Orange Polska Sa

Good morning, thank you for standing by and let me welcome you to Orange Polska Q3 2025 results conference call. My name is Leszek Iwaszko and I'm in charge of industrialization. The format of the call will be presentation by the management team followed by Q&A session. Unfortunately, our CEO, Lyudmila Klimot couldn't join us today due to urgent private matters So the sole speaker will be Jacek Kunicki, CFO. So I'm passing now the floor to Jacek.

Good morning. I'm pleased to say that the third quarter was very successful for Orange Poster. The success is rooted in our strong operating performance. We've achieved very good commercial growth. especially on the consumer market, where both the customer bases and the RPOs have increased at a healthy pace. Our wholesale line of business has delivered more revenues and more margins. This comes as a result of new business that is monetizing our fiber infrastructure. It will generate more value over the course of the next few years allowing us to compensate some large wholesale contracts that are due to end in 2026. This should remind us that wholesale is our strategic asset, complementing our retail operations and reducing our risk profile. Successful commercial activity is the anchor of the Lead the Future strategy and our value creation. After nine months of 2025, we're pleased with the developments in this area as they lay a solid foundation for the strategy going forward. This performance has translated into strong financial results and let's take a look at that, these on the next slide. I'm pleased with the financial results of Q3. We have increased revenues, profits, and cash generation. Revenues were up by a steep 9.3% year over year, including a spike in IT and IS sales, and also a strong, consistent contribution from the core telecom services business. This solid expansion of the core business, combined with cost discipline, drove the Q3 EBITDA almost 3% up year over year, despite a demanding comparable base. We're really happy with this result. Our eCAPEX has amounted to just over 1.1 billion zloty year to date. It is at a comparable level to the same period of last year, and it is in line with our full-year plans. Its quarterly evolution reflects different timing of CAPEX between the two years. Following a stronger Q3, the year-to-date level of organic cash flows is also stable year-over-year. This reflects higher cash from operating activities, driven by the EBITDA expansion, which compensated for less proceeds from real estate disposal. My takeaway from this is that robust Q3 results give solid support to a full year prospect. After nine months of the year, we're confident to deliver on our 2025 objectives and to create further value for shareholders. Let's now take a look at the commercial activity in more detail on the next slide. It came very solid across all core telecom services. What particularly stands out this quarter is mobile. The net customer additions have exceeded 100,000 and were at their highest in more than four years. As you may recall, our B2C strategy is focused on reaching new households not yet using Orange Polska services in order to unlock their growth potential for the future. We're pleased that it is bearing fruit and we are enlarging our customer footprint. The robust growth of the customer base was coupled with an increase of the mobile output a slight improvement versus the trend observed a quarter ago. This comes due to a strong ARPU development in the main consumer brand, partly diluted by an increasing share of the B brand customers in the overall customer base. Growth in convergence and fiber was solid, consistent with previous quarters, and in line with our strategy. It was a combination of 5% and 13% growth of the respective customer bases and a solid 3% to 4% uplift of the average revenue profit. In spite of fierce competition in fiber, we are successfully competing in the local battles and growing well. by addressing our customer's need for higher speeds and for more content. Commercial growth is essential for future value creation and these results demonstrate that we have the right commercial strategy to prevail in the core telecom offering. Let's now take a look at how these translated into revenues. Our Q3 top line dynamic was exceptional. above 9% growth year-over-year. It reflects three main developments. First, an exceptional hike of the IT and IS sales. Second, a consistent growth of the core telecom services revenues. And three, third, the accelerated dynamics of wholesale. Let's now review them one by one in a little bit more detail. The IT and IS revenues went up by an extraordinary 47% in Q3. The key driver of this performance was retail software licenses. It is a tool to create future upsell potential. Hence, despite the large stock line, its immediate contribution to profits was negligible. Nonetheless, looking at this development and also at other wins in our pipeline, we are now more optimistic about the future prospects for the growth in IT and IS revenues and profits. What is most important in our top-line performance this quarter is that revenues from core telecom services grew by 6.5% year-over-year, repeating their strong and consistent dynamics. You've seen the drivers of this growth, robust increase of a customer basis and solid R2 development. Finally, the third factor, wholesale. Its growth has accelerated on the back of first revenues coming from the new fiber optics backhaul business that I mentioned earlier on. It is a multi-year business development and it gives us a solid baseline. also for 2026 and beyond. We anticipate to further grow the value of our wholesale line of business activity in the future. To sum up on revenues, after nine months of the year, the top line growth exceeds 4%. Revenues from core telecom services are delivering a rock solid performance this year, supported by robust net customer additions and ARPUs. And three, the new business in wholesale significantly boosts its future prospects, once again demonstrating the value add of this activity to Orange Polska. Obviously, the profitable revenue growth is the main driver of the higher EBITDA. Let's look at the latter on slide seven. EBITDA for Q3 has increased by almost 3% year-over-year. It benefited both from growth of the direct margin and from less indirect costs. The direct margin grew by 21 million year-over-year, and its underlying increase was even greater. Please note that last year's results included a positive one-off related to capitalization of 53 million customer connectivity costs, obviously excluding this one-off, our direct margin for Q3 would have grown by 4% year-over-year. This outstanding growth was driven by high margin from core telecom services and by increased contribution from wholesale. Indirect costs were 4 million lower versus the third quarter of last year. We benefited from increased efficiency of network operations, including savings in field maintenance. The transformation of the network activity is an important part of our strategy and we're pleased that we can already report its first tangible results. Q3 indirect costs have also reflected lower growth of labour costs and less advertising expenses versus the previous quarters. To sum up on EBDA, we're very happy with its growth in Q3. It stems from a healthy combination of high margin from core business and cost discipline. And obviously, this is our main recipe to deliver consistent and sustainable EBDA growth throughout the Lead the Future strategy period. With 3.4% growth For the nine months of this year, for the year to date, we are obviously well on track to deliver on the full year objective in this area. Let's now turn to cash flow on slide eight. Year to date, we generated nearly 670 million zloty of organic cash flow. This is almost exactly the same level as last year, helped by a very solid quarter three. The OCF benefited primarily from a very healthy growth of cash from operating activity. It increased by almost 200 million zloty year-over-year due to a higher EBDA and also due to lower working capital requirements. It was offset by higher cash capex and also by 80 million zloty less proceeds. from real estate disposal than in the comparable period of last year. We're satisfied with cash generation so far and with robust sources of growth coming from the operating activity. We plan for a peak of property sales in Q4 and we anticipate a solid organic cash flow in the last quarter of the year. Our leverage has increased very slightly following the acquisition of the 5G Spectrum license and payment of the dividends in July. However, our balance sheet structure remains very sound. Let's now summarize Q3 on the next slide. So for us, the underlying message is our commercial financial results in Q3 were very solid. We're pleased with the performance to date and in particular with the commercial developments. We have a well-performing core telecom services business. The prospects for wholesale operations have improved substantially, and we see initial signs of recovery on the business market. These demonstrate our strong fundamentals. We're confident to achieve our 2025 objectives, and also to create further shareholder value by implementing the Lead the Future strategy in subsequent years. That's all for me and we're now ready for your questions.

Thank you. We'll now be moving into Q&A session. If you are dialed in via the phone and would like to ask a question, please press star 2 on your keypad and wait for your name to be called. You may also a voice or text question using the webcast window. So once again, to ask a question, start to on the keypad or press the question button on the platform. First question is coming from the line of Marcin Nowak. Marcin, your line is open. You may ask your question.