Edited Transcript of UTDI.DE earnings conference call or presentation 28-Mar-19 1:30pm GMT


Edited Transcript of UTDI.DE earnings conference call or presentation 28-Mar-19 1:30pm GMT
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Full Year 2018 United Internet AG revenue Call
Frankfurt am headmaster Apr 9, 2019 (Thomson StreetEvents) -- Edited Transcript of United Internet AG revenue conference summon or presentation Thursday, March 28, 2019 at 1:30:00pm GMT
TEXT version of Transcript
Corporate Participants
* honest Krause
United Internet AG - CFO & Member of the Management Board
* Ralph Dommermuth
United Internet AG - Founder, CEO & Member of the Management Board
* Stephan Gramkow
United Internet AG - IR Officer
Conference summon Participants
* Fathima-Nizla Naizer
Deutsche coast AG, research section - research Analyst
* honest Rothauge
* Martin Jungfleisch
Kepler Cheuvreux, research section - Junior Equity research Analyst
* Stephen Paul Malcolm
Redburn (Europe) Limited, research section - research Analyst
* Ulrich Rathe
Jefferies LLC, research section - Senior European Telecommunications Analyst
* Usman Ghazi
Joh. Berenberg, Gossler & Co. KG, research section - Analyst
Stephan Gramkow, United Internet AG - IR officer [1]
Welcome ladies and gentlemen ought our analyst and investor conference. We are terribly unhappy almost the delay. And report ought everybody who joined us via telephone conference or webcast. Mr. Dommermuth and Mr. Krause will stroll you along the affair figures because 2018 first of all, and then they will cottage the glitter above 2019. And at the purpose of the presentation, the ball will exist at your court, and you can need your questions.
Having said that, Ralph Dommermuth, the floor is yours.
Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [2]
Thank you identical much, Mr. Gramkow. Ladies and gentlemen, those of you who haven't been with us before, I'd alike ought report too ought our analyst and investors conference. First of all, I will award you some insight into 2018 because United Internet, then I will award an expectation because 2019, and then Mr. Krause will award you some detailed insights into the figures. at my presentation, I will no dig deep although honour ought Internet Access. I've done that at the foregoing event, the 1&1 Drillisch. This time around, I will quite concentrate above the big cinema and stroll you along the different segments.
First of all, let's accept a emerge at the KPIs. We had 1.28 million new contracts, 250,000 coming from World4You and 1,030,000 from organic growth. Sales went up ought EUR 5.1 billion. And the growth pro forma, both Strato and Drillisch, we took them above at 2017, and if we had included them at 2017 because the total year, then the growth used to own been 10.5%; EBITDA, 22.6%, EUR 2.1 million, Strato and Drillisch, 20.5%; EBIT, 15.2%.
EBIT per fragment '18 lower than at '17, this is due ought the increasing quantity of minorities, and Mr. Krause will state more almost that afterward on. And then we've got the revenue per fragment ago buy revenue allocation. Here, we've got a growth of 6% from EUR 2.34 ought EUR 2.48. Included at our figures are the changeover ought IFRS 15 that has generated a sure consequence of EUR 283.2 million above the revenue aspect by bringing deliver hardware revenues. at condition of EBITDA, we had a sure consequence of EUR 286.9 because the identical reason. Then above the other side, above the downside, although we own discussed before, we used more smartphones final year, and that had a negative consequence of EUR 268.1 million. when we had our integration process, we invested EUR 41.7 million and our dividend proposal because United Internet is although noise depending above the 5G spectrum auction although with 1&1 Drillisch. if we don't favour the frequencies, then we will increase the dividend from EUR 0.85 ought EUR 0.90. if we favour 5G frequencies, we will mean the minimum dividend ought the AGM, which used to exist EUR 0.05 per share.
Story continues
We had 2 affair areas, Internet Access and Internet Applications. Most of you will exist identical familiar with this slide. We've got our goods at the center, our team, our sales strength, we've got 60 million accounts that we operate, the news centers that we flow and our fiber network. These goods are combined with other networks because the final mile, because example. We attach that with internal devices, such although DSL routers and smartphones ought create Internet Access products. And we although noise attach them with content that we buy or standardized software above climax of our own applications.
We suggest total of that both because consumers and corporate customers. We've got little brands above the Access side. Our headmaster brand is 1&1. This is our premium brand, and we although noise own little discount brands stemming from the takeover of Drillisch. That's impartial yourfone or smartmobile.
