United Internet

Right. Good afternoon, ladies and gentlemen, dear guests. Welcome to the Analysts and Investors Conference of United Internet. I'm very happy to be able to welcome you here in person. And I obviously also welcome those guests who are here by webcast. Now, let's quickly look at today's agenda. I mean, firstly, Mr. Dormammut is going to be taking the floor and presenting the company development in 2024 and also take a look at what we're expecting for 2025. And then Carsten Theurer is going to share the financial year 2024 results with you. And then obviously at the end, there'll be ample time for a proper Q&A session. Mr. Dormammut, the floor is yours. Good afternoon, ladies and gentlemen. I think many of you I've already seen and personally welcomed. Many of you were already in the meeting for eins und eins. I hope you won't be bored. I am in charge of corporate development and will also give you the outlook for 2025. My colleague Carsten Theurer is going to go into the nitty-gritty details of the financials in 2024. You know, we're reporting in four segments. Applications, internet access for consumers, private consumers and business customers. We have 11,000 employees and We have a good infrastructure, transportation network, 66,000 kilometers of fiber networks, 5G mobile networks, and over 100,000 servers who are running into computing centers in the whole of Europe and the U.S. We are offering our products via different brands and investments, predominantly by the brand Eins und Eins, our most important brand. But in addition to that, we have brands such as Urophone or Smartmobil or Winsim. In the business customer business, we have 1&1 Valsartel. For consumers, GMX, web.de and mail.com and United Internet Media. Business customers, we have IONOS predominantly and their... subsidiaries where all of whom we also have grown unorganically by buying companies, particularly in Spain, in Britain, Poland, and other countries. And then we've got certain minority shareholdings as well. Let us just start with consumer access. 3.95 million broadband connections, 12.44 million mobile contracts, and the first open RAN in Europe, fully virtualized. And we're doing the migration of existing customers from wholesale contracts since January 2024. We are actually moving 50,000, migrating 50,000 customers per day and hope to be done with this by the end of the year. We have Internet with 190,000, a very slight decline in the broadband applications. Our sales dropped by 0.8%, but other revenue certainly comes from making smartphones available to our customers. We have had a marked slowdown, minus 10.8%. to 761.2 million, but this is a low-margin business and doesn't really affect the result. We have minus 9.6% EBITDA, that's 590.8 million, including minus 265.3 million costs for the rollout of the 1&1 mobile network. Prior year it was minus 132.4 million. where we had 133, I mean, I just said 132.4 million of additional cost. Well, how do I explain those 70 million difference? They come from our operational business. That is the area of access where we had a plus of 8.9 percent EBITDA increase to 856.1 million, an EBITDA margin of 21.1 percent. That, too, I think very satisfying for a wholesale business because here we are asset lights. Basically, in the 1&1 mobile network, we're building our own mobile network. And I have told you, markedly higher costs for infrastructure here than the year before. Business access, 1&1 Welsertal, 66,376 kilometers of fiber optic networks available in over 350 German cities. including the 25 largest ones, and when we say business locations, have been linked by plug-and-play solutions for businesses. So this runs via 1&1 and 1&1 Wausautel. We are predominantly using 1&1 Valsatel for business applications with businesses or any form of public or state authorities, plus 1.9% revenues, an increase to 574.9 million. This is a bit miserly, that plus 1.9% you're going to say, and I also would have hoped for more. But we have to say we are in fact losing sales in the voice area. I mean, in the past, we could basically bill for any moment used to... and that is no longer feasible today. All people do want a flat rate for what they do, particularly business customers, so voice usage is actually reduced and reducing. At the same time, monthly subscriptions for the fiber optics links are increasing so that below the line we can still show a plus of 1.9%. of added revenue the ebitda has risen by 1.4 percent to 165.1 million and thereof there are 20 minus 21.6 million startup costs for the new um business areas 5g and expansion of the commercial areas And obviously, this also includes data centers. And we also have startup costs for business areas where we're basically linking business areas at the start. We have one or two customers, and then we have two, and then we have 10. So this is an ongoing process. Let's talk about applications. Let's start with consumer applications. You possibly know GMX WebEx. and mail.com. You know all of those. This is a broad product portfolio for private customers. We have email, we have tasks, appointments, calendar, online office and cloud storage. We also have a differentiation through data