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Hello everyone. Thanks for joining NOSH second quarter 3035 results conference call. We'll have a presentation followed by Q&A as usual. But this time we'll start with Manuel Llanes, who is the ex-comm member in charge for B2B. He will go through some slides on CloudInert Portugal. It's easier to get more callers since this is the first quarter that we are actually consolidating the company. Then our TSO will go through the rest of the presentation before Q&A. Now I hand you over to Mehran.

Thank you, Peter. Hi, everyone. I'd like to give you a quick update on Clarinet and to explain why we believe that we have now on IT a much bigger and better growth engine. The first note is that Clarinet's acquisition to a four times larger and faster-growing market. Basically, we estimate the telco market in Portugal to be the V3 market in Portugal to be worth 1.1B, and the IT market in Portugal to be worth around 4.6, with basically much, much higher structural growth. We believe that this growth is possible basically by driving expansion in three key purchase areas where either we have significant competitive advantages or have a high growth potential. We'll see that in the next stage. We'll be able to reinforce our position in managed services and in professional services as well. Actually, basically, we double the size of our IT services business with the acquisition of Foreignet. And we also believe that even the resale part of the business is key in the sense that it puts the non-group in the center of the deal flow of the key manufacturers in Portugal, the hardware and software, and that presents a very relevant opportunity for services growth, as most of the manufacturers will tell you. The second is that IT brings, or this acquisition, brings relevant scale and a full breadth of not only solid offer, partnerships, and talents to our IT business. First of all, Clarinet brings the set of practices that we aim to be bred in in the IT arena and the full breadth. So it is a great way to structure the way we look at the IT business and the practices of cloud and infrastructure, applications, security, workplace, data and AI and third-party software. We believe that these are the exact arenas where we want to be present, where we believe we have the synergies and the competencies and we believe that we now have the full breadth with which to address the market. The second is that we are, as a group now, very relevant to a number of key technology partners in this market. the transversal partners of Microsoft, HPE, and HP, and the practice-specific partners of Cisco, AWS, Cloudflare, Dell, Adobe, EasyVista, Fortinet, Palo Alto, and Google. I believe these are very relevant names in the technology arena, and I believe that they all regard the NAR group as a relevant partner in Portugal. The third note is that we have now as a group a very relevant scale and a very relevant company. We have 19 plus FTEs, managing professional and managed services in IT in Portugal, a very large engineering team, and over 200 task certifications with which to help our Portuguese customers address their digital transformation needs. We believe that we, with this acquisition, we have very relevant growth lever support First of all, we have an increase, actually a very significantly increased sales footprint in enterprise and mid-market, which crossing with the full breadth of IT services brings a full potential that is very relevant for the future. The second is we have practices in our portfolio, namely cloud, cyber, security, and data and AI, which have in themselves very high potential for growth. And third, we have a strategic cooperation with the Clarinet Group that benefits us both ways. First of all, the ability to serve multinational customers and the second, to leverage the scale of our practices in multinational environment of the Clarinet Group. So back to the beginning of my very short presentation. The idea was to say that we have a bigger and better growth engine for IT with which to show you progress in the next few quarters.

