United Internet

Good day and thank you for standing by. Welcome to the United Internet quarterly statement Q3 2024 webcast and conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dominic Korsman, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Hello and good morning, everybody. I would like to welcome you to our Q3 2024 Analyst Investor Call. Thank you for joining us today. My name is Dominic Korsman. I'm responsible for investor relations at United Internet. And here with me today, I have our CFO, Ralph Hartings. Briefly about today's program. Ralph will first take you through our presentation with the business development in the first nine months, and will also give an outlook for the rest of the year. Afterwards, we will be happy to answer all your questions. So far from my side, I would now like to hand over to Ralph. Ralph, please go ahead. The floor is yours.

Thank you, Dominik, and also a warm welcome from my side to our webcast on our nine-month figures 2024. Let's get into our numbers. On slide two, we have summarized our major KPIs for you. Our customer contracts increased by 420,000 to 28,870 in the first nine months of 2024. Our revenue increased by 2% to 4,660,000,000. EBITDA decreased by 1.4% to 978,000,000. However, it is important to note here that we have already invested more than 160 million in the rollout of our 5G mobile network in the first nine months of 24. Our EBIT declined by 11.2% to around 530 million. The decline in EBIT is driven by higher depreciation amortization as a result of investments in the rollout of our fiber optic network at 1&1 Bersatel and the rollout of the 101 mobile network. This increase in depreciation and amortization is to be offset by gradually increasing cost savings from this year onwards. EPS decreased from 1 euro 22 to 82 cents. This was due to a reduced EBIT, minus 26 euro cents, and the increased interest payments equaling to negative 14 euro cents. I will continue on slide three. Let's have a look at our segments, starting with consumer access. Going to page four. In this segment, we have increased our contract portfolio by a total of 90,000 contracts to 16,350,000 year to date. Mobile internet contracts increased by 130,000 to 12,000,000 380,000, while broadband lines remained broadly stable, being just shy of 4 million. On page five, revenue in the consumer access declined by half a percent to 3 billion, 17 million. The decline in overall revenues is attributable to the decrease in hardware sales as service revenue increased by plus 2.5% to nearly 2,479,000,000. Hardware sales, especially smartphones, are subject to seasonal effects and are also heavily dependent on the popularity of new devices and the model cycles of hardware manufacturers. This effect may therefore be reversed in the coming quarters. The lower hardware sales have, in any case, only a very minor impact on the results. The high margin service sales, which represent the core business of the segment, increased year over year, which is our focus area. Going to page six. EBITDA in the consumer access segment decreased by 9.4% to $463 million. The decrease in EBITDA in the existing core business is driven by the higher cost for the rollout of the one-in-one mobile network, as the breakdown on the next slide shows. The excess subsegment increased its EBITDA by 7.7% to around 630 million, while costs for the rollout of the mobile network, one-in-one mobile network subsegment, rose by more than 93 million in absolute terms. Switching over to slide eight, let's have a look at business access. We were able to increase sales here by 4.2% to around 430 million. On slide number nine, EBITDA and the segment increased by 2% to 120 million euros. The high quality expansion of our own fiber optics had a positive effect on EBITDA development as expected. despite the startup losses from the new business areas, 5G, and expansion of business parks at 101 Versatil. Looking at our core business, EBITDA grew by 5.4% in the first nine months of 2024. Our EBITDA margin remains broadly stable at around 28%. Let us now turn to the application segment, and I'll continue on Slide 11. Accounts from the consumer application decreased by roughly 1 million from December 31, 2023 to 41,660,000. The decline resulted from a 1.25 million decrease in free accounts due to seasonal factors and higher security requirements, while pay accounts, i.e. pay contracts, increased by 180,000 to nearly 3 million now. On slide 12, we are looking at revenues in this segment. We've increased sales by 11.8% to 218 million in the first nine months, mainly driven by our growth in paid contracts, as well as a slight positive development in the advertising market. Our EBITDA increased also by 11.8% to 78.9 million. As explained before, we had invested some of our top line accretion into future growth of existing and new data-driven business models. On page 14, business application segment, we increased our contract portfolio by 150,000 contracts to 9.54 million. The increase came to a large share from our operations abroad. Total revenue in the segment increased by 7.8%. The increase was driven from growth in web presence and productivity plus cloud solutions, which combined grew by 11.3%. Year over year, our total revenues grew by 11% in Q3. On page 16, EBITDA in the business applications segment increased by 9.1% compared to the same nine months of the prior year to over 320 million. The EBITDA margin rose accordingly from 27.7% to 28.1%. So much for our segments. On page 17, we have summarized the most important KPIs for the group once again and added a few more. We've already talked about revenue and EBITDA. Our capex amounted to $442 million after $460 in the previous year for the investments in our fiber optics network and one-on-one versatile and the rollout of one-on-one mobile network. As you can see, capex investments have a slight decrease compared to the same period of the prior year. However, this is mainly a phasing effect as we are expecting a very significant proportion of our annual capex in Q4. I will provide a detailed breakdown of free cash flow on the next slide. Our net liabilities to banks increased by 11.4% to over 2.7 billion. Our equity ratio reduced by 1.9 percentage points. Going to page number 18. Here we have our bridge from EBITDA to free cash flow. Largest items here are our net capex of approximately $440 million as a result of investments in the network rollout. Furthermore, we had a cash outflow of $260 million for our contingent payment, then phasing effects from Q4 2023 of around $100 million and taxes of roughly $200 million. including working capital of 68 million. This results in a free cash flow of 39 million, respectively negative 64 million after leasing. And finally, a brief word on the outlook, which you can find on page 20. We specify our guidance for the fiscal year and expect an increase in revenues to approximately 6.35 billion operating ebitda guidance remains unchanged to approximately 1.38 billion as you may have heard in the webcast of 101 hg today our guidance is subject to successful ongoing negotiations to compensate for the damages caused by the network outage CapEx, including NEMA transaction, is expected to increase by 15% to 25% over previous year's levels, in particular as a result of expansion into new business areas and for connecting mobile antennas. We continue to remain optimistic about the future. Thanks to its predominantly subscription-based business model, United Internet believes it is well-positioned to benefit from the investments made in recent yet in-customer relationships, new business fields, and internationalization. So much from our side. We are now available for any questions you may have. Thanks very much.