Freenet Ag · XETR:FNTN
Freenet — FY2018 Earnings Presentation
42 slides from Freenet's earnings presentation, Feb 28, 2019
Slide 1: Management Presentation Preliminary Results for FY 2018
Management Presentation Preliminary Results for FY 2018 Christoph Vilanek, CEO and Ingo Arnold, CFO 28 February 2019 | Analyst and Investor Conference Call 1 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 2: Cautionary statement
Cautionary statement This presentation contains forward-looking statements which involve risks and uncertainties. The actual performance, results and timing of the business of freenet AG could differ materially from the expectations regarding performance, results and timing expressed in this present
Slide 3: Presenting board members
Presenting board members Christoph Vilanek Ingo Arnold CEO of freenet AG CFO of freenet AG since since 2009 January 2019 ▪ Management positions ▪ Head of Finance and IR at at debitel AG since 2005 freenet AG and Managing ▪ Consultant for Director of mobilcom-debitel telecommunication with GmbH since
Slide 4: Agenda
Agenda (1) Achievements 2018 Christoph Vilanek, CEO (2) Financials 2018 Ingo Arnold, CFO (3) Goals 2019 Christoph Vilanek, CEO (4) Q&A 4 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 5: Operational challenges and derived goals in 2018
Operational challenges and derived goals in 2018 Mobile business ▪ Strengthening customer experience ✓ ✓ ▪ Protection of business model with 5G auction rules ✓ TV and media business Guidance ▪ Digital transformation of Media Broadcast ✓ ▪ Market leadership in internet delivered linear TV ✓ 2018 Acti
Slide 6: Customer Experience put into focus of key improvements
Customer Experience put into focus of key improvements Customer journey Customer touchpoints Service initiatives Improving customer satisfaction Digitalisation to increase comfort Moving closer to customers by and self-service connecting on- and offline ▪ Enhancing service quality ▪ Enhancement of s
Slide 7: Final 5G auction rules favor service provider such as freenet
Final 5G auction rules favor service provider such as freenet What would improve freenet’s Represented in final rules Assessment position to current status? Obligation for the operators to contract Obligation to negotiate based on (Diensteanbieterverpflichtung) existing legacy contracts ▪ Improved r
Slide 8: Media Broadcast's successful digital transformation in 2018
Media Broadcast’s successful digital transformation in 2018 DVB-T2 HD SAT TV freenet TV connect DAB+ Covering 63 locations Media In the second half of 2018 End of May 2018, freenet TV Following the trend of Broadcast reaches around freenet TV launches connect was launched offering digitalisation Med
Slide 9: Strategic divestment from analogue radio – in a nutshell
Strategic divestment from analogue radio – in a nutshell ▪ German regulatory board announced new regulation of analogue radio antennas; new regulated prices would have made the business unprofitable in the coming years ▪ Given the overall focus on digital (DVB-T2 and DAB+) management decided to auct
Slide 10: waipu.tv became market and technology leader in German IDLTV
waipu.tv became market and technology leader in German IDLTV New features launched in Q4/2018 Successful year 2018 Launched Alexa – waipu.tv is the first waipu.tv has reached more than 250k paying ✓ linear Live-TV-Provider with Alexa voice control feature worldwide subscribers within 2 years waipu.t
Slide 11: Stability and growth in customers main pillar of TV segment
Stability and growth in customers main pillar of TV segment Subscribers (RGU) Subscribers [in '000] [in '000] End of major trial period 1.001 1.014 252 902 945 901 202 745 174 133 454 102 72 52 25 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 ▪ Churn