protection and security. So we basically... The consumer application accounts, we've actually seen a minus of 0.76 million. We have invested quite a lot to ban spam, so the attractiveness of the system has increased, so we haven't lost accounts. that were key accounts for us. So 3.04 million pay accounts, that's 240,000 more than the previous year. So we basically have plus 7.7 percent revenue increase to 298.3 million, plus 6.6 EBITDA to 113.2 million and 37.9 percent EBITDA margin. Previous year was at 38.3% and all of this with just very little capex because for running the data centers requires a lot less capex than building a mobile network. So I think we can say that the EBIT is also at about 100 million. But you've got it in your handout. These are business applications via IONOS. as Europe's leading digitization partner for freelancers, small, medium-sized, enterprise and reliable cloud enablers, active in 15 European countries with wealth in the U.S., Canada and Mexico. We basically have plus 220,000 new customers, particularly abroad, plus 4.96 million – plus 160,000 abroad, 4.96 million, and plus 60,000 domestic, 4.63 million, plus 9.6 percent increase in the revenue to 1,560,300 million. Customer growth, and we have moderate revenue growth in the ad tech segment as a result of temporary phasing effects in connection with the new product launch, plus 2.4%. The ad tech segment is a small segment, so if we exclude that and home in on the core segment, then we see a revenue growth of plus 11.6% in the core business, digital solutions, and cloud segment. I think this is quite healthy. EBITDA did even better, plus 15.1% last year to 430.2 million. I will show you the non-adjusted results because IONIS itself shows adjusted results, and they also do adjust it. So the billing carve-out, you know, they used to have... a joint system, but after the IPO, they now have their own one. They need to, and they have it. And therefore, you can see the numbers without the adjustment, 430.2 million. And that is despite the fact that we're in a hub tech segment, that the EBITDA side, we It's slightly worse. We had minus 16.5% less EBITDA in the ad tech segment, but then in the core business, if we were to exclude that, we'd have 20% EBITDA growth in our core business. So we've now summed up the numbers, plus 590,000 customer contacts in the group. That's plus 1.9% of revenue. EBIT is in decline, minus 15.3%. EBITDA plus 0.1%. But if you look at the EPS, if you look at the operational EPS, Then you basically have to process the EBIT first, which was negative, and that is why the operating EPS was only 0.98 euros, but positive was plus 0.03 euros. as a financial result, minus 0.99 impairment on Kublai and Telecolumbus investment. You know we are in mediation proceedings with them and that I think the last capital increase has strongly diluted that effect. And we have one-off tax effects through a regrouping that we need to show is minus 0.30. So we show a negative EPS of minus 0.28 cents. The dividend proposal to the AGM 2025, we suggest to pay 40 cents per share, regular dividend, plus 1.50 per share, one-off catch-up dividend to compensate for the reduced dividend payments for the financial years 18 to 23. You can see the red columns. Those are the dividends we paid in euro cents, 2016, 80 cents, 17, 85 cents. You see 2018, the legal minimum of five cents and then a regular 50 cents for the years 19 to 23. So the National Grid Agency has decided that the auction of new frequencies is going to be postponed by a few years. And that actually makes us confident that eins and eins will be able to do that. and shoulder the burden of this auctioning process on its own without any external financial assistance. And we've said we'll actually pay an extraordinary dividend of €1.50 to compensate for these weak financial years beforehand. So that will take us to roughly 35% of adjusted consolidated net income after the minority interests. And that is what we want to pay out with these 35%. I think we'd then be happy and healthy. I mean, it obviously still needs the consent of the AGM, but I would assume that it will come like that. So in 2025, this new year, we've seen revenues of approximately 6.4 billion. The EBITDA is roughly at 1.35 billion. In 24, it was at 1.295 billion. So it's basically a minus 20 million deductible due to the change of national roaming structures, the provider at eins und eins, but no impact of the EBIT. So It costs us EBITDA, but in the EBIT it stays the same. The cash capex is approximately $800 million, and it was $774.6 million in 2024. If you add that up, so there's $20 million on this $1.35 billion, then we talk about a 6% growth for EBITDA that we're seeing. planning to reach this year. Cash capex, I already said, 800 million, slightly more than last year, particularly driven by the expansion of the eins und eins mobile network and eins und eins with the fiber optics networks and basically linking up more and more business centers and basically affording to run the base business. So, so much from me, and I turn the floor to my colleague, Christiane Thora, who is going to go into the nitty-gritty details of the financials with you.