On the B2B business, because our affair customers, we've got 1&1 Versatel. above the Applications side, the consumer affair is driven by the brand GMX, WEB. DE and mail.com, and United Internet Media is used ought just the applications although most of them are advertisement finance.
Then above the affair Applications side, our headmaster brand is 1&1 IONOS, and you can although noise watch little brands there that we own acquired abroad: Arsys at Spain; World4You at Austria; Fasthosts at England; and another brand at Poland; and Strato, they operate their affair at Germany and the Netherlands first and foremost; and then Sedo and United Internet domains from farther acquisitions. We've got little fellow companies with which we collaborate closely, and we although noise know the shares at these companies, often slightly above 25% and impartial under 50%. And then we although noise own participations at Tele Columbus and Rocket Internet. consequently that used to exist United Internet at a glance.
Now allow us favour started with the Access district and our consumer business. The affair of 1&1 Drillisch. although I've already said, we own a good network quality. We accept turns with Deutsche Telekom when it comes ought winning the join award. We use the 1&1 Versatel network. We attach that network with Deutsche Telekom and city carriers' network at direction ought create fiber ought the curb and fiber ought the home.
On the mobile side, we use advanced services by Telefónica and Vodafone. when we favour Telefónica advanced services, we own commitments from Telefónica. when there was the merger with E-Plus, and we although noise own little brands, 1&1 is our headmaster brand though.
Now consumer business, 970,000 new contracts final year. First and foremost, from the mobile Internet area, we've got 9.2 million contracts there and 4.34 million broadband connections.
Revenues went up 30% ought EUR 3.629 billion, and EUR 270 million thereof can exist attributed ought IFRS 15. It's a 13.3% increase pro forma, and if we inspire Drillisch, then we own a growth of 4.6%. EBITDA, up 32.9% ought EUR 719 million. Once again, we own the sure IFRS 15 effect, and we own a negative consequence coming from the use of smartphones. We own distributed more smartphones that we buy initially and that are then paid hind or refinanced above the classification of the contract, 24 months. And then we had a one-off investment of EUR 25.1 million because the Drillisch integration. The EBITDA margin went up 19.8%. Pro forma, including Drillisch because 12 months, that's an increase of 12.3%.
Now the affair Access. This affair 1&1 Versatel offers fiber-optic networks, and we join companies and authorities ought that network. We own 47,000 kilometers of network available at many German cities, and some 14,000 buildings are direct connected ought this network.
Let's shine a glitter above sales. affair Access, up 4%, EUR 465.9 million. Now if you inspire the mass just affair from the first 4 months at 2017 although 1&1 Versatel at consumer affair ago that we own transferred ought 1&1 Telecommunication where it belongs ought then alike because like, without the mass just business, we own a growth of 13.9%. 13.9% growth at sales at the B2B business. I believe, this is a identical good value. The identical condition because the EBITDA at first glance, 10.9% less, EUR 72.6 million, and a little share, EUR 1.6 million results from the IFRS 15 changeover. We've got an EBITDA margin of 15.6%, and once again, if you inspire the mass just affair from the first 4 months of 2017 that wasn't available at 2018, then the EBITDA has grown more massively, namely by 27.9%.
Now above ought the application business. above the Consumer side, I confide you're total familiar with that glide by now, we are developing from an e-mail provider ought a provider because communication and identity management. due ought different applications, our customers can favour free of accuse or customers own ought allowance because these services although well.
Now we own a good just site at Germany. We've got 31.2 million well users at Germany. We are identical well when it comes ought personal e-mailing, and we although noise are noise positioned when it comes ought cloud storage. although honour ought content, we own a big reach, and the identical is accurate because win mailing, the e-mail or eIDAS. Now with our mailing service, we site ourselves apart due ought news refuge and due ought our cloud options, and everything is marketed along United Internet Media.
Now the quantity of accounts, good increase, up 1.3 million. Now we've got 39.25 million well accounts and 37 million thereof are free accounts, and 2.25 million accounts are paid accounts, monthly subscriptions. Mobile habit increased ought 222.7 million well user. They're using our mobile apps and our mobile refuge page, and 18.5 million use our cloud storage facilities.
Sales, a decline, we planned because that, and we own announced that. We will perform without EUR 20 million per year lower -- at cargo above the portal, more bright monetization, due ought data-driven affair model. We are currently developing things now. The first test's underway. Everything seems ought exist reasonable. However, although a result, sales went down final year, 3.5% less, around EUR 17 million and -- EUR 10 million and EUR 17 million vacation from the reduction of advertising space.