So good morning and once again welcome to our conference call. Just an additional comment on Clarinet. This quarter we fully consolidated Clarinet Portugal for the first time. And for consolidation purposes, in accordance with the IFRS 15, revenues from contracts were quite a net tax as an agent should be recognized on a net basis. Therefore, the $216 million of quarter net gross revenues of 2024, under the Portugal cap, must now be consolidated for $130 million of net revenues. It's a 40% adjustment, but only for consolidation purposes. Well, now, following the update on Clarinet Portugal, we will now briefly review the quarterly results and then open for Q&A. The main highlights for this quarter are strong operational performance with the RGU trend significantly improving quarter-on-quarter, consolidated top-line revenues growing year-on-year and a bit increasing faster-than-revenues with AI and transformation programs progressing well, An operational performance, capex reduction and working capital improvement, pushing recurring free cash flow, and a solid balance sheet with leverage below reference level, despite the acquisition of cloud and network school and the dividend payment. So, a quick overview on our main KPIs. Revenues increased by 3.2% and the EBITDA rose 5.9%. This positive performance, along with a capex reduction of minus 2, led to improved EBITDA minus capex of 22%. Recurring free cash flow, excluding extraordinary income related to legal procedures and sell next hour sale, increased 8.8%. And net income, also excluding non-recurring activities, grew 16%, reflecting a solid operational performance. On the operational performance side, this was another strong quarter of Fibre2DOM expansion. Over 5.9 million households are now covered by NordGigabit 6 network, with the FTTH representing 86% of the households past. This is a significant increase of 78,000 households quarter on quarter and 313 year on year. But despite the challenging competitive market, Nordstrom offers and commercial capabilities delivered a very strong second quarter with a 2% increase to 10.7 million RGOs. With almost 58,000 net ads, this quarter not only represented a significant improvement compared to the previous quarter, but also exceeded the results of the second quarter of 2024. On unique successes, we increased almost 2% to 1.5 million. The second quarter showed some new dynamics, as net ads recovered to 8.3, driven by lower levels of churn, a competitive woo offers, and make a broadband that is gaining momentum and changing the mix of new customers. With 46 net ads in the quarter, mobile increased 3.3 year-on-year, reflecting a stronger performance both in postpaid and in prepaid. Postpaid had 160 net additions, posting very strong results above the previous six quarters, driven by WOU and not initiatives in app and cross-help. Prepaid net additions decreased by 70,000 in this quarter, but this not only represents a recovery, from Q1, but also exceeds the results of last year. So in summary, a solid operational performance and a strong recovery from the previous quarter. Now moving to audiovisuals and cinema business. A late Easter holiday and three strong releases led to a 44% increase in cinema ticket sales this second quarter. The audiovisual segment also performed strongly, driven by Lilo & Stitch and Mission Impossible. And we had five audiovisual films ranked in the top ten this quarter, boosting NOS performance. On the financial performance side. NOS consolidated revenues increased by 3.2% year-on-year to R$ 458 million, driven by the resilient performance of the telco segments and the robust growth of audiovisuals and cinema divisions. Telco revenues rose by 2.3%, primarily due to the strong growth on the B2B sector, which posted a 9.6% increase, supported by healthy growth in recurring services of 6%, along with a significant rise of resale. The B2C segment experienced a slight decline of 0.3%, indicating early signs of deceleration due to increased competition impacting our pool, despite stronger operational activity. The new IT business showed a small decline of 0.8%, mainly driven by a reduction in the volatile resale of equipment and licenses. However, this was almost fully offset by a solid 10% growth in IT services. So IT net revenues accounted for 49.3 million, while the gross revenues accounted for 77.9. The audiovisual and cinema division reported strong growth levels, increasing by 31% year-on-year, driven by a 44% increase in cinema attendance, supported by a strong lineup of movies. Norse operational performance. and the solid results of NOS transformation programs supported on GenAI driven efficiency program continue to deliver a solid 5.9 EBIT increase significantly above revenues with a robust contribution from telco, IT and media segments which recorded increases of 4.2, 18.8 and 34% respectively. At the same time, NARGE CapEx decreased 2% to 91.7 million, driven by a 3.6% reduction in customer-related investments and by a 2.3% decrease in base CapEx. Expansion CapEx, however, saw an exceptional increase this quarter, driven by a temporary peak in NARGE FTTH projects. IT CAPEX increased by 400,000 to 1.7 million, driven by customer-related investments to support business growth. And audiovisual and cinema CAPEX declined 20% to 4.2 million, reflecting a return to a more normal spending level. As a result, improved operational performance and efficient CAPEX management drove a 22% increase in EBITDA L- CAPEX. Consolidated net income declined by 28% to 58 million, primarily due to fewer positive extraordinary effects in second quarter 25 compared to the same period last year. These effects included a tower sale to sell nets and gains from legal procedures, which resulted in a net impact of minus 30.5 million this quarter. recurring net income increased by 16% to 57.4 million, mainly driven by a strong EBITDA growth, lower depreciations and amortizations, and reduced financial costs. This performance was achieved despite the 15 million decline in non-current income, mainly driven by an interconnection-favorable core decision during the second quarter. 24. Very a similar reality in free cash flow that declined by 72% to 38 million, primarily due to a minus 102 million in extraordinary effects related to the power sale and gains from legal procedure, which positively impacted by almost 83 million in second quarter 24. However, this quarter, these effects have a negative impact on additional 23 million in taxes. Despite this, a strong operational performance Lower investment and the reduction in working capital contributed to a 9% year-on-year increase in recurrent free cash flow, even after accounting for higher tax rate. Finally, this quarter, knowledge debt increased to 1,145 million, primarily due to the Clarinet Portugal acquisition and the dividend payment. Despite this increase, the company maintains a conservatively financial leverage ratio of 1.7, well below the reference threshold of 2 times. Additionally, Norse benefits from a lower average cost of debt, now below 3%, representing a decrease of 0.3 quarter on quarter and 1.1 year on year, reflecting the lower interest rate. And as end of March, the company held $278 million in cash and liquidity. With this, we conclude our presentation and we are now ready to answer to your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Our first question comes from the line of Molly Whitcomb from Goldman Sachs. Please go ahead. Your line is open.