Thank you very much. Good afternoon. And I'd like to give you a summary and to give you an overview. Let's have a look at the results and the trends. First of all, the customer contracts, you've already seen them with a growth of 0.59 million coming from consumer access, eins und eins, 130,000 customers, new customers. Consumer application portal, 3,240,000 paying customers on top, and business applications, 220,000 plus. So 29.02 million paying contracts. free accounts and financed a slight decrease and a shift from free to paid accounts due to the security issues with the free accounts. Revenue, 1.9% plus. Here we can say that for eins und eins, 32 million minus in revenue, but in service revenues, a plus of about 60 million minus. and low margin decreasing from 93 million. So from the eins und eins segment, a slight decrease compensated by consumer applications with 20 million in growth and business applications with 136 million. in revenue. The EBITDA plus 0.1%, same as the previous year, even though we had higher expenses for the 5G network expansion with 132.9 million euros in expenses. And we also see the improvement of the access segment for eins und eins, 70 million more in EBITDA. which can somehow compensate for the expansion expenses. And then we have 45 million more in business applications EBITDA compared to the previous year. Let's go to the EBIT. Here you can see our expansion of the network, 117.2 million higher depreciations compared with the previous year, minus 15.3% EBIT and more assets and the depreciations effects that come with it, so minus 117.2 million. Cash flow. Let's have a look. We can see an increase here despite lower consolidated net income. We can see here the effects of the 117.2 million of depreciation. And we also have the Kuplai depreciation of Telekolumbai. And the third factor here is taxes. Versatil was included tax-wise to United Internet to be able to make use of the losses. And so we have a slight tax impact here and had to take latent taxes out of the balance sheet with 80 million of an impact. And then the net cash inflows from operating activities. Here we can see a slight increase despite the lower consolidated net income. Here we have the contract assets that have seen a slight decrease. with a lower hardware sales volume in 2024. Let's go to the cash inflow from investing activities, a slight decrease of capex that led to a decrease in investments. the net cash flow from financing activities. Here we see an increase due to higher interest expenses about the same as what you can see here. Now, here you can see the cash flow bridge from the EBITDA to free cash flow, 1294 of EBITDA 2024, net capex in minus 770 roundabout, and then the contingent payment to Deutsche Telekom over the past four years. This is the last year. In 2025, we will not have the same amount. Then taxes, then the change in working capital. That leads to the free cash flow of 184.5 million. Deducting leasing, we get to free cash flow after leasing of 47.4 million euros. Now let's have a look at the balance sheet. Here you can see the trends that I have already mentioned. We have tangible assets increasing about 600 million euros due to investments primarily into the 5G network coming from 1&1 and Versatel. The goodwill, mainly unchanged. In financial assets, you see a decline in the Kublai share with 170.5 million. Accounts receivable, mainly unchanged. Contract assets I have already mentioned. Here you can see the effect of the decline of the volume, the hardware eins und eins volume that has an impact, a negative impact in the contract assets. Inventories and deferred expenses. Here we see the leases, rental and pre-service providers, payments, telecom contingent contract, which leads to this increase in assets. Income, tax claims and other assets, cash and cash equivalents. We see a slight increase. in the claims due to upfront payments because we included Versatil and now we can make use of the positive effects and that leads to the increase in the income tax claims, then cash and cash equivalents at reporting date, a slight increase as well, and As Mr. Davies said, we are in an investment phase, and so the phasing effects play a role. And this is what you can see here for cash and cash equivalents. This could be optimized. Let's switch to equity. First, the equity ratio, mainly unchanged due to the balance sheet sum. So we are talking about three percentage points to 46.5%. Liabilities to banks. We see an increase here due to the financing over the past few years, and you can see the different factors here. Telecom contingent payment, 262.9 million, and capex. That was linked to that. trade accounts payable, eins und eins business, mainly an increase of about 100 million for contract liabilities. It's about the same as the previous year. And accrued taxes and deferred liabilities, the passive latent taxes, that has a slight increase. That is one factor. And then we have the positive effect that the that the tax we have to pay goes down due to the positive effect mentioned before. crude liabilities and other liabilities at reporting date. Now, and the total here, you can see the effect of the investment phase and the assets, the tangible assets that have gone up. And this is what you can see here in the total. And with that, we end this presentation. And we are happy to hear your questions. Thank you very much. Now we'll start our Q&A session. Please wait for the microphone. We'll start with UBS.

From UBS, I've got two questions. The first question is really just about use of cash, because you've announced a €1.50 special dividend, but would you consider special dividends or buybacks in the near to medium term? Can you maybe talk about what your priorities for use of cash are going forward? And then in terms of leverage, you're running right about two times leverage at the moment. But in your view, what is a comfortable leverage range? Is there a floor? Is there a ceiling? Second question is really just about the perimeter or shape of the group, specifically in terms of IONOS. You've previously talked about spinning it off. So what are the latest thoughts on this topic? And are there any tax implications? Thanks.