NOS, S.G.P.S., S.A.

Good morning, everyone. Welcome to NOSH first quarter and 2026 results conference call. Our CFO, Luís, will guide you through a brief presentation and then we have the executive team in the room who will be happy to take your questions after the presentation. Over to you, Luís.

Thank you, Pedro. Good morning to all and welcome to NOSH first quarter conference call. We will begin, as usual, with the main highlights of this first quarter. revenue growth driven by strong IT expansion and solid audiovisuals and cinema performance, more than offsetting competitive pressure in telco. A bit of performance reflects the disciplined cost management and structurally lower capex delivering health-free cash flow generation. And the balance sheet remains strong with a 1.4x leverage ratio and a credit rating upgrade to BBB by S&P, reflecting a stable financial outlook. A quick overview on our main KPIs. In this first quarter, consolidated revenues increased by 1.9% to 460 million and EBITDA rose 3.1%. This solid EBITDA performance, along with a CAPEX reduction of 5%, led to an improved EBITDA IL-CAPEX of 84 million, a growth of 18%. Recurring free cash flow, Excluding extraordinary items grew 22% to almost $30 million, and recurring net income increased 7.9% to $60 million, reflecting a solid operational performance and our GenAI-driven efficiency program. As usual, we will discuss each of these metrics in more detail throughout the presentation. As said, NOS credit rating has been upgraded by S&P to BBB with a stable outlook. S&P Rational for the upgrade highlights three key points. NOS robust operating performance and cost optimization program. That NOS is well positioned to face increased competitive dynamics with modern and well-maintained networks. And that declining fiber and mobile CapEx supports strong free operating cash flow generation. Committed to a long-term value creation, NOS has established itself as a leader in both R&D investment and patent application in Portugal. On the research and development front, NOS has consistently ranked in the top three since 2018, while on the patent side, the company has topped the Portuguese market for the second consecutive year. Our scale program continues to scale AI across NOS, with seven execution programs and more than 140 AI use cases identified. Another key example is the workforce augmentation program, which includes our sales assistant in B2B and B2C, a virtual assistant designed to support sales consultant and maximize their productivity. This tool is already handling more than 5,000 questions per month and answering to more than 98% of the questions autonomously. The B2B Virtual Agent is effectively boosting efficiency and sales productivity through opportunity follow-up and smart recommendations. The SCALE program has also developed the B2C Sales Assistant, a virtual assistant designed to support customers throughout their resolution journey, successfully contributing to higher NPS scores and reduced call handling times. Moving now to the operational performance side, more than 6.1 million households are now covered by NOS Next Generation Fixed Network, with FTTH representing 91% of the households passed. During the quarter, NOS deployed 96,000 new fiber homes, 75% of which were rolled out over third-party networks, thereby reducing expansion capex. Despite the challenging competitive environment and typical first-quarter seasonality in mobile, NOS delivered positive operational momentum in first quarter. Total large use grew by 12,000, the strongest first quarter in three years, and a significant improvement year-on-year, driven by a solid fixed net ads of 24,000 and a return to positive mobile net ads of 3.8. In fixed, we achieved 8,000 net ads in unique fixed practices. This is a strong quarterly performance, outperforming both the previous quarter and the same period last year, and are consistent with the Predigy levels. Sharn remains at low levels, reflecting the strength of Nosh customer base and its competitive positioning, and new offers, Woo and Naked Broadband, continue controlled, but with some impact in the mix of new customers and RPs. Immobile This was the best first quarter of the last three years, with 3.8 net hats, with mobile RGUs increasing 4% year-on-year, reflecting a positive performance backed by post-pay resilience, despite the challenging competitive environment, particularly in the prepaid segment. Post-paid increased 69,000 RGUs, with a slight acceleration versus previous quarter, impacted by the low-value machine-to-machine decline, which is more volatile. mobile prepaid declined by 65,000 against the best first quarter of the last three years, despite reflecting the ongoing push to convergence and