United Internet

Ladies and gentlemen, welcome to the Analysts and Investors Conference of United Internet for the half-year figures 25. My name is Dominik Grossmann. I'm very happy to be able to welcome you here personally at Sofitel in Frankfurt. I also like to welcome everybody who is participating online and allow me to take you through the agenda today. We'll start with Dr. Mahmood presenting the development of the first half of the year, giving a focus on the second half of the year, and following that, Carson Farrer is going to explain the figures in detail. You will, after our presentation, have opportunity to place your questions in our Q&A session. That's it from my behalf, and I pass on the stage to Mr. Dr. Mahmood. Thank you. Thank you, Mr. Grossman. Welcome, ladies and gentlemen. As announced, I will present the development of the company in the first half of the year and a forecast on the rest of the year, and then my colleague, Mr. Toya, will give you the details on the figures of the first half of the year. You know our business. We work in a team with about 10,800 employees, 4,000 of them in product management, development, and data centers. We run a powerful infrastructure with fiber optic networks, a mobile network, and computer centers with over 100,000 servers worldwide. We have the access business and applications, and these, again, are in offers for consumers and business customers. Our products are offered in a number of brands. In the consumer business, the main brand is Einzelheims, and we have discount brands from the merger in 2017. In the business access, we are active with Einzelheims Versatil. Application for consumers are TMX, WebDA mainly, and internet media. Application for business customers are provided by AOMOS with different subsidiaries like and acquired like OPL in Poland, Austria, England and so on and a number of minority partners. Let me start with the consumer access. In the first half of 2025, you know our business Our consumer assets business is organized in 1&1. Again, they are stock listed 3.89 million broadband customers and 12.44 million customers. Contracts, we are operating the first open run business and we are migrating the existing customers from the wholesale contracts to this open run business. At the end of the year, we had 16.33 million customer attacks. Mobile broadband hasn't changed and the broadband has reduced by 60,000. Our service revenue could increase slightly to 1.647 billion euros. The general development... minus 13.12, 130.6 million euros included in this is the build-up of the mobile networks. 1.1 reports two segments, one segment of success, minus 3.5% due to the change of the roaming partner with higher roaming costs as expected before, and then the mobile network with... 130.6 billion euros coming from 111. Business Access, a one-on-one versatile, operates one of the largest German fiber optic networks. We operate the access network transport networks on 67,000 kilometers. We are available in over 350 cities in Germany, including the 25 largest cities And over 28,000 buildings are directly connected. We have increased 287.3. This is the accumulated figures. Our own optic fiber is growing much more. We have a decline in the voice business where earlier customers paid per minute. for voice, and they don't accept this anymore. This is why we are losing non-recurring revenue, but the recurring revenue is growing. That is the lines, for example. So we'll see this development over a couple of years still. The ABTR has startup costs Without these thoughts, of course, the ABDR would have been at 92 million. The margin is a bit higher than last year with 38%. Looking at the applications, I have said so. The consumer area is GMX, WebDE, Mail.com, online office, cloud service, cloud storage. And our differentiation here is German data protection and data security. We had 41.75 million active consumer accounts at the end of the year, and that is free accounts, which are funded by advertising, 38.7 million, minus 360,000, and... We have 3.8 million pay accounts, which are much better for us than the advertising accounts. There's some seasonal figures. That's why we have a difference here between the end of the year and the middle of the year. This is a bit misleading, but if we look at the year to date, we see a plus of 90,000 coming from... 41.66 million. We see this in revenue as well, a plus of 3.1%, 248 million, and the result is not brilliant. We expect that to rise with the revenue as well, but we expect a change. We have a high business region, 36.2% EBITDA, and we don't need many servers to have that business running. Business applications, IONOS, they published figures today as well as the leading digitalization market for small and medium-sized companies. The cloud enabler active in Europe and in the U.S., raw product portfolio ranging from digital solutions, websites, e-shops, marketing tools, right to virtual servers, dedicated servers, cloud infrastructure as a service, all of these are the active figures. A very good growth in the first half of the year, 310,000 