Management Presentation Q2 2018 results Christoph Vilanek, CEO and - - PowerPoint PPT Presentation

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Management Presentation Q2 2018 results Christoph Vilanek, CEO and - - PowerPoint PPT Presentation

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Management Presentation Q2 2018 results Christoph Vilanek, CEO and Joachim Preisig, CFO 09 August 2018 | Analyst and Investor Conference Call 1 | Management Presentation Q2 2018 | 09 August 2018 Cautionary statement This presentation contains

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1 | Management Presentation Q2 2018 | 09 August 2018

Management Presentation Q2 2018 results

09 August 2018 | Analyst and Investor Conference Call

Christoph Vilanek, CEO and Joachim Preisig, CFO

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2 | Management Presentation Q2 2018 | 09 August 2018

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 presentation. This presentation does not constitute an offer to sell or a solicitation to purchase any securities of freenet

  • AG. Any such decision must not be made on the basis of the information provided in this presentation.

freenet AG does not undertake any obligation to publicly update or revise information provided during this presentation.

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3 | Management Presentation Q2 2018 | 09 August 2018

Positive 1st half year 2018 performance

▪ +5.4 per cent yoy in group revenue before IFRS 15 and +3.8 per cent yoy in recurring EBITDA ▪ All operational and qualitative KPI targets achieved ▪ Financial investment Sunrise with good performance ▪ New strategic investment in CECONOMY closed ▪ 2 new board members assigned, Chief Commercial Officer and Chief Customer Experience Officer

Group Mobile Communications TV and Media

▪ Continuous growth in postpaid customer base (+4.0 per cent or 264,000 yoy) ▪ Postpaid ARPU stable at 21.5 euros ▪ Digital lifestyle revenues + 14.5 per cent yoy ▪ freenet TV with 1,140,000 paying user (RGU within expected range) ▪ Media Broadcast TV B2B contribution/ gross revenues in line with full year prognosis ▪ One-off effect amounting to 7.3 million euros effect from the partial sale of VHF infrastructure will be compensated by corresponding lower revenues in VHF in 2nd half of 2018 ▪ waipu.tv with new high in number of registered customers per quarter + 215,000 up to 824,000 per June ▪ waipu.tv subscibers up from 133,000 in Q1 2018 to 174,000 in Q2 2018

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4 | Management Presentation Q2 2018 | 09 August 2018

Postpaid net adds in Q2 2018 amount to approx. 60,000

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

[in million]

Postpaid No frills Customer Ownership

3.03

Key drivers ▪ Continued improvement of customer structure based on increase of postpaid customers by 4.0 per cent yoy or +264,000 ▪ Shrinking no frills customer base (-287,000 yoy) because of new ID regulations and waiving super discount offers ▪ Online share of contract related transactions 45 per cent

9.57 9.60 9.59 9.60 9.59

2.95 2.88 2.83 2.74 6.56 6.65 6.71 6.77 6.83

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Most important postpaid ARPU stable

2017 2016

[EUR/month]

Prepaid ARPU 3.4 euros – again due to lower base No-frills ARPU 3.5 euros as a consequence of offer policy 2018 Postpaid No-frills Postpaid ARPU 21.5 euros. Data revenue share at 35.5 per cent. Prepaid

21.5 21.4 21.6 21.1

21.4 21.7

21.4 21.5

Q1 Q2 Q3

2.4 2.7 3.5

Q2

3.1 3.1 3.4

Q2

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Digital Lifestyle revenues constantly increasing

Strong performance ▪ + 4.5 million euros or + 12 per cent year on year Main drivers ▪ Increasing focus on entertainment products namely freenet Video ▪ Integrated multi-channel-platform ▪ Digitization of all customer interfaces

36.3 37.9 41.0 49.0 42.6 42.4

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

[in EUR million]

42.4 55.0 78.3 106.0 137.1 164.2

2012 2013 2014 2015 2016 2017

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freenet TV outlook 1.2 million paying user including Satellite

DVB-T2 HD

▪ Total revenues 13.3 million euros during Q2 ▪ Paying user growing to 1.1 million

Sat

3

▪ Initial shipments of respective CI+ modules only in May; testing of advertising, promotions and product placements during month of June ▪ Real uptake only from Q4 due to summer season Full year outlook remains on 1.2 million paying user