competitive pressure in the low-cost segments. In summary, a solid operational performance despite the competitive environment and the normal first quarter seasonality in mobile. Now moving to audiovisuals and cinema business, Ticket sales grew by 12%, with a very strong performance in January and February, driven by the successful launch of The Housemaid and by Avatar and Zootropolis. NOS Audiovisuals distributed two of the top three movies in the quarter. NOS Consolidated Revenues rose 1.9%, driven by a strong 16% growth in IT, a 7% increase in audiovisuals and cinema, partially offset by the resilience Telco performance. Telco revenues declined slightly by 0.2% to 390 million, mainly impacted by the wholesale unit. The B2C segment recorded a decline of 0.7%, driven by a combination of factors pressuring ARPU. The competitive pressure, the growing share of wool within NOS customer base, and the impact of storm pricing that offset the price increase that happened in mid-February. B2B revenues grew 5.5% to 81 million, maintaining the growth path of the previous periods. This acceleration in overall revenue growth reflects a higher volume of projects and resale activity. Wholesale revenues declined 11%, driven by a reduction in mass calling services and by changes in one wholesale model, which no longer record revenues and costs. IT revenues showed a strong increase of 16% to 54 million, driven by a solid 4.8% increase in IT services and by a significant 36% growth in the more volatile equipment and licensing sales. Finally, the audiovisual cinema division reported a 7% revenue increase to 25 million, driven by the strong cinema performance with ticket sales growing 12% year-on-year. NOS EBITDA grew 3.1% to 203 million with a consolidated EBITDA margin of 44.2, an improvement of 0.5 year-on-year, reflecting the solid operational performance and the Gen-AI driven efficiency program. Despite flat revenues, Telco EBITDA grew 2.8 with a margin expansion of 1.4% to 47.5. IT EBITDA increased 6.1% Below the 16% revenue increased, explained by the strong growth of resale of equipment and licenses with lower margins. And audiovisual and cinema's EBITDA grew 6.1%, in line with revenue's growth. CAPEX continues its structural declining trends. In this first quarter, total CAPEX excluding leasing dropped 5% to 86 million. Telco CapEx declined 6%, driven by a 3.8% reduction in customer-related investments. Technical CapEx fell 8%, impacted by a higher percentage of deployment rolled out over third-party networks, thereby reducing expansion CapEx. IT CapEx increased 14% to 1.5 million, explained by customer-related investments. And audiovisual and cinema capex increased 15% to 4.6 million euros, reflecting a return to a more normal spending level in movies after the lower investment in 2025 caused by the disruption of the Hollywood strikes. As a result, improved operational performance, the Gen-AI driven efficiency program and efficient capex management drove an 18% increase in EBITDA L-Capex, reaching 84 million. Recurring net income grew 7.9% to 69.7 million, driven by the positive EBITDA contribution of 6 million, a DNA reduction of 4 million, and a decline in net financial expenses. These positive impacts were partly offset by a 4.6 million reduction in joint venture results, canalized by the reversal of a sport easy provision in first quarter 25, and higher taxes driven by higher EBITDA. No recurrent items declined to 2.2 million, driven by lower refund of Anacom activity fees, resulting in a total net income increase of 4.7% to 62 million. Recurring free cash flow increased 22% to 80 million. Operating cash flow increased by 50 million year-on-year, driven by the strong operational performance and lower investments. Interest rates increased €1.4 million year-on-year, penalized by a one-off tax devolution in Q1 2025. Non-recurring items declined €6 million to €12.4 million due to lower ANACOM refund of activity fees versus Q1 last year, bringing total free cash flow to €91.8 million, a 10% increase year-on-year. At the close of the first quarter, NOS net financial debt decreased to €930 million and the financial leverage ratio improved to 1.4, well below our reference level of approximately 2 times. Additionally, NOS benefited from a lower average cost of debt, now 2.8%, a reduction of 0.5% year-on-year, reflecting the lower interest rate environment and in line with the previous quarters. As of March 31st, NOS held a total liquidity position of 347 million. 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. Please stand by while we compile the Q&A queue. We'll now go to our first question. Our first question comes from the line of Molly Whitcomb from Goldman Sachs. Please go ahead. Your line is open.