new contracts, 9.8 million as a total. Also from abroad, but our main market in Germany, 80,000 plus contracts reaching 4.71 million. The revenue has grown strongly, 19% to nearly €900 million. That is due to customer growth and better up and cost selling of additional products and a strong growth in the art tech segment. The total EBITDA, even better growth, 24.6% plus to 258% in the first half of the margin, now at 28.9%. So a very strong margin business here. The figures again in the overview, the total of 290,000 new customer contracts and pay services reaching 29.31 million contracts, a plus of 4.3 in revenues, EBITDA plus 2%. EBIT is dropping due to investments and the antennas, the computer centers and so on, which are being added and activated. So a drop here and a result of minus 3.3%. So included in this, as I've said, is the 130 million ramp-up costs. As I said, and if you take these 18.4 on the EBIT, you will get a growth of, I'd say, around 5%, a little bit less. What is the forecast? How are we going to carry on? We confirm our forecast. We're expecting the forecast to fulfill. 6.545 billion. The EBITDA is about 1.35 billion. We've just explained this 20 million less EBITDA due to the change of the National Role-Making Partner to Vodafone. We had deactivated components before that increased the EBITDA. Vodafone doesn't do this and EBITDA has no impact. So if we add this difference to the 1.535, we would end up at 1.7, which would be 5.5% of growth, something in that range, which is quite reasonable. CapEx will end up at about 800 million this year, a bit higher than last year. We are still investing into the optical fiber network, in the mobile network, and also in the cloud infrastructure. So, thank you for your attention so far, and I would like to ask Mr. Torja to present the figures.

Welcome again by me. I'll have the honor of taking you through the figures in detail. giving you a summary from the overall view and into the balance sheet. First of all, why do we have different figures here? Mr. Drummond mentioned it. We have the comparison like for like, i.e. the key figures as of 30th of June 2025 compared to 30th of June 2024. And you can see that the fee-based customer contracts actually grew by more than half a million in this period of time. If we take a look at the ad finance free accounts, we have a decrease with 180,000. But at the same time, we were able to get paying customers, which are in the first figure indicated. So we have actually plus 270,000 customers. Revenue growth, 4.3%, as I mentioned. EBITDA, as we can see here again, with 2%, despite the 19.6 million higher costs for the rollout of the one-on-one mobile network. The EBIT, a larger impact of the effect we've mentioned already. shown in the EBIT, but not in the EBITDA. In the EBIT we see the 39 million higher depreciation in connection with the network expansion, 12 million for Versatil, so that we have an overall decrease of 8.5% of the EBIT. Let's speak about the cash flow. In the first half of the year we have a an increase from 557.9 to 578.9 cash flow from operating activities we see strong growth here why well last year the contingent payment the last contingent payment of 260 million euro was paid to Deutsche Telekom for the last time and we benefit from this now so we don't have this payment anymore and that has this positive effect here the increase of operating activities. In investments, we can see the impact of the CapEx, which is more or less at last year's level, 13 million higher than last year. And for financing, we have two effects, a 15.4 positive last year, and we're minus 211 this year. There's two effects. dividend payments of 426 million euro that have an impact but also the catch-up dividend for last year just so under 240 million euro we have an effect of the one-on-one shares that's 160 million that we bought in April and we have a re-personing program of €36 million that is reflected here. So we have this overall change of €426.3 million. It's not quite true. It's €326 million. Sorry, the figure is wrong here. Let's look at the EBITDA bridge, the cash flow, starting with EBITDA, €675.6 million. Then we can see the capex, which is a little bit different from what we saw before because there's a 2 million euro investment removal, then a phasing effect, payments made in the first quarter that actually were for quarter 24, but that led to a decrease of money. Then the tax, 51.2 million euro, then working capital and others. reduction of our payments due to our liabilities then free cash flow arrives at 105.8 and then 80.7 million euro worth of leasing costs so the free cash flow after leasing for the first half of the year 2025 25.1 million euro look at the balance sheet what can we see let's start at the bottom line we have a slight Decrease of the balance sheet total from $11.935 million down to $11.863 million, whereas the common, not from assets, from property assets, that's pretty much the same. Goodwill financial assets are pretty much at the same level, accounts receivable is a little bit higher contracts assets