Paying user and RGU

30.06.2017 31.12.2018 30.06.2018 31.12.2017

> 1,200,000

> 974,600 1.2 – 1.5 > 2.5 1.7 – 2.2

Thereof RGU1 Paying user

31.03.2018 > 2.5

> 1,022,000

> 454,300 902,000 945,000 1,001,000 > 1.0 mio. RGU 454,000 975,000 1,022,000 1,138,000 >1,200,000

1) RGU as the abbreviation for “Revenue Generating User” refers to freenet TV subscribers who purchased and also activated the freenet TV access

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waipu.tv massively broadened its technical reach in Q2 2018

Aside of Android and iOS apps serving Google Chromcast and Amazon Fire, waipu.tv is now available on four more platforms

  • iPad
  • Android Tablet
  • Fire Tablet
  • Web-Client (Browser-Version)

Apple TV as well as direct access to Samsung is planned before end of 2018 Platform extensions

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Proof of best quality service with low latency technology

Delay in delivery by access technology ARD ZDF Sat SD Sat HD 0.5 0.5

waipu.tv HD* 2.3 2.3

DVB-T 2 HD 4.5 2.5 Kabel HD 6.5 6.0 Telekom Entertain HD Receiver 7.0 8.0 Zattoo* 41.0 34.0 MagineTV* 45.0 46.0

*on Fire-TV all information in seconds Source: c‘t magazine

Goal Deliver „the fastest“ goal during world championship Solution

  • Own fibre network, no buffer or proxy
  • Self developed software in client, server- and

traffic-management

  • Patents pending

waipu.tv faster than cable and other IPTV

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Successful launch of on-demand-content as linear channel

Beispiel: Tagesplatzierung MySpass im Senderranking (Viewtime)

waipu.tv can take any content into its CMS and delivers it as a live-channel with the option for the consumer to switch into demand mode to select program and/ or series. Brainpool is one of the most successfull comedian, sit-com and fun-series producer in Germany Successfull formats comprise Anke Engelke, Stefan Raab, Carolin Kebekus KPI of „my spass“ on demand channel in Q2 2018

  • Market share of up to 2.3 per cent
  • Ranks 9 out of 90 channels
  • Advertising handled exclusively by EXARING AG
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Uptake of registered as well as paying users accelerates

Q2 2018 performance

▪ By the end of Q2 waipu.tv has attracted more than 824,000 registered user ▪ Out of those 174,000 have decided for a paid service ▪ For the first time real time promotions alongside the football championship have been applied with great uptake (conversion tbd.) ▪ Those promotions are taken as proof

  • f concept to attract more content

partners with own customer bases

147,100 255,300 339,400 463,600 25,000 52,100 71,900 102,300 608,800 133,100 >250,000 >1 Mio.

Paying user Total user

Total registered and paying user

30.06.2017 31.12.2018 30.06.2018 31.12.2017 52,000 31.03.2018 102,000 133,000 174,000 174,000 250,000 255,000 464,000 609,000 824,000 >1,000,000

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Strategic Participation in CECONOMY AG

Rationale

▪ Strategic investment with the aim to strengthen the very successful cooperation, which has been existing for 27 years ▪ CECONOMY, the leading retailer in the market in which it operates, is one of freenet’s most important sales channels ▪ Considerable strategic importance: Focussed on mobile up to now with the intention to extend the cooperation to further areas, including TV access and Digital Lifestyle services ▪ Friendly participation, that will benefit both parties

Transaction details

▪ Capital increase of 10.0 per cent resulting in a stake of 9.1 per cent (32,633,555 ordinary bearer shares) ▪ Purchase price of 8.50 EUR per share (level of the ABB-announcement date) results in 277 million euros

Financing

▪ Bridge loan (bilateral, duration: 18 months, interest rate 1.4 per cent) ▪ Refinancing at favourable market conditions intended; no equity planned ▪ Financing strategy confirmed: Leverage target corridor of 1.0 to 2.5

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Financial statements – Income statement information

1st half 2018 1st half 2017 Q2 2018 Q2 2017

Revenue without the effect of IFRS 15 1,767.7 1,677.2 894.0 839.2 Revenue 1,386.2 1,677.2 696.6 839.2 Gross profit 445.8 458.6 222.2 231.6 EBITDA 224.4 209.3 117.9 108.4