Hello, good morning. Thanks for posing my questions. I have two please. Firstly, on the price increases, a little bit of colour on how they landed in Telco. This is fine, but GD was more competitive following the increases. A little bit more colour around that and the competitive dynamic would be fantastic. And then you mentioned in your release the impact of storms in Portugal. I just like to understand, are there any ongoing or potential future CAPEX funds that we should expect associated with this, and can you quantify?

Thank you very much.

Well, I'm not sure if I completely understood your questions. If I understood the first one was on the competitive environment, And the competitive environment is in line with previous quarters. I would say that limited to B2C as before. DG had a very strong first quarter last year, but since then lost the momentum and nothing changing in that part. Our commercial activity with our dual plan strategy has impacted the operational since the second quarter. And this quarter was very positive on that too. It was the best first quarter of the last two years. But the issue is the ARPU. What the competition environment is impacting is that the second brand is increasing weight on our customer base. It's still very controlled on gross sales. at 10-12%, but the weight on the customer base is increasing and therefore impacting ARPU. Future CAPEX. We don't provide guidance, but looking to the numbers of this quarter, we continue to decline CAPEX through the reduction of the expansion both on mobile and FTTH. So our expectations is continue to decline capex in line with what we did in the past and this quarter.

Maybe just a little bit of clarification. So my first question was also on how the price increases landed. I don't know if you can give a bit of color around that.

So the price increases were in line with the past. So just on NAS brands, but on the same customers, they were, I would say, well-received, as they can be well-received, so no impact on churn. If you compare with 2024, the number of complaints or questions declined 40%, also because it was an inflation-based pricing quiz that was below what happened in 2023 and 2024.

Thank you. And then, sorry, just again to clarify on CapEx, My question was actually more about the impact of the recent storms in Portugal and if we should expect anything unexpected in relation to that for the current year capex.

Yes, the storms have had some impact and naturally have and will have some impact on capex, but it's not material to the point that will affect the declining trend that we are having.

Very clear. Thank you very much. Thank you. We'll now go on to our next question. Our next question comes from the line of Fernando Cortero from Banco Santander. Please go ahead. Your line is open.

Thank you very much for taking my two questions that I partially followed up on the previous ones. Also thinking on the impact of the storms, I would like to understand of the ARPU performance year-on-year, how much of that is coming from the customers that you haven't built and just building the quarter as they were impacted by the storms? Just making a very quick number, if the price increases have been around 2.3% in mid-February, impacting house in the ARPU, and you It seems that excluding price increases, ARPU has suffered around 2%. I don't understand how much of this ARPU impact is coming from the non-recurring effect of the stones. And the second question is on the footprint expansion. We have seen a material deterioration during the quarter. I understand that also storms have impacted, but I would like to understand how do you see, let's say, the recurrent run rate in terms of footprint expansion in the coming quarters? Thank you.

Well, on the storms, I understand the question, but to not provide that much detail, I would say that IARCU has three different dynamics. The first one is, yes, the storms that impacted because we had a few thousand customers that were without service, so therefore not being built, but that effect is fading. It was stronger in February and March and now it's fading. The second one, as I said, it's the dynamics, the competitive dynamics, but mostly the woo effect. Because it's increasing quarter on quarter and therefore pushing the ARPU down. Let's say that this is a headwind that we will continue to face for the future. The third one, with opposite effect if the price increase. It was in mid-February, so just between 50% and 60% of the price increase was captured this quarter and will have a positive impact for the next, but it's very difficult to differentiate the three impacts and even harder to estimate the future trend of it. On the footprint expansion, we are obviously going to the end of the FTTH expansion. We will end our own expansion of FTTH until the end of the year, so that's why the numbers of new fibre homes is It's declining, it was still a strong number, 96,000, but already with 75% coming from third parties.

In that sense, thinking on the whole footprint of the company, it has been basically flat in the quarter. Should we expect similar trend in coming quarters?

The total footprint has been flat this quarter because there was a significant number of houses that are what we call brownfields, so houses that we already had cable, and that will change from quarter to quarter, but it's obviously going to quarter to quarter. The number of new houses will decline.

Okay, many thanks.

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.

Hi guys, thanks for taking my questions. I think the thing that I think investors are asking this morning is really around the consumer growth. Obviously it has decelerated this quarter and obviously the ARPs are down as well and people are really trying to figure out how much of that is from the storm and you know what's the positive tailwind from the CPI and I know you can't really provide clear numbers on that but how would you expect your residential RPs to evolve throughout this year you know taking into account all of the effects that you've already talked about And then on the consumer side, do you think you can get the revenues back into positive growth territory this year? Or do you think it will be more of a 2027 story? Thank you.