are a bit lower with the decrease of contract assets due to lower customer growth and lower hardware sales the inventories are at the same level slight increase due to rental and pre-service provider payments and then the income tax claims a little bit lower than as per the end of the year, same goes for cash and cash equivalents. That leads to a slight decrease in the balance sheet. Now let's look at the liabilities. We have a little bit more movement in equity here, and I'll tell you a little bit more about why. Maybe we'll speak about this effect. First of all, we had the purchase offer for one-on-one shares. This goes beyond the 30th of June. So this... total of the increase offer needs to be affected here even though only 140.1 mini euro were spent on shares so we have a deviation here which is however required by us by IFRS I find it a bit strange because it also has a serious impact on the equity ratio which is 4.6% lowered to 41.9%. The right figure would be if we only accounted for the 140 million, then we'd be at 3.3 percentage points and 43.3% equity ratio. What else do we have? We have the acquisition of the one-on-one shares with the 60.8 million and the dividend payment accordingly of 328.4 million euro. Liabilities have increased and we can see our CapEx measures acquisition of one-on-one shares but also the dividend then Trade accounts payable, we've seen it already with a decrease of liabilities to 603 million and with contract liabilities were nearly at the same level. And then of course the 300 million that we had to reflect here from the offer to increase our number of shares. So this takes us through the figures, and now we have the possibility of taking your questions, so please get ready. Well, thank you very much so much on our presentation. We'll start with the question and answer session now. Please use the headsets. with the microphones that our colleagues make available for you. And please start by indicating your name and company will start on the left-hand side.

Hi there. It's Ben from New Street Research. I had two questions, please. The first question was on the DT contingent payment. You mentioned that you made the last payment last year and that you're now seeing a benefit from that. So are you now receiving working capital inflows from that asset? And can you comment on the scale and the timing of the inflows you expect to see from that prepayment asset? And then the second question on the consumer applications business. You're seeing declining free subscriber numbers, but you're growing the number of premium subscribers. I just wondered if you could talk a bit about the relative value of those subscribers. So, for example, what is a typical ARPU for a free subscriber and what is a typical ARPU for a premium subscriber? Thank you.

Yeah, let me start with a consumer contract. The typical Apple of a free subscriber is about 25 cents, a bit more. Let us say 25 to 30. And the paid customers is about 3 euros. 3 euros about. So that means the paid customer is 10 times as valuable as the free customers, quote unquote. And this is why we... try to convert the customers wherever we can. If we look at the business, the turnover composes of advertising fees and the fees of the paid customers, and we do more with them, and this is the goal to carry on with this. The contingent payments, I can answer that. The time was 10 years. The first four years were the high upfront payments, ranging about $260 million per year, which were decured and are being used over the years now. So a clear cash flow effect, which is probably not going to reflect in the results because we have accrued it. So we have taken it over the years, and the cash effect that we have taken up in the first four years by the payments. Maybe I can add a note for everybody who's not so involved with this. In telecom, you can select when you get the, want to use the optical fiber for the last mile, then you can select whether you want to pay upfront in the contingent model that will go over four years and that will give you a better price or whether you will not have the upfront payment and pay a higher price every year. And now, as in EinzelEins, we fund and have a good funding. It was a good opportunity. to do this upfront payment so that means we paid about one billion over the four years and now we have the benefit that we don't have to pay them for the next six years and that would help us in the result but it will help us in the cash. Another question on the right hand side.

I have a couple of questions, please. Firstly, in terms of your longer-term strategy for the group, in terms of maybe the consumer applications business, for example, do you still see it as a core part of the group? Would you consider monetizing it? And then the same question for IONOS. How do you think about your stake in the business? Would you consider increasing it? What are your thoughts on maybe disposing of parts of it to fund build-up lines and lines? Just wondering how you're thinking about the structure of the group and your strategy into the midterm. Thank you.