Hi, thank you for taking my questions. I have a couple, please. Firstly, I was wondering if you could give us a little bit more colour on the competitive environment that you're seeing in consumer, particularly with DG in terms of pricing and promotional, incremental differences versus last quarter. And my second question is, how should we think about the capacity for further OPEX efficiencies and synergies at Clarinet? Are there any one-off integration costs that we should think about in the coming quarters or one-off capex amounts that we should incorporate? Thank you.

Okay, thank you very much. Miguel Almeida here. What concerns the competitive environment? So we have to be aware of the context we have there. Since November last year, a new player in the market that has entered the market with heavy discounts compared with the prices that were in place at the time. So this is the context. When we look at the dynamics, taking into consideration that this is the context, we are quite happy with the dynamics. You can see from the operational numbers that we are actually posting this quarter positive net ads. And I think that tells you a lot about the churn we are having in the company. We have seen from a trend point of view, the second quarter of this year in terms of operationals was actually better than the first quarter. So things are progressing in the right direction. And overall, we are very, well, given the context, I would say happy with our performance and the whole things are evolving. In terms of synergies or integration costs from Clarinet Portugal, we will not have any integration costs. In what concerns synergies, it's not our priority. Our priority, as Manoli Ange mentioned, is to grow the business. We have a significant ambition in terms of growth, and that's where our focus will be. So I wouldn't expect any costs and not much from Synergy as well.

Understood. Thank you very much. Thank you. We'll now move on to our next question. Our next question comes from the line of AJ Soni from JP Morgan. Please go ahead. Your line is open.

I'd say for my questions, I've had a couple. The first is around your net ads, which obviously were pretty strong this quarter. I just wanted to give us a bit of colour on what portion of those mobile net ads and fixed RGUs are coming from your second round versus your first round. And my second question is around your native broadband. So what's the main difference here? You mentioned it's a bit of a growth therapy, so a bit more detail around that would be helpful. Thank you.

Thank you. In terms of weights, if we take growth ads as the metric, Woo is still, even though it's close, it's still below 10% in terms of wireliner RGU's. Of course, as you can imagine, if we were talking about net ads, this weight is obviously bigger than that. But in terms of acquisition, it has been more or less stable. around slightly less than 10% of our growth size. In your concerns, naked broadband, I'm not sure where your curiosity is. We have naked broadband offers in both brands, so in Wu and Nosh, at significantly different prices. And we believe also at significantly different customer experiences. So it's consistent with the overall positioning of both brands. In both cases, it's naked broadband. But what we are offering customers is different. And what we are charging customers is also significantly different. It's almost twice as much at-nose than we Okay, understood. Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Jose Osina from CaixaBank. Please go ahead. Your line is open.

Hi. Good morning, gentlemen. I have a question on the transformation program. Could you detail the expected savings from this program? how much of them have already materialized, and if you could also explain the amount of provisions which are linked to this program, how much of them have been already provisioned.

About the transformation program, not easy to know the the exact number that has already been achieved. But we believe that we have done already about 50% of the transformation that we expected. But this is a long-term transformation program that we expect to continue to bring efficiencies for a long time.

Yeah, well, you have very different things under this. umbrella all with the same objective of efficiency we believe that we will keep expanding our EBITDA margin for quite some time meaning that we are far from over in our initiatives to give you an example in what concerns GenAI the benefits of implementing company-wide GenAI are just coming in so we believe that it will increase significantly over the next few quarters And we are talking about always recurrent costs that we are taking away from the company. So we are very optimistic in what concerns margin extension coming from this transformation program, coming from efficiencies, which, as I mentioned, have very different shapes and forms, but are far from being exhausted.

Okay. Just for the question, could you... indicate out of the improvement in the VTA reported in this second quarter, how much out of it do you see from this transformation program?

Well, everything that doesn't come from top line is coming from this transformation program because on the other side you have inflation, you have salary inflation, you have different areas of inflation, and the way to achieve this 6% growth in EBITDA this quarter is coming basically from the cost structure that is this quarter lower than it was one year ago, and most of it, actually more than 100% of it is coming from this transformation program.

Great. Thank you very much.

Thank you. We'll now move on to our next question. Our next question comes from the line of Antonio Celadas from AS Independent Research. Please go ahead. Your line is open.

