Management Presentation Results 9M/3Q19 Christoph Vilanek, CEO and - - PowerPoint PPT Presentation

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Management Presentation Results 9M/3Q19 Christoph Vilanek, CEO and Ingo Arnold, CFO 07 November 2019 | Analyst and Investor Conference Call 1 | Management Presentation 9M/3Q19 | 07.11.2019 Cautionary statement This presentation contains

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1 | Management Presentation 9M/3Q19 | 07.11.2019

Management Presentation Results 9M/3Q19

07 November 2019 | Analyst and Investor Conference Call

Christoph Vilanek, CEO and Ingo Arnold, CFO

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2 | Management Presentation 9M/3Q19 | 07.11.2019

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 9M/3Q19 | 07.11.2019

Results on track to meet full-year guidance 2019

Revenue in EUR million

2,130

EBITDA in EUR million

325.8

Free cash flow in EUR million

199.2

Subscriber base1 in million

8.299

1 Postpaid customers, freenet FUNK customers, freenet TV RGUs and waipu.tv subscribers
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4 | Management Presentation 9M/3Q19 | 07.11.2019

Group subscriber base growing by 75,500 in 3Q19

8,224 8,299

+32.2

  • 0.9

+33.9

1 ARPU comparable to postpaid contracts, but not counted within postpaid base

Group subscriber base

[in ‘000s]

+10.2

1

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5 | Management Presentation 9M/3Q19 | 07.11.2019

▪ Sales agreement for VF and TEFD signed with Expert SE ▪ DLS strongest 3Q result since 2013 ▪ Majority of customer base changed to LTE for free by year-end ▪ freenet FUNK +31k w/o marketing; FUNK technology to be used for

  • ther tariffs before end of the year

▪ Volume increase in Media Markt/Saturn and indirect online channels ▪ More rigid use of discounts and dealer commissions

Countermeasures effective – Postpaid net adds positive again

Mobile market challenges freenet countermeasures Status end of 3Q19

▪ Fully saturated mobile market with commoditized products ▪ New regulation put into force (e.g. international calls) ▪ Reduced competition on hardware market (Huawei ban) ▪ Longer hardware innovation cycles and usage ▪ Broadening sales cooperations, bundling DLS options etc. ▪ LTE portfolio completed on all networks ▪ Innovative products e.g. freenet FUNK as full digital proposition ▪ Churn down – Customer loyalty projects (digitalization customer journey) ▪ Customer acquisition mix focusing

  • n quality and lifetime margin
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6 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 19 Q2 19 Q3 19 1,994 Q1 19 Q2 19 Q3 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 18 Q2 18 Q3 18 Q4 18

Number of waipu.tv subscribers already above FY plans

Registered customers Subscribers

[in '000]

Some operational KPI highlights:

[in '000]

1,007 1,264 824 609 133 174 202 252 286 332 1,515 1,748 366 +987,300 registered customers added (or +98.1%) Contained subscribers almost doubled (+163,400 or +80.7%)

Consumption of

unique NewTV channels e.g. Bild or ADAC up

66% since March 2019 31% of all users use

the newly introduced

waiputhek Average duration of daily

waipu.tv usage per subscriber

up 40% since 3Q18

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SLIDE 7

7 | Management Presentation 9M/3Q19 | 07.11.2019

New features launched in 3Q19

Launch of Germany’s largest Turkish language package with over 30 channels Launch of further proprietary channel assets (including wellness, crime series (bing watching), fashion and lifestyle, nature and documentaries) Joint presentation of voice enabled user interface feature with Amazon at IFA consumer trade fair in Berlin Roll-out of personal video library feature (“Waiputhek”)

waipu.tv as aggregation platform for linear entertainment growing

Upcoming in 4Q19

Distribution of 14 regional German channels on a transmission fee basis Launch of even more channel assets with genres including music, documentaries and celebrity news Launch of a feature allowing artificial intelligence based filtering of electronic programming guides based on viewers/content preferences

✓ ✓ ✓ ✓

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8 | Management Presentation 9M/3Q19 | 07.11.2019

Key facts about “Türki Paketi”

waipu.tv‘s Turkey package adds significant customer potential

30+

Largest Turkish language package in Germany with over 30 channels in HD

800k+ Turkish TV households in Germany >50%

Turkish TV households addressable by freenet/waipu customer base

9.99€

Attractive initial pricing modell, no buy-through product

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9 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 19 Q2 19 Q3 19