We do assume that the business as we have it will stay with us in the long run. We don't plan to sell any of the business or sell shares of Jonas or Eins and Eins. We... think we have a good portfolio it's balanced and i understand that a shareholder doesn't want a conglomerate uh saying i could set up my own portfolio however if you are a medium-sized company you will get more business models quite attractive because um Some things may not work out in the market as well as others. So we can compensate that. So I think we have a good and stable portfolio basing on a number of business models. Of course, that means the growth would be a bit smaller. If we had IONOS only, we would grow faster now. But I can recall years where we didn't have any growth at IONOS. So I think it's good that we have the different business models and that they do compensate each other's and we have no plans to change this. Okay, I don't see any more questions. Maybe here on the back side, Mr. Glazer. Yes, Volker Glazer from MMPEM. The honest question has just been answered. And the other perspectives, we got some news as far as AI is concerned. We had this last year, Gigafactory. How do you assess this in the term of two, three, four, five years? What may be the perspective there? That will be the first part concerning the honest. Well, I'm not on the board there. I'm in the supervisory board, so I can't talk for the company. I can only give the main shareholder's view. We are satisfied with the development Ionis has taken. We took them over in 89 with 38 staff members and 25 million marks. German marks turnover, which wasn't accrued, so the prepayments weren't accrued, and that has developed greatly for us. We see many opportunities for the future as well. Where do they arise from? First of all, from the AI issue, because we do think that we have a good access to our customers, and the investments in home pages and websites can be sold to small businesses and assistance agent functions that will facilitate business. That's where we see business deals in the next years, but we have to get into that. We see opportunities and platform consolidation I've shown that we have different companies founded by ourselves in different countries, Spain, U.S., and so on, and where we had opportunities, we bought the competitions. And so these platforms have been integrated to a certain extent, but not completely yet. So we want to tap into synergy effects here. which, as we did in the past years as well, accompanying our business development, increasing productivity, that's going to be a driver for the wellness profit as well. And in addition to the business today with the websites and so on, it's growing about 8% per year. So growth in the core business, consolidating platforms, and opportunities here by new products and artificial intelligence. These are growth opportunities for EAMAS. And then we have a cloud business. We have our own cloud infrastructure developed over many years. It's completely sovereign. No UAV in there. No Huawei as in telecom or open source stack self-built. So we do see that. We can sell this well to public administrations and some big federal authorities are using it. So we have to see on how far companies are willing to take this up to have an independent cloud. I think that discussion has just started What is an independent cloud? Is it a cloud which I buy from Amazon or Google or Microsoft, or will it be independent if they have a subsidiary in Germany or in Switzerland? And is that independent enough, or is independent only if it was done by a European company who developed it and understands it themselves? and can change it. So that discussion is ongoing, and of course we do hope that there's going to be an increasing awareness, and our positioning can be strengthened in the market here, and we can grow on that base. So that's the big field that Jonas sees opportunities in, and that means we should stay invested. And what we also have to see is We have a good development of the shares. If you look at the normal development, well, let me explain. Over all the years that we bought smaller hosting companies in Europe, we had 13 to 14 days FTA. And if we look at the Janos listing today, you see, although it was listed so well, it just got there. So the European market leadership, IE ideas, cloud ideas, these small hostess didn't have that. That's not depicted in the share. So, this is why I'm positive. We have to do the business, of course, but I'm optimistic that we will be able to show that this has more to gain, that we can carry on and the market understands the business opportunities involved. And this is why I think we will stick to our position as we have it.