Depreciation and amortisation

  • 66.8
  • 69.9
  • 30.2
  • 34.9

Subsequent recognition from Sunrise PPA

  • 9.5
  • 10.4
  • 4.8
  • 5.2

EBIT 148.1 129.0 83.0 68.3

Interest result

  • 23.1
  • 24.6
  • 12.1
  • 12.2

EBT 125.1 104.4 70.8 56.0 Taxes on income

  • 17.0
  • 12.5
  • 9.5
  • 5.8

Group result 108.0 91.9 61.3 50.2 Earnings per share (EUR) 0.89 0.76 0.50 0.41

[in EUR million]

The increase in Group revenue without the effect of IFRS 15 by 54.8 million euros to 894.0 million euros is mainly attributable to increasing hardware sales. Decrease in reported Group revenue due to the reclassification

  • f commissions because of IFRS

15. EBITDA grows to 117.9 million euros yoy (+8.8 per cent); influenced by a one-off effect from the partial sale of VHF infrastructure amounting to 7.3 million euros. Group result amounts to 61.3 million euros; an increase of 11.1 million euros yoy (+22.2 per cent)

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Split of the financials into the relevant segments

1) Revenue incl. IFRS 15 effects; Group revenue in the 1st half 2018 without IFRS 15 effects 1,767.7 million euros; Mobile revenues in the 1st half 2018 without IFRS 15 effects 1,619.6 million euros. 2) Excluding the profit share of our holding in Sunrise we generated a Group EBITDA of 204.7 million euros (1st half 2017: 189.8 million euros); Excluding the profit share of our holding in Sunrise we generated a Mobile Communications Segment EBITDA of 181.8 million euros (1st half 2017: 180.5 million euros).

[in EUR million]

Revenue Gross profit

  • 2.8%

EBITDA

209.3 +7.3%

Group Mobile Communications

354.1 354.8 +0.2% 200.0 +0.8% 201.52

TV and Media

72.2

1st half 2018 1st half 2017

83.8 148.7 149.4 28.0 13.8 458.6 445.8

  • 0.5%
  • 13.9%

+103.2% 224.42 1,677.2

  • 17.3%

1,238.21 1,519.8

  • 18.5%

1,386.21

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Financial statements – Balance sheet information

Shareholders' equity Borrowings Trade accounts payable Other liabilities

4,495.8 4,665.7 Total

Intangible assets Goodwill Trade accounts receivable Cash and cash equivalents Other assets

4,495.8 4,665.7 Total Shareholders‘ equity and liabilities Assets

542.9 1,379.9 224.0 2,102.6 246.4

31.03.2018

1,327.0 1,674.9 1,102.2 401.2 552.5 1,379.9 261.6 2,110.8 360.9 1,672.7 1,118.2 401.2

[in EUR million]

1,473.6

30.06.2018 30.06.2018 31.03.2018

391.7

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Financial statements – Cash flow information

1st half 2018 1st half 2017 Q2 2018 Q2 2017 Cash flow from operating activities 189.4 211.5 123.6 133.2 Cash flow from investing activities

  • 23.8
  • 29.9
  • 12.6
  • 8.4

thereof net capex

  • 23.5
  • 30.4
  • 12.5
  • 8.5

Cash flow from financing activities

  • 242.0
  • 239.3
  • 225.5
  • 220.7

Change in cash and cash equivalents

  • 76.4
  • 57.7
  • 114.5
  • 95.9

Free cash flow1 165.8 181.1 111.1 124.7

1) Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets.

[in EUR million]

Cash flow from

  • perating

activities decreased in Q2/2018 by 9.6 million euros to 123.6 million euros yoy mainly due to the increase in NWC. Cash flow from investing activities is significantly lower primarily due to lower investments in TV & Media. Free cash flow of 111.1 million euros in Q2/2018 – representing a decline

  • f

13.7 million euros compared with the corresponding previous year quarter. Fully in line with the quarterly guidance.