Hi. Good afternoon. I have two questions. First one is still with the price evolution. So according to your metrics, prices, blended prices are coming down by around 1% in consumers. This is something that we can expect for the coming quarters. You mentioned that you are happy with the results, so I guess that you were thinking about tougher pressure on prices. I don't know if you can comment on this. And second question is related to your division IT. I don't know if you mentioned about growing the business, I guess that you have some You are expecting some synergies from the revenue side. I don't know if you can share with us what kind of synergy are you expecting? Thank you very much.

Thank you. I'm not sure that I fully got the question on prices, but we don't expect prices to evolve in any direction as far down in the coming months. We don't see space for that. Again, I stress this in either direction. When you look at our revenues, B2C revenues this quarter, I think it's important to understand that we have three main impacts that drove the revenues on the quarter down from the same quarter last year. And two of those impacts are burn-offs. So you cannot extrapolate from that. And the three impacts are basically the fact that this year we didn't do the price increase linked to inflation, which is a one-off. And if we have done that, obviously we would be discussing today year-on-year growth in terms of B2C revenues. But I stress this, this is a one-off. It doesn't mean anything concerning the future The second one-off was the fact that we had new regulation concerning off-bundle data, and that has, again, a one-off impact. This was end of last year. It's a one-off impact. And if not for that, we would be growing revenues again. And then the third one is the one that is not one-off, is the fact that given the mix of our products, we are experiencing some price erosion, which will continue to materialize in the sense that we keep having today some weight coming from our digital brand wool, which has lower prices and as such brings our pull down. So basically this is the dynamic, but most of the impact is coming from two one-offs and cannot be extrapolated. The third one, obviously, we are expecting to be around for quite some time.

Regarding B3, we believe that there are three sources of revenue. First of all, we have a full breadth of IT services coverage to help businesses perform their digital transformation. And this wider breadth, according to a combined sales force, will give us added revenue potential. The second is that we have a wider coverage. Clarinet did not cover the full market, not in enterprise and not in the mid-market, and Analyzing Telecom does. So we believe that this added market coverage will produce better results. And the third is that we have basically doubled our scale in key practices. Double scale means double maturity and means more competitiveness and an aggregated value proposition and we believe that this combination will give us a higher success rate in the businesses that we have in our deal flow. So we believe that this combination will produce a much better result.

Okay. Thank you very much.

Thank you. We'll now move on to our next question. Our next question comes from the line of from Barclays. Please go ahead. Your line is open.

Good afternoon, and thank you for the presentation. I have two questions, please. First, in terms of the price increase that you did not do, and the sudden that one of your competitors actually did increase prices, and I was wondering if that had any impact in terms of the portability numbers between you and that operator. Positively, I would expect, but if you can comment on that, that would be interesting. And second, on the IT division, you flag the very strong growth potential of that division. And I was wondering if you could give a bit more color on the data center and cloud business. A number of companies in Europe have sold their data centers. I think you have kept yours, if you can confirm that, and also if you could give a sense of, you know, who are the main players and maybe even what is your capacity when expressed in megawatt hours. That would be very interesting. Thank you.

Thank you. Well, you're right. One of our competitors did increase prices beginning of this year. I am not in a position to know what exactly happened with them. What we can see in terms of portability, as you asked, from us to them or vice versa, we didn't see any relevant change. So in terms of market dynamics, I cannot say that we witnessed any kind of impact driven by that price increase.

So regarding the data center business, We believe that it sends the businesses, depending on which scale you look at it, it can be still a big opportunity. What we're seeing is that there is some move back to operate a cloud and to on-prem, out from the cloud, given some... bad surprises that some of the customers had on cloud costs. So now the pressure to drive IT efficiency has driven some of them back. The second is the servering issue, which makes public customers that still haven't had their problems fully solved in cloud environments to build or to share local environments in the cloud. So we believe that there is still room to grow in the cloud, well, in the data center business. And we also are ready for that growth in the sense that we can grow still three times our current capacity with the assets that we have and the assets that we acquire with Paranet. So we're confident that we'll still be able to help customers in their hybrid environments do whatever movements they feel are more appropriate to their strategy. And we believe that we have a role to play in this area.

And can you give any call in terms of what kind of capacity you have or that you're not disclosing that?

I would like to disclose that, but what I can tell you is that we can still grow three times without changing our asset structure.

Thank you very much.

Thank you.

Thank you. There are no further questions at this time, so I'll hand the call back to Pedro Cotardiez, Head of IR, for closing remarks.

Okay, thanks. So, as usual, please get in touch if you have any questions or follow-ups. Thanks for tuning in, and we hope to see you after summer for the third quarter results. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.