And if... Janos needs more capital for AI factory. Will that be possible without having to increase your capital? No problem. We're only talking about 3 to 5 billion there. Let me break it down. What you could read in the press was that a factory costs 3 to 5 billion. Yeah, that may be true, but you don't build it in a day. You build it in individual stages and you fill it in stages as you increase your business. It doesn't make sense to set up a huge number of computers and just keep them there if you don't use them. So growth accompanies business. How will we finance this? You need some equity, of course. I'll get back to that. But the... the envelope of the data center, the passive infrastructure. You can do that with credit. You don't need to use your own money for it. And software we develop ourselves. The hardware has to be bought. The cost of money, we buy it gradually, but we can also use the subsidies made available by the EU now that will cover something of like 35% of the cost. That means that we have less of a financing need. We do it together with a partner that decreases the financing needs. And if you see that Jonas has a net debt of less than 800 million now, of 530 million DBA, you can see that we really could take up a credit line of a billion without any increase in equity. So if you take these assets together, credit worthiness, the partner, also the availability of passive infrastructure credits plus the subsidies available by the EU, then this should be possible. But as I said, it isn't done overnight. It has to be built, filled by the buy. By then, the conditions will be better. More cash will have been generated. We don't want to take any dividend out of this. So we don't see any need for an equity increase as per today. Now, if you take a look at the demand, so it's been used capacity, what year are we talking about? When will that be? Difficult to say. It depends on how product development progresses. It depends on market demand. On the one hand, I'm very optimistic. On the other hand, I can also see that a lot of companies don't appreciate this issue of independence, of sovereignty enough. Big companies. So we'll take a Microsoft product. Their subsidiary is located in Switzerland. And if we ask them, like, what if they don't make any update available anymore? How will you continue? Or there's no more update for this cloud anymore. Or if it gets more expensive, how will you handle this? Many haven't thought about that yet. Also, a lot of those companies are locked into multi-year contracts. You booked so many capacities for the next five years or whatever, then you don't need additional contracts. capacities anymore, and it's very difficult to implement. This is always big, major projects, so this won't happen overnight. It's very difficult to say that within three months, six months, five years. It also depends on our own performance. We have to be good. We have to make enough capacity available. We're only at the beginning here because we don't have the ecosystem that Amazon or Microsoft can make available. But there's an 80-20 principle here as well. 80% of workload will cover only 20% of the workload. Databases, backups, LLM models, ERP software. I think we have a lot to offer here and we'll do more going forward so that our offering will become ever more competitive. But it's very difficult to predict. Then the complex of 1&1 is listed. Arianos is listed. What about 1&1 Versatil? Are we peaking here and it's going downhill beginning next year? So you're about 600 million euro revenue. 30% EVDA margin. You said this is going down. Fiber optic will go up. So when will this move back into a growth phase? Absolutely. In absolute terms. I think you can see increasingly how the non-recurring revenues are decreasing. So we have here at the bottom now that the non-recurring is beginning to grow. We'll see that over the next few years. Investments we will have to continue to make. That's positive because we're increasing our footprint in commercial estates. That costs money. Every commercial estate we connect costs money. We have a bigger footprint because we connect to the one-on-one network. That increases our return because the contract has to be made, but we have to make an investment upfront. With a growing business, these investments will earn ever more money. I have a feeling, maybe a year ago or so, Versace used to invest 400 million, have an EBITDA of 160 million, and the rest was paid by United Internet. This year we still have some subsidy, but it's less than it was, and next year it will break even. So we increasingly managed to generate cash through our own business that will be an improvement. So that has to be taken into consideration. A lot has to be invested by Versatil. We completely renovated the fiber optic network, overhauling the entire technology. We're very happy with the technology now. We're able to win tests best network compared to Network Telefonica Vodafone we invested a lot of money there we invest into expansion of the network and we can increasingly see that money is rolling in now and that is our view from the holdings point of view because one-on-one doesn't cost us any money because it has its own money. Janos doesn't cost any cash because they generate it and um all our further businesses generate their own cash the only uh company that is costing us money if you wish um is one-on-one versatile and that will end over the next couple of years so um we don't need to look at cash too much here we're doing uh we're well underway last question United Internet Group, what would it look like in the free cash flow basis? That should turn around the beginning of this year after this intensive state of investments that you've had. Well, we have a multi-year plan and I don't know the details of it now. It's indicating basically that our debt ratio will decrease. So we're peaking in terms of debt now. If we don't buy anything else, well, we took out another credit line because we bought one-on-one shares. But operatively speaking, our indebtedness will decrease by the by, even though we're extending the mobile network investing into the cloud. But that is still excluding the AI gigafactory, of