Subscribers (RGU1)

Voucher push back freenet TV anticipated and averted

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

9M19 vs. 9M18 comparison: ▪ freenet TV subscribers (RGU1) show no voucher push back (+135,100 or 15.0%) and still above long-term target (> 1.0 million RGUs) ▪ Promotions and discounts significantly reduced ▪ Testing of combined offer with waipu.tv under investigation

[in '000]

Q1 18 Q2 18 Q3 18 Q4 18 945 1,001 901 1,014 1,020 1,037 1,037

✓Stability maintained

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10 | Management Presentation 9M/3Q19 | 07.11.2019

▪ EU international calls/ roaming regulation ▪ International call regulation effective since 15 May 2019 ▪ EBITDA effects (yoy) in 2019 (mEUR):

Regulatory effects announced in August are taking place in Q3

▪ Missing operational results in H1/2019 ▪ Follow-up costs from divestment ▪ EBITDA effects (yoy) in 2019 w/o book profits sale (mEUR):

Analogue radio (TV & Media)

Q1 Q2 Q3 Q4e FYe

  • 3
  • 2

+/-0 +/-0

  • 5

International Calls/ Roaming (Mobile)

Q1 Q2 Q3 Q4e FYe

  • 2
  • 5
  • 5
  • 12
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11 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 18 Q2 18 Q3 18 Q4 18 IFRS 16 EBITDA w/o regulatory effects Q1 18 Q2 18 Q3 18 Q4 18

Group performance adjusted by regulatory effects steady

Gross profit

[in mEUR]

EBITDA

[in mEUR]

0.8 98.6 223.3 11.4 113.3 108.1 96.8 123.0 International calls/ roaming Analogue radio divestment 218.1 100.2 10.9 107.5 101.6 100.4 96.0 106.5 IFRS 16 107.9

  • 2.1

223.5 222.2 235.1 222.9 227.3 219.4 Gross Profit w/o regulatory effects Q1 18 Q2 18 Q3 18 Q4 18

9M19 vs. 9M18 comparison: ▪ Revenue up 26.7 mEUR to 2,130.0 mEUR. ▪ Gross profit and EBITDA impacted by effects from inevitable regulatory changes: IFRS 16, international calls/ roaming and analogue radio divestment. ▪ Adjusted by regulatory effects both, gross profit and EBITDA, developed almost steady: Gross profit -1.0 per cent to 662.1 mEUR and EBITDA +1.9 mEUR to 304.8 mEUR.

Revenue

[in mEUR]

689.6 696.6 794.2 717.0 689.9 699.1

  • 2.0
  • 1.5

International calls/ roaming 7.7 16.5 11.6 741.0 4.0

  • 2.0
  • 5.0

219.4 220.8 3.4 3.5 106.0 11.2

  • 5.0

110.3

  • 1.9
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12 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 18 Q2 18 Q3 18 Q4 18 Q1 18 Q2 18 Q3 18 Q4 18

Mobile – Stable running engine…

EBITDA Gross profit

[in mEUR] [in mEUR]

84.4 179.0 175.7 178.5 185.2 179.6 88.6 89.0 83.4 96.0 92.1 6.9 99.8 91.5 90.3

  • 4.2

3.8 2.4 EBITDA w/o regulatory effects/ inter-segment allocation 6.2 168.9 170.5 171.7 181.0 179.7 171.7 179.5

  • 0.0

0.1

  • 2.5

4.0 8.5 5.5

  • 5.0
  • 0.7

Gross Profit w/o regulatory effects/ inter-segment allocation 96.5 92.1

  • 1.8

90.4 88.7

  • 1.8

5.6

  • 2.0

9M19 vs. 9M18 comparison: ▪ Revenue up 36.3 mEUR to 1,928.7 mEUR due to low-margin hardware sales; high-margin postpaid service revenue -6.3 mEUR due to international calls (1,159.7 mEUR vs. 1,166.0 mEUR). ▪ Gross profit adjusted by regulatory effects and without inter-segment allocation increased by 4.0 mEUR to 526.0 mEUR mainly due to lower subscriber acquisition costs in 1Q19. ▪ EBITDA without extraordinary effects increased by 8.3 mEUR to 276.7 mEUR based on gross profit development.

