting from our regular price adjustments. In the same time, consumer base was growing also thanks to the increasing share of our B-brands, New and Flex, which with corresponding contribution of lower levels are poor. This well reflects our two-steps approach which we were describing in Lead the Future. First, to acquire customer and to build new relationships and further we grow the value and we upsell to conversions. These results demonstrate that we have right commercial strategies and we are coping well with challenging competitive environment and as commercial growth is essential for our future value creation. So let's move now on slide six. And here talking about infrastructure. Svetlovot Investice, our FIBA co-joint venture, just finished its fourth year of operations and we are very satisfied with its performance. We can describe its development as exemplary one on the European landscape. Business plan is on track, and this year the investment program that was initiated in 2021 will be completed. And within this plan, 1.7 million households get access to fiber, mostly outside big cities, in the areas with low infrastructure competition. Shvetslovotn is very effective in converting these home paths to homes connected. There are already 22 retail operators that provide services on its network. and it serves around 700,000 active customers, which implies more than 30% of infrastructure take-up rate. So a very solid achievement, as you can see. And based on this success of first investment program, we decided together with our investment partner that There is more potential for Svetlovat Investitie and in June our Fiber Core raised 3.7 billion zlotys to refinance the outstanding debt and to secure funds for the second investment plan. This plan will include the rollout to half a million of new households over the next three years and to another 200,000 in the following few years to densify already covered areas. And as a result, Światłowice Investition Network intends to reach coverage of 3.1 million households in Poland. Our cooperation model with Svetlovat Investice will not change under the new plan. Orange Polska will continue building the network and rendering a number of services for Svetlovat Investice. And to point out that regarding a reconsolidation option for Orange, which we had, Its timing has been adjusted in line with the new investment horizon and now it covers the period between 2029 and 2032. This new Shvetlovot Investit investment plan is a key element for our expansion plans for Fiber Access Network. As according to Lead the Future, you remember that we plan to grow from 9.5 million households covered by orange fiber today to 12 million connectable by the end of 2028. So, this being said, I want to hand over the floor to Jacek.

Thank you, Luzmira. Good morning, everyone. Let's start the financial review on slide 8 with the highlights of our performance. I'm pleased with the financial results of the second quarter. We have increased our revenues, profits, and cash generation. Revenues were up 1.1% year-over-year, fueled by a solid growth of the core telecom services at almost 7%. In turn, this strong performance of the core business drove the EBDA to a 4.3% year-on-year growth in the second quarter and to 3.6% for the six months of the year. The net income was almost 2% up in H1. This was mainly due to higher EBDA coupled with a $70 million estimated gain on the disposal of our energy trading subsidiary. The e-CAPEX amounted to 800 million zloty in the first semester, with almost 300 million invested into the fiber and mobile access networks, so in line with our strategic priorities. Its year-on-year growth was due to lower proceeds from disposal of real estate. We have a back-end loaded schedule of property sales this year, an expected peak of proceeds in the fourth quarter of 2025. The organic cash flow in H1 reflected solid cash from operating activities, offset by higher cash capex and low cash coming in from the above mentioned sale of real estate assets. My overall takeaway from this is after the first six months of 2025, we are on track to deliver our full year objectives and create further value for shareholders. Let's now review the results in more detail, starting with the top line. Our Q2 revenues have increased by 1.1%, including a very solid growth dynamic of the most important revenue streams. The key driver of this, core telecom services, increased by almost 7% year on year. It was driven by consistent growth of our main customer bases and ARPUs, as discussed by Ludmila. This year, It was additionally boosted by a 14% growth of the prepaid ARPU and a similar uplift of its revenues. This reflects the prepaid price adjustments that we had made in the fourth quarter of last year and in the first quarter of 2025. And these were applied to roughly 60% of the customer base. The IT and IS revenues were stable in the second quarter after they had captured very solid growth in the first quarter of 2025. This is a combination of two factors. First, our ITT subsidiaries have increased revenues, which is encouraging given the challenging market environment. This was, however, offset by a decrease of revenues year over year, from wholesale sms service here we need to note that this is measured versus a very high comparable base of 2024 when we benefited from a surge of activity of some retailers in both the second and the third quarter of 2024 q2 was the last quarter in which we consolidated the results of Orange Energia. Starting from the third quarter, we will