course, after I say that. We have to exclude that. Now, if we exclude that, then our indebtedness keeps going down year on year, despite the other ongoing investments. Next question from the left side, Karsten Oblinger. Yes, Karsten Oblinger, DZ Bank. I have a question concerning Versatail. You indicated in your presentation that there's a lot of CapEx for the mobile network included there. Can you roughly indicate... how we will, when we will see that in the proven loss statement. Would it be visible or would it be background noise, basically? There's an upfront payment for any connections between 112 versus Linden. There's a long, relatively long period where we have this background noise, recurring background, recurring revenues that will generate, keep generating cash. So the margin will be at the level of... the same level as the companies right now? Yeah, that's what we're planning, yeah. Okay, thanks. Next question is by Simon Stivek. Simon Stivek, OneWorks Research. Thank you very much for your presentation. I have a couple of questions as well. You have 10% of your own... shares on the balance sheet I would like to know what you're planning to do with them because you could take a view that the holding is undervalued in other words you could be very satisfied because you could then buy IONOS very cheaply via the holding if you were to buy United Internet shares so I'd like to know You can't buy back your own shares right now. What's your plan here? And then a number of short questions. You just mentioned the leverage, your plan sheet capacity. You said that you have a maximum leverage. What's the maximum range you can imagine there? Then the refinancing ratio. What is it right now with you? And then finally, the dividend for the next year. Could you imagine that it goes up a bit than the 50 cent that you have been paying out, excluding this year? Thank you. Well, we have about 10%. own shares. We can buy more shares at any day. We have a resolution by the board. We would have to withdraw shares, but that can be done by the board. We used to have 252 million shares in United Internet, and we're now at 173 shares floated so 60 million have been already withdrawn over the years so we could do the same again if we wanted to buy more shares we could withdraw them and then buy more but we feel very well with these own shares because we can use them to use them as a bar term currency or to make them a as a part of a payment for our employees and they have no voting rights but if we need to withdraw them because we need shares for tomorrow we would have to first have them registered with a stock exchange etc so it's easier to withdraw our own shares now concerning the dividend policy we have a policy of paying out somewhere between 25 and 40% of our profits and what we've been paying out was not an obligatory dividend it's just what we calculated we had a cash up effect now because we paid less over the last few years and in one year didn't pay anything at all so that takes us to an average of 35 cents 35% and I think that is what we feel happy with So the catch-up dividend was 50 and previously it was 40%. So that was at the upper limit of the 30% limit. Leverage now with the increased program, the purchasing program, we have 2.5 leverage now. The threshold for us would be 3%. if we calculate without leasing and frequency liabilities if we calculate leverage then it is the limit would be 3 for us and as Mr. Donovan said to reduce the leverage with an increase in cash flow over the next 3 years to actually pay it back it all depends on what we spend the money for if we buy shares in companies then it may make sense If we invest into fiber optic cables into transmission towers, then we have an asset in return. So, we are quite optimistic in terms of the 2.5 because of well underpinned, but in the long term, we'd like to reduce it. We used to have a lower indebtedness, and we'd like to return to that in terms of the conditions that we get. They're still very favorable for us. The margins are somewhere between 0.8 and I think 1.4. So it's still, in our view, a good access that we have to the financial markets. We can finance ourselves very well. The overall interest rates have decreased again, so we feel quite well in this context. Are there any other questions? again. What I asked the last time as well, in the context of our economic environment, can you see anything where you do very well? But you also participated in this March meeting with about 60 entrepreneurs. Do you have any optimism for things improving in this country, or what's your view? That's a good question. First of all, our business is more than resilient. We've seen all sorts of things, financial crisis, COVID, et cetera. We never had any problems because we're a provider. We provide email accounts, websites, internet access to our customers. And before people let go of that, a lot has to happen. Now, concerning the overall economic development, I can't say. because on the one hand I see some optimism, because people say, okay, the government is what intended, they want to do something. I won't comment on whether it is sufficient or correct, but the trend is that they want to do something. We have the uncertainties, however, coming from charity, etc. So I don't know what comes out at the bottom line. A much bigger... worry whether we have 1% more or less is the question of digital sovereignty because AI will penetrate all walks of life, all areas of the economy, all products and that determines if you determine what the prices are who can get what services will have enormous power and we have to say and there's China and America today as we talk about AI and we'll have to see whether Europe can catch up here or whether we fail to do so and I think over the years that will be the big game changer because it has ramifications everywhere You can make the best product if you only have the third best AI. It won't work. I don't see any further questions here now at this stage. So we would like to thank you for your keen interest and the many questions. I hereby close the conference. I would like to... warmly invite you to a cup of coffee and thank you very much. Stay home and see you next time.