We used to own EUR 17 million plus otherwise.
EBITDA is alike situation, 9% less than before, EUR 112 million. EUR 200,000 from the IFRS 15 changeover, and we had a negative consequence of EUR 15.9 million from the planned reduction at advertising space. The EBITDA margin is 41.1% now.
Now affair Applications. We ripen ourselves from a Web hosting provider, storage device and domains towards a provider of e-business solutions. Our target group are first and headmaster little and medium-sized companies. We suggest them everything they want ought exist successful online and we although noise suggest them solutions that they want because that hind office because their office's email solutions and affair applications.
In Europe, we are the headmaster provider. We are represented at 12 countries. We've got a good just site at big European countries. And next ought Europe, we are although noise well at Northern America. We've got a broad produce portfolio, domains, DIY homepages, agency products, cloud servers, e-shops, total the fashion ought infrastructure although a service, and we own a total fate of extra tools. Products are developed although noise in-house or together with partners, with whom we own signed a long-term commitment. final year, we added 300,000 new customers, 250,000 thereof stem from the World4You takeover. at total, we own 8.06 million customers, most of them, 4.24 million are based abroad.
Here, you can watch that sales own developed identical noise final year, up 10.5%, EUR 841.8 million now. identical little quantity can exist attributed ought IFRS 15. Once again, pro forma calculation, including Strato, the growth was 5.9%.
Now the EBITDA grew stronger, up 17.4%. We now own EUR 290.4 million. IFRS 15 effects, once again, above the one side. above the other side, we own one-offs from the Strato integration and from the rebranding of 1&1 Internet towards 1&1 IONOS.
EBITDA margin, 34.5%, up 2% from the final year. And the pro forma condition is 13.7% up, including Strato because 12 months at the foregoing year. I confide this is a identical gay development above the EBITDA side, and this development is site ought last.
Now allow us accept a emerge at the future. We confide that we can attitude our advantageous growth strategy. 1&1 Drillisch, 4% growth, impartial consequently larger sales chunk. at overall group of companies, we assume 4% growth ought EUR 5.34 billion. EBITDA will become 8% ought EUR 1.3 billion. That fashion we own a stronger growth there than above the sale side. And at the new year, we will confirm with IFRS 16, and the IFRS 16 effects will quantity ought around EUR 50 million, meaning a 12% growth, except allow us cane ought like-to-like figures, and that used to exist 8% more. Including -- included at 8% are EUR 30 million one-offs because integration projects above the Consumer Access side, and above the affair application side, that quantity is lower than at the foregoing year. except I confide this is however a figure worthy mentioning although I confide it reduces the arise by well, exactly, EUR 30 million. Thank you identical much because listening. Now above ought you, Mr. Krause. He will award you econmic figures because 2018.
Frank Krause, United Internet AG - CFO & Member of the Management Board [3]
Thank you identical much, Mr. Dommermuth. And report everybody above my isolate although well. I used to alike ought talk you almost the econmic -- key econmic figures at detail because 2018. consequently let's commence with a short recap above the most significant econmic KPIs and visitor accounts.
Our visitor contracts own increased by 1.28 million contracts. consequently 250,000 contracts from the World4You acquisition, which is the headmaster hosting provider at Austria. We took above a little months ago, 131,000 host from organic growth.
79,000 are Consumer Access and 900,000 mobile and 70,000 broadband. The other 60,000 more organically grown contracts are at applications, 50,000 at affair Application, 10,000 contracts at Consumer Applications. Now sales and EBITDA own been reported. It has now increased by some 22%. We adapt this because -- by 2017 because the -- total of -- all-year effects by Strato and Drillisch, favour a pro forma arise of some 10%. And at the reported EBIT, you now watch the increased PPA that is the write-off toward the buy revenue allocations can exist seen at those figures. The EPS, Mr. Dommer mentioned at there identical briefly, is now hind taking into consideration because the total year relevant minority shares above the 33% of Warburg Pincus at the affair application section and the 27% investment of minority shareholders at 1&1 Drillisch, which first took a total year consequence at 2018.
Now let's accept a emerge at the remains sheet, and let's commence with the asset aspect and let's emerge at the most significant changes of 2018 and that's compare the 31st December 2018 hind the new -- the middle column, which is the opening remains part although per IFRS 15. consequently if you emerge at