Revenue

[in mEUR]

621.0 617.2 654.2 714.3 624.7 631.3 Inter-segment allocation International calls/ roaming IFRS 16 Inter-segment allocation International calls/ roaming IFRS 16 672.7 169.3

  • 0.5

174.8 94.9

  • 5.0

5.8 95.9

  • 2.0
  • 0.1
  • 2.0
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13 | Management Presentation 9M/3Q19 | 07.11.2019 Q1 18 Q2 18 Q3 18 Q4 18

Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19

9M19 vs. 9M18 comparison: ▪ Postpaid customer development positive again (+32,200 in 3Q19) reaching 3Q18 customer level. Guidance in sight. freenet FUNK customers +10,200 added in 3Q19 not included (Total active: >30,600). ▪ Postpaid ARPU without hardware at 18.8 euros moves stable forward, but slightly below 3Q18 (international calls impact). ▪ Demand for value added services unchanged. Digital Lifestyle revenues slightly up 2.8 mEUR to 133.2 mEUR.

Q1 18 Q2 18 Q3 18 Q4 18

Digital Lifestyle revenues Postpaid Customers

Mobile – …with postpaid net adds bouncing back

[in '000]

Postpaid ARPU

[in EUR] [in mEUR]

Q1 18 Q2 18 Q3 18 Q4 18 6,770 6,828 6,896 6,869 ARPU without hardware ARPU incl. hardware 49.4 42.4 42.6 45.4 19.2 19.0 21.5 21.9 21.7 21.7 18.8 18.9 18.8 21.7 6,862 6,834 18.8 21.8 42.1 44.6 46.5 Q1 19 Q2 19 Q3 19 6,866 21.4 19.0

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14 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 19 Q2 19 Q3 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 18 Q2 18 Q3 18 Q4 18 Q1 18 Q2 18 Q3 18 Q4 18 17.4 18.9 IFRS 16 Inter-segment allocation

TV & Media – On the way to continuity

EBITDA Gross profit

[in mEUR] [in mEUR]

37.4 34.7 46.7 28.6 16.6 17.0 17.5 14.8 7.8 20.3 32.8 25.5 13.4 14.3 EBITDA w/o regulatory effects/ inter-segment allocation 40.7 39.1 44.3 41.5 44.4 34.2 38.1 36.5

  • 1.4

2.3

  • 6.9
  • 6.8
  • 5.6

4.0 4.1 Inter-segment allocation IFRS 16 Gross Profit w/o regulatory effects/ inter-segment allocation Analogue radio divestment 3.6

  • 5.9
  • 4.5
  • 1.7
  • 1.8
  • 9.7

4.8 4.8 11.6 7.7 16.5 0.8

  • 2.1
  • 1.5

9M19 vs. 9M18 comparison: ▪ Revenue down 23.5 mEUR to 187.8 mEUR mainly based on missing analogue radio revenues from H1/2019. ▪ Gross profit adjusted by IFRS 16 and without inter-segment allocations decreased by 7.5 mEUR to 112.5 mEUR effected by regulatory and

  • perational developments.

▪ Without inter-segment allocations, IFRS 16 and divestment of analogue radio EBITDA stable at 48.8 mEUR (though content cost path and SAT guarantee payments).

Revenue

[in mEUR]

74.7 74.7 75.6 77.3 71.5 77.3 71.3 62.5 62.9 61.0 63.8 40.6 4.0 37.9 19.4 4.8

  • 1.9
  • 1.5

18.0

  • 1.4
  • 1.4
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15 | Management Presentation 9M/3Q19 | 07.11.2019

EBITDA 9M18 Analogue radio sale (book profits) Inter-segment allocation EBITDA 9M18 w/o analogue radio sale & inter-segment allocation MB B2C MB B2B EXARING EBITDA 9M19 w/o IFRS 16 & inter-segment allocation Inter-segment allocation IFRS 16 EBITDA 9M19 Gross profit 9M18 Inter-segment allocation Gross profit 9M18 w/o inter-segment allocation MB B2C MB B2B EXARING Gross profit 9M19 w/o IFRS 16 & inter-segment allocation Inter-segment allocation IFRS 16 Gross profit 9M19

▪ Gross profit without IFRS 16 and inter-segment allocation decreased by 7.5 mEUR to 112.5 mEUR mainly induced by: (1) MB B2C: Higher content costs from freenet TV (2) MB B2B: Mainly missing

  • perational results from

analogue radio business ▪ EBITDA without IFRS 16 and inter-segment allocation decreased by 4.6 mEUR to 43.3

  • mEUR. Partly compensation of

negative gross profit deviation with reduced marketing spend and lower personnel costs. ▪ EXARING still runs over negative budget in 3Q19.