Slide 12: We strongly believe in our strategic investment in CECONOMY
We strongly believe in our strategic investment in CECONOMY ▪ Timing of investment not ideal from a short-term financial perspective (share price loss of CECONOMY) ▪ HOWEVER: Strategic rationales for the investment decision remains valid - we focus on long-term relationship and new common business a
Slide 13: freenet Group major KPIs for 2018 are met
freenet Group major KPIs for 2018 are met EBITDA 441.3 excl. Sunrise 289.2 Free Cashflow excl. Sunrise dividend million EUR incl. analogue radio sale million EUR 6.9 Postpaid customers + 185 thousand yoy 1.3 TV customers (revenue generating) + 262 thousand yoy million million 13 | Preliminary result
Slide 14: Financial Guidance 2018 – Achieved
Financial Guidance 2018 – Achieved EBITDA Analogue radio excl. Sunrise Analogue Scenario: going-concern radio sale Guidance: 410.0 mEUR 430.0 mEUR ✓ Actual: 441.3 mEUR Free Cashflow Analogue radio sale excl. Sunrise Analogue radio sale Scenario: future cash-in direct cash-in Guidance: 290.0 mEUR ✓ 3
Slide 15: Agenda
Agenda (1) Achievements 2018 Christoph Vilanek, CEO (2) Financials 2018 Ingo Arnold, CFO (3) Goals 2019 Christoph Vilanek, CEO (4) Q&A 15 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 16: Stable EBITDA despite missing operational analogue radio EBITDA
Stable EBITDA despite missing operational analogue radio EBITDA Revenue ▪ Revenue before IFRS 15 increases by 4.3 per cent from 3,507.3 [in mEUR] 988.9 mEUR to 3,659.2 mEUR based on (low margin) hardware sales 873.7 894.0 902.7 949.9 185.6 194.7 ▪ Gross profit decreases by 46.0 mEUR to 903.7 mEUR (2
Slide 17: Reported EBITDA remains the main KPI, but…
Reported EBITDA remains the main KPI, but….. …adjusted EBITDA introduced to make non-recurring one-offs and regulatory effects transparent -83.3 Current logic (based on 2018 FY) Future logic (based on 2018 FY) 485.5 EBITDA 485.5 EBITDA Adjusted EBITDA [in mEUR] [in mEUR] 402.2 117.9 133.0 128.0 117.
Slide 18: All segment-EBITDAs stable without inter-segment allocations
All segment-EBITDAs stable without inter-segment allocations Sunrise Analogue radio sale Inter-segment allocation Segment EBITDA Mobile TV & Media Other/ holding freenet Group [in mEUR] 541.2 485.5 513.6 438.8 420.4 410.3 133.2 44.3 86.3 36.5 8.5 39.1 133.2 36.5 44.3 39.1 Including 40.2 402.3 399.6
Slide 19: Explanation of deviation on major financial performance indicators
Explanation of deviation on major financial performance indicators Revenue Gross profit [in mEUR] [in mEUR] Mobile Communications TV & Media without inter-segment allocation 169.5 TV & Media -4.2 -8.0 -5.4 3,507.3 -761.8 -3.5 -9.2 -15.4 -14.2 -3.7 2,897.5 946.3 949.8 903.7 S -29.6 mEUR FY 2017 IFRS
Slide 20: Free Cashflow definition changed to common sense (starting 2019)
Free Cashflow definition changed to common sense (starting 2019) Calculation of free cashflow as it is available for shareholders and debt investors Current logic (based on 2018 FY) Future logic (based on 2018 FY) in mEUR in mEUR EBITDA 485.5 EBITDA 485.5 +/- Profit share of at-equity accounted inve
Slide 21: Mobile – Operational KPIs developing in 2018 as expected
Mobile – Operational KPIs developing in 2018 as expected Postpaid Customers 6,896 ▪ Increase in strategically most important and valuable customer group [in '000] 6,869 6,828 with two-year contracts: Postpaid customer base increased by 6,770 +185,000 to 6.896 million; growth yoy stable 6,711 6,646 ▪
Slide 22: Mobile – ARPU definition no longer including hardware revenues
Mobile – ARPU definition no longer including hardware revenues IFRS 15 allows to separate hardware revenues from service revenues Current logic (based on 2018) Future logic (based on 2018) Postpaid ARPU Postpaid ARPU without hardware [in EUR] [in EUR] 21.93 21.36 21.54 21.68 21.63 19.25 18.95 19.01