compare a year-on-year dynamic to a pro forma of 24. We'll provide the comparative figures in the KPI file that you can always find on the investor relations website. To sum up on the revenues, first, we're happy with the pace of growth of the core telecom services. Second, the outlook for ICT is gradually improving and I am cautiously optimistic in this area, even if Q3 will still be affected by the high comparative base of the wholesale SMS service from last year. Profitable revenue growth is the main driver of our EBDA. Let's now take a look at the latter, at the EBDA on slide 10. The EBITDA for Q2 has increased by a strong 4.3% year over year. The increase was driven by solid growth of the direct margin. This predominantly reflected the consistent growth of margin from the core telecom services mentioned a minute ago. Our direct margin amounted to almost 57% of revenues. So this is well in line with our goal to keep it and drive it above 55%. Indirect costs were slightly lower versus Q2 of last year. They reflected the pay rise pressure on workforce costs and higher advertising spend that was needed to support our good commercial progress. This was offset by additional margin from the fiber rollout project. was enabled by further operating progress in this key final big year of the first rollout agreement, as well as by signing of the second investment plan with Światłowódz Inwestycje. This last point allows a much more gradual decrease of our production capacity instead of having to make a hard stop at the end of 2025. In turn, this makes the entire project more profitable, and we have reflected this in our Q2 results. We're happy to continue this cooperation with Światłowódz Inwestycja on rollout number one, but also on the newly signed rollout number two, well beyond 2025 or 2026. I also note that the amount of the rollout margin re-evaluations that we have made in H1 was practically the same as in H1 of last year. So it had no material impact on the year-to-date EBDA evolution between the years. To sum up, we are happy with the EBDA growth in Q2. We're happy with the sources of this growth, and namely the good solid recurrent growth of the direct margin. And we're confident that with the 3.6% growth in H1, we are on track to deliver the full-year objective. Let's now turn to net income on slide 11. It has exceeded 460 million zloty in H1, so up by 2% year-over-year. Let me now walk you through its underlying drivers and also through the one-offs. The underlying growth stems from the consistent increase of the EBDA, up by 60 million zloty in H1. This is partly offset by higher depreciation, as we have a progressively changing asset mix, and by higher financial costs, a consequence of last year's debt refinancing. The net impact of this is slightly positive, confirming the solid fundamentals for us to increased the net income. Obviously, the net income was also affected in H1 by some important one-offs. It decreased year-over-year due to provisions for significant risks and restructuring and due to lower gain from the sale of real estate that I mentioned a minute ago, which is linked more with the timing of the expected real estate sales between three years. Negative impact of both of these was nearly offset by the estimated gain on the sale of the energy trading subsidiary. The bottom line for us is that we have solid underlying factors that are driving our net performance, our net income performance upwards. And we focus on these in order to achieve higher net income in the future. Let's now switch to CAPEX, which amounted to 800 million zloty in H1. Considering the typical H1, H2 phasing, this is in line with our full year objectives. It increased by 18.6% year over year, with the difference stemming mostly from lower proceeds from real estate disposal, as we have discussed it already. Capital spending was on a comparable base, on a comparable level to last year. In line with our strategic priorities, we allocated almost 40% of capex to access network. In fixed, this is fiber rollout in the wide zones and dedicated connections for the large B2B clients. In mobile, we are deploying the 5G network and we are completing the renewal of our radio access networks with the bulk of the latter project to be finalized still this year. Another 30% of investments were dedicated to call and fixed networks as we are expanding our capacity in order to serve the growing traffic demand. Finally, We've spent just over 30% of capital expenses on IT with a focus on projects to support process efficiency through digitalization, both on the front desk as well as in the technical and field maintenance areas. Finally, over to cash flow on page 13, we have generated just over 340 million of organic cash flow in H1. This was less than a year ago, mainly due to 100 million less cash in from real estate disposal due to the timing difference that I mentioned early on. This apart, cash generation was solid with growing cash from operating activity with a positive year-over-year difference on working capital requirements, even if this latter one was offset by an increased cash capex. We are satisfied with cash generation in H1. We expect a solid organic cash flow in H2. And once again, we are eyeing to achieve over 900 million of organic cash flow in the full year. Moreover, we have maintained a very sound balance sheet, and we have already secured the refinancing of the debt that was due to mature in 2026. This concludes the financial review, and now I hand the floor back to Lyudmila for the conclusions.