TV & Media – Without analogue radio effects picture stable in Q3

[in mEUR]

Gross profit 9M18 vs. 9M19 EBITDA 9M18 vs. 9M19

[in mEUR]

53.5 47.8 43.3 52.6

  • 25.7
  • 0.8
  • 5.5*

1.7

  • 5.0

14.4 100.8 120.0 112.5 120.4 19.3

  • 2.3
  • 8.5

3.4

  • 4.2

S -11.0 mEUR S -6.3 mEUR

12.1 20.0

* Compared to previous slide, MB B2B includes -5.0 mEUR operational result from analogue radio.
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16 | Management Presentation 9M/3Q19 | 07.11.2019

1Q19 2Q19 3Q19 4Q19

35-45 75-85 70-80 50-60

Free cash flow fully in guided range

Free cash flow (FCF) 9M19 Guided/actual quarterly breakdown

[in mEUR] [in mEUR] 45.3

▪ Slight catch-up of net CAPEX in 3Q19, which was expected ▪ Tax payments still under average and expectations, but catch-up expected in 4Q19 ▪ In general, free cash flow fully within guided range and on track to meet full year guidance

126.7 81.5 72.4

EBITDA 9M19 Change in net working capital Tax payments Net capex Sunrise dividends Leasing Interest payments Other FCF 9M19

325.8

  • 45.9
  • 12.3
  • 27.0
  • 47.8
  • 34.8
  • 0.4

199.2 41.5

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17 | Management Presentation 9M/3Q19 | 07.11.2019

Main financial KPIs: Equity ratio, net debt & leverage

Higher total assets as direct consequence of IFRS 16 caused lower equity ratio

30.9.18 30.9.19 26.2% 27.4%

Leverage increase due to inclusion of net lease liabilities (IFRS 16) Deducting market values of equity investments lowers net debt

4.6x 4.4x

Total assets & Equity ratio

[in mEUR]

Net debt & Leverage*

[in mEUR]

  • Adj. Net debt & Leverage*

[in mEUR]

4,799.7 4,894.5 30.9.18 30.9.19 1,151.1 2.5x 1.9x 30.9.18 30.9.19 1,902.5 2,102.5 837.0

* The last twelve months (i.e. October 2018 to September 2019 or October 2017 to September 2018 for the previous year) are used for the period-related parameter EBITDA (according to the new definition). The last twelve months EBITDA for October 2018 to September 2019 include a linear extrapolation of the current IFRS 16 EBITDA effect in order to improve the informative value of the KPI.

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18 | Management Presentation 9M/3Q19 | 07.11.2019

For any follow-up questions reach out to: Investor Relations +49 (0) 40 513 06 778 investor-relations@freenet.ag www.freenet-group.de

Results 9M/3Q19 – Q&A session

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19 | Management Presentation 9M/3Q19 | 07.11.2019

Appendix

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20 | Management Presentation 9M/3Q19 | 07.11.2019

Q1 18 Q2 18 Q3 18 Q4 18

Mobile – Detailed revenue split, service & hardware revenues

Revenue split

[in mEUR]

171.4 164.1 267.2 191.5 32.2 Hardware Other Service Revenue Postpaid 30.2 30.6 22.1 34.6 35.3 35.6 36.6 382.8 387.6 389.5 395.5 621.0 617.2 654.2 714.3 Service Revenue NoFrills/ Prepaid 9M19 1,159.7 9M18 1,166.0 Q1 19 Q2 19 Q3 19 387.2 385.2 387.2 33.4 33.8 35.1 177.8 182.8 213.8 26.2 29.5 36.7 624.7 631.3 672.2

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21 | Management Presentation 9M/3Q19 | 07.11.2019

Q1-Q3 2019 Q1-Q3 2018 restated Q3 2019 Q3 2018 restated Revenue 2,130.0 2,103.3 741.0 717.0 Gross profit 666.1 668.6 219.4 222.9 EBITDA 325.8 327.9 110.3 123.0 EBIT 210.2 230.6 72.1 92.4 EBT 189.3 162.6 66.2 37.5 Group result 169.3 148.1 57.6 40.0 Earnings per share (EUR) 1.38 1.22 0.46 0.33