Slide 23: Mobile – Without intersegment-allocation financial-KPIs stable
Mobile – Without intersegment-allocation financial-KPIs stable Revenue ▪ Revenue before IFRS 15 increases in 2018 by 5.3 per cent to [in mEUR] 3,368.4 mEUR due to extension of (low margin) hardware business 909.0 805.0 814.6 839.8 ▪ Gross profit without inter-segment allocation decreases by 1.3 per
Slide 24: TV & Media – Subscriber momentum intact at EXARING
TV & Media – Subscriber momentum intact at EXARING Registered customers ▪ waipu.tv reached more than 1,250,000 registered customers [in '000] (+173 per cent), the contained subscribers more than doubled to 252,000 (+146 per cent) 1,264 ▪ freenet TV with more than 1,014,000 freenet TV subscribers 1,0
Slide 25: TV & Media – EBITDA stabilizing on expected levels
TV & Media – EBITDA stabilizing on expected levels Revenue ▪ Revenue decreases by 4.1 per cent to 282.6 mEUR due to lower [in mEUR] analogue radio revenues (2017: 294.8 mEUR) 74.7 74.7 75.6 ▪ Gross profit without inter-segment allocation decreases by 15.3 per 77.3 cent to 164.5 mEUR (2017: 194.1 mEU
Slide 26: TV & Media – Transformation from B2B to B2C at Media Broadcast
TV & Media – Transformation from B2B to B2C at Media Broadcast and investing into growth at EXARING Gross profit TV & Media ▪ Gross profit without inter- [in mEUR] segment allocation decrease of 31.2 22.8 29.6mEUR to 164.5 mEUR -2.6 -14.2 1.4 -14.0 -3.5 -23.1 (2017: 194.1 mEUR) in TV and -17.0 Media
Slide 27: Main financial KPIs: Equity ratio, net debt & leverage
Main financial KPIs: Equity ratio, net debt & leverage Total assets & Equity ratio Net debt & Leverage [in mEUR] [in mEUR] 27.6% 33.9% 3.3 2.5 4,634.7 4,314.1 1.3 1,596.6 0.9 1,350.3 644.1 510.0 FY 2018 FY 2017 FY 2018 FY 2017 Total assets Equity ratio Net debt Pro-forma net debt Leverage 27 | Preli
Slide 28: No overpromising leverage calculation
No overpromising leverage calculation Alignment of leverage presentation to market view and correction of double-countings Current logic (based on 2018 FY) Future logic (based on 2018 FY) 1. Leverage: 1,3 1. Leverage: 3,6 in m EUR in m EUR Net debt: 644,1 Net debt: 1.596,6 + Borrow ings 1.722,9 + Bo
Slide 29: Increase of leverage from introduction of IFRS 16 is non-material
Increase of leverage from introduction of IFRS 16 is non-material BUT: Though effects on KPIs not negligible e.g. EBITDA will be increased by 30-40 mEUR ▪ Simulated effects on KPIs 2018 based on 12/2018: − EBITDA approx. 30-40 mEUR (+) − Net income approx. ~0 mEUR (+/-) − Net debt approx. 500 mEUR (
Slide 30: Agenda
Agenda (1) Achievements 2018 Christoph Vilanek, CEO (2) Financials 2018 Ingo Arnold, CFO (3) Goals 2019 Christoph Vilanek, CEO (4) Q&A 30 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 31: Operational agenda is set for 2019
Operational agenda is set for 2019 Products Subscribers Operations ▪ Fast data/LTE available for own ▪ Further focussing on most valuable ▪ BI-based loyalty up and churn tariffs postpaid customers down ▪ Pureplay app based tariff offering ▪ Prepaid further to decline ▪ waipu.tv available on Android
Slide 32: KPI Guidance & Financial Policy (1/2)
KPI Guidance & Financial Policy (1/2) Dividend Revenue EBITDA Free Cashflow in mEUR/ Payout as indicated Guidance stablea 420 - 440b 240 - 260c 1.65 EUR/shared 2019 Results 3,659.2 Excl. Sunrise: 441.3 Excl. Sunrise: 289.2 1.65 EUR/sharee 2018 (preliminary) (incl. IFRS 15: 2,897.5) (Adjusted EBITDA:
Slide 33: KPI Guidance & Financial Policy (2/2)
KPI Guidance & Financial Policy (2/2) Mobile TV and Media Financial Policy Communications freenet TV Postpaid Postpaid waipu.tv subscriber Leverage Equity ratio in EUR/ customer ARPU subscriber as indicated (RGU) Guidance moderate stablea > 350,000 > 1,000,000 < 3.5b > 25%c 2019 increase Results 21.
Slide 34: Looking forward to answer your questions.
Looking forward to answer your questions. Hollerstrasse 126 Investor Relations 24782 Büdelsdorf +49 (0) 40 513 06 778 www.freenet-group.de investor.relations@freenet.ag 34 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 35: Appendix
Appendix 35 | Preliminary results for the financial year 2018 | 28.02.2019
Slide 36: Financial statements – Income statement information
Financial statements – Income statement information [in mEUR] 2018 2017 Q4 2018 Q4 2017 The decrease in Group revenue is only attributable to higher new Revenue excl. IFRS 15 3,659.2 3,507.3 988.9 949.9 accounting method (IFRS 15). Exclusive of this, revenues Gross profit 903.7 949.8 235.1 251.6 inc
Slide 37: Financial statements – Cashflow information
Financial statements – Cashflow information [in mEUR] 2018 2017 Q4 2018 Q4 2017 Cashflow from operating activities decreased in 2018 by 4.1 Cashflow from operating 369.5 385.4 82.3 73.4 per cent to 369.5 mEUR yoy. activities Cashflow from investing Due to payments made for the 9.1% -332.9 -42.1 -21.
Slide 38: All key KPIs for 2018 in line with guidance
All key KPIs for 2018 in line with guidance Mobile Group waipu.tv freenet TV Communication Dividend Customer Postpaid Paying Revenue1 Total User Paying User RGU ARPU payout ownership ARPU User Results 3,659.2 1.65 2018 -135,400 21.6 € 1,263,900 251,800 1,114,600 1,014,200 4.4 € (Prelim) EURm €/share
Slide 39: Alignment between strategic focus and definition of customer KPIs
Alignment between strategic focus and definition of customer KPIs Focus on sustainable postpaid customers and simplification of low profit no frills/prepaid revenues Current logic (based on 2018 FY) Future logic (based on 2018 FY) Postpaid Service Revenue Postpaid Service Revenue Customers ARPU Cust
Slide 40: Current financing and maturity structure
Current financing and maturity structure Average financing cost below 2.0 per cent p.a. [in mEUR] Promissory notes Issue Instrument Volume Maturity Syndicated bank loan Promissory 2015 100 m€ 2020, 2022 note 610.0 2016 Promissory 560 m€ 2021, 2023, 2026 (March) note 428.0 2016 Promissory 350 m€ 2020
Slide 41: Financial Guidance 2019 – Like for like stable at all levels
Financial Guidance 2019 – Like for like stable at all levels EBITDA Guidance 2019 EBITDA (as reported) 485.5 mEUR EBITDA* - Sunrise EBITDA 44.3 mEUR 441.3 mEUR incl. IFRS 16 (approx. 30-40 m€) - One-offs (analogue radio) 39.1 mEUR 402.2 mEUR 420 - 440 mEUR = Adjusted EBITDA 402.2 mEUR Dividend stabl
Slide 42: Free Cashflow bridge and quarterly breakdown FY2019e
Free Cashflow bridge and quarterly breakdown FY2019e Detailed Bridge from EBITDA to Free Cashflow Quarterly breakdown FY2019e FY2019e [in mEUR] [in mEUR] 420-440 -25 40 -40 75-85 -50 70-80 -60 50-60 240-260 -45 35-45 EBITDA Chang e in Tax pa yments Net capex Sun rise Lea sin g Inte rest Free Cash fl