Thank you for the question. Well, I think we are basically going around the same question. We would rather not go into such detail, but what I would say, reinforcing what is already said, is that we are still facing headwinds. Those headwinds are not growing in density. Things are pretty stable in terms of the discount brands. The weight of the discount in gross ads is stable also. But naturally, when you compute the methods and look at the customer base, the weight of the discount brands continues to grow. And our expectation is that it will continue to grow throughout 2026. So the headwinds will continue to be there. We still have some effect coming from the price increase. some effects coming or disappearing from the storms, still some impacts in the second quarter, but looking at the second half of the year, hopefully no more storms there. But I think the main message is that the headwinds are still there and will continue to be. And our expectation is that the intensity, as I said, will not increase, but they are not going away.

Okay, thanks. You're just kind of reading what you're saying. You're basically saying that the current trends kind of give a good indication of what might be coming ahead. And then if I could just kind of move to business, obviously it was a strong quarter, maybe pretty similar to last year. Again, is this mid-single-digit growth something that you see within your current customer orders for 2026 as well, so around that 5% number? Thank you.

Yes. As you know, there's a strong leading indicator in B2B, which is the commercial activity, and we are comfortable with the commercial activity these first few months of the year. So the expectation is that we will continue to strong healthy growth in terms of B2B throughout the year.

Great. Thank you.

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

Hi, good morning. Thank you for taking my question. So, just regarding the storm, sorry to insist on this, maybe you can provide some color, at least in terms of the costs, the North Korean costs that you book over the quarter. I don't know if something that you could provide or not. Second question is related with synergies and IT division. You mentioned in the past that you both quite a lot that the revenues synergies were one of the points. So maybe you can provide also some color how it's going on. And last question is related with the consolidation sector. There are some comments on the press last week about sector consolidation. I think that yourself and the other CEOs of the other incumbent operators also mentioned it. Maybe you can share with us your main ideas about it. Thank you very much.

Look, the idea is quite simple. When you look at different markets, mainly in Europe, you can see that there's a small number of markets with four operators. You've seen more recently, for example, in France, probably going from four to three. So that's a trend. And we all know that the right number of players, if you're thinking about consumer wealth, is three, it's not four. From our view, The fourth operator is not economically sustainable. So when you add up all those reasons and more, I think it's not about if it's going to happen, it's about when it's going to happen. So we don't expect any kind of market structure changing in the near future. But when you think about long, long term, I think it's something that will eventually happen. I'm actually pretty sure it will happen. As I am pretty sure that it will not happen short term.

Regarding the IT synergies, there were two sources of potential synergies. One was the combined coverage and penetration in the market of And the second is the added capacity to close deals because of competence of the different practices. We're still on a very early stage of that materializing. What I can say is that the pipeline that we are – the combined pipeline that we are seeing is already showing materialization of that potential. And what I hope to see and expect to see in the coming quarters is further materialization of the start of that process because this is an immediate process, long process, but it will be fruitful.

Well, on the cost of the storms, we are not disclosing the specific numbers, but I would say that the main impacts have been felt on the customer support. on the fuel force and also on the recovery of the fixed and mobile networks.

Okay. Okay. Thank you very much for your answers.

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

Morning, everyone. I've got two questions. Please. Firstly, on the scale program, which continues to progress well, I think last quarter you gave a number which was 25 to 30% of the initiatives have been implemented. Can you give us an update on that and perhaps how that translates to the percentage of savings achieved? That would be very helpful. And secondly, it was just a follow-up on previous questions, and apologies if I missed it. It's around the CapEx. Now, you've previously given a kind of mid-term guidance of around 350 million annual CapEx ex-deleases. We've seen a consistent increase. trend down of your CapEx profile. Do you see any kind of upside to that 350 number after the recent performance that you've seen and any other efficiencies you can extract?

Thank you. Okay, so on the scale, well, the 25 to 30% of last quarter is more now close by the 40%, but that's not the relevant KPI to look, because as you can understand, we have begun by the biggest project. So the most relevant information, I would say, is that the program is moving as expected. The efficiencies are there. If you look to the relevant numbers, the cost reduction of the telco, and it's completely in line with last quarter. Last quarter, it declined 2.9%. This quarter, it declined 2.7%. I would say that the majority of this number is coming from the efficiency program. Okay, so we are very confident that we will continue to deliver this kind of savings for the next quarters. On the CAPEX, I understand your question, but we don't provide guidance, and I would say that the 350, it's still the number that we say, but we are also confident that the level of reduction that we have this quarter is something that we can expect for the rest of the year.

That's great. Thank you.

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

Okay, so thanks very much for joining. Any questions, please feel free to reach out and we'll see you next time. Take care. Bye-bye.