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Detailed bridge from EBITDA to free cash flow

[in EUR million]

224.4

  • 30.8
  • 14.4
  • 23.5
  • 19.7
  • 7.0*

165.8

Q1 – Q2 2018

* Incl. gains on the disposal of fixed assets (mainly VHF infrastructure) in the amount of 7.3 million euros ** Free cash flow w/o Sunrise dividends 290 – 310 million euros according to guidance

FY 2017

541.2

  • 25.6
  • 30.1
  • 42.5
  • 133.2

34.4

  • 1.4

342.8

FY 2018e

410 – 430

  • 25
  • 50
  • 50

37 327 – 347**

36.9

EBITDA Change in net working capital Tax payments Capex Sunrise EBITDA (no cash) Sunrise dividends

  • ther

Free cash flow

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freenet AG financial guidance 2018 & perspective 2019

Group revenue4 Group EBITDA Free cash flow (FCF)1 Dividend payout

Perspective 2019 50-75%

  • f FCF incl. Sunrise

Guidance 2018 410 - 430 m€2

(+ Sunrise)

290 - 310 m€3

(+Sunrise)

50-75%

  • f FCF incl. Sunrise

Results 2017

3,507.3 m€ 408.0 m€

(incl. Sunrise 541.2 m€)

308.4 m€

(incl. Sunrise 342.8 m€)

1.65 €/share

Guidance 2017

> 410.0 m€2

(+ Sunrise)

~310.0 m€3

(+Sunrise)

50-75%

  • f FCF incl. Sunrise

1) Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets. 2) The expected EBITDA contribution of Sunrise Communications Group AG is not included in our guidance. 3) Dividend payment from Sunrise is not included in our guidance. 4) Without effects from IFRS 15

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freenet AG KPI guidance 2018 & perspective 2019

Mobile Communication waipu.tv freenet TV

Customer

  • wnership

Postpaid ARPU Total User Paying User Paying User ARPU1

Perspective

2019 Guidance 2018

> 250,000 > 1,200,000

Results 2017

+60,000 21.4 € 464,0002 102,000 975,000 4.3 €

Guidance 2017

> 500,000 > 100,000 ~ 950,000 ~ 4.5 €

1) freenet TV ARPU is referring to number of freenet TV paying users 2) without 72,000 pre-registered users

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freenet Group management

We are looking forward to your questions

Joachim Preisig, CFO Christoph Vilanek, CEO

▪ CFO of freenet AG since 2010

▪ CFO of debitel AG since 2006 ▪ CFO of T-Mobile / Head of Group Controlling at Deutsche Telekom AG since 2002 ▪ CFO at O2 since 1996

▪ CEO of freenet AG since 2009

▪ Management positions at debitel AG since 2005 ▪ Consultant for telecommunication with McKinsey&Company since 2001 ▪ Management positions in Direct Marketing and Media 1991-2001

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Appendix

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About CECONOMY AG

▪ CECONOMY acts as a platform that brings together various businesses in the area of Consumer Electronics ▪ Operational business is handled by several brands, with the main focus on MediaMarktSaturn Retail Group with its brands MediaMarkt and Saturn ▪ EBITDA of 704 million euros in financial year 2016/2017 ▪ Total sales of 22.2 billion euros in financial year 2016/2017 ▪ Market leader in 9 European countries ▪ More than 1,000 stores in Europe ▪ Approximately 65,000 employees worldwide

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Overview over current financing and maturity structure

Average financing cost below 2.0 per cent p.a.

[in EUR million]

54.5 274.5 443.0 163.5 93.5 12.0 23.5 100.0 278.0 610.0

2018 2019 2020 2021 2022 2023 2024 2025 2026

Promissory notes Syndicated bank loan Issue Instrument Volume Maturity 2012 Promissory note 54.5 m€ 2019 2015 Promissory note 100 m€ 2020, 2022 2016 (March) Promissory note 560 m€ 2021, 2023, 2026 2016 (November) Promissory note 350 m€ 2020, 2022, 2024 2016 Syndicated bank loan 610 m€

(+100 m€)

2022 2018 (July) Bank loan (“Bridge”) 278 m€ 2020 (Jan)

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Hollerstrasse 126 Investor Relations 24782 Büdelsdorf +49 (0) 40 513 06 778 www.freenet-group.de investor.relations@freenet.ag

Thank you.