[in mEUR]

Financial statements – P&L (shortened)

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22 | Management Presentation 9M/3Q19 | 07.11.2019

2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019

Segment changes evaporate at adjusted level, underlying stable

EBITDA

w/o regulatory effects/ inter-segment allocation

Mobile TV & Media Other/ holding Group

EBITDA (reported)

IFRS16

Analogue radio divestment
  • 5.0

6.9 10.6 281.6 281.8

  • 7.2
  • 8.6

327.9 325.8 53.5 52.6 268.4 276.4 48.5 48.8

  • 14.1
  • 20.7

302.9 304.8

  • 6.7

+0.3 +1.9 +8.3

International calls/ roaming
  • 7.0
  • 5.6
  • 7.0

As of Sept.

[in mEUR]

17.7 14.4 1.5 33.5 25.0 25.0

Inter-segment allocation

13.1

  • 5.6
  • 20.0
  • 5.6
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23 | Management Presentation 9M/3Q19 | 07.11.2019

Q1-Q3 2019 Q1-Q3 2018 Q3 2019 Q3 2018 Cash flows from operating activities 284.9 260.1 102.6 90.6 Cash flows from investing activities

  • 24.1
  • 311.5
  • 11.5
  • 287.7

thereof net capex

  • 27.0
  • 33.7
  • 11.4
  • 10.1

Cash flows from financing activities

  • 286.2

48.0

  • 18.8

270.0 Net change in cash funds

  • 25.4
  • 3.4

72.4 72.9 Free cash flow1 199.2 210.1 72.4 75.0

Financial statements – Cashflow statement (shortened)

1 Free cash flow is defined as cash flows 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, minus repayments of lease liabilities.

[in mEUR]

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24 | Management Presentation 9M/3Q19 | 07.11.2019

9M/19 2018

Maturity mEUR % 2019 15.0 1 2020 274.5 16 2021 428.0 25 2022 163.5 10 2023 780.0 45 beyond 59.0 3 Total 1,720.0 100

2017

Maturity mEUR % 2018 0.0 2019 54.5 3 2020 274.5 16 2021 443.0 26 2022 773.5 46 beyond 129.0 8 Total 1,674.5 100

Financing and maturity structure end of September 2019

Maturity mEUR % 2019 16.0 1 2020 258.5 13 2021 428.0 21 2022 163.5 8 2023 1080.0 54 beyond 59.0 3 Total 2,005.0 100

Note: Figures do not include revolving credit facilities.

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25 | Management Presentation 9M/3Q19 | 07.11.2019

KPI Guidance & Financial Policy (1/2)

Group

in mEUR/ as indicated

Revenue EBITDA Free cash flow Dividend Payout

Guidance 2019

stablea 420 - 440b 240 - 260c 1.65 EUR/shared

Results 2018

2,897.5

(excl. IFRS 15: 3,659.2)

  • Adj. EBITDA: 402.2

(excl. Sunrise: 441.3)

New FCF logic: 263.8

(excl. Sunrise: 289.2)

1.65 EUR/sharee

a Based on revenue including IFRS 15 b Including IFRS 16 (approximately 30-40 mEUR) c Based on new free cash flow definition applicable from 2019 d Dividend proposition of 1.65 euros per dividend-bearing share for the financial year 2019, given that the business runs stable (within Guidance) e Dividend of 1.65 euros per dividend-bearing share for the financial year 2018 to be proposed by the Executive Board
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26 | Management Presentation 9M/3Q19 | 07.11.2019

KPI Guidance & Financial Policy (2/2)

Mobile Communications TV and Media Financial Policy

in EUR/ as indicated

Postpaid customer Postpaid ARPU waipu.tv subscriber freenet TV subscriber (RGU) Leverage Equity ratio Guidance 2019

moderate increase stablea > 350,000 > 1,000,000 < 3.5b > 25%c

Results 2018

+185,000 21.6

(w/o hardware: 19.0)

251,800 1,014,000 1.3

(New leverage definition: 4.2 incl. DFMG)

27.6%

a ARPU without hardware (IFRS 15) b Mid-term target based on new leverage definition including IFRS 16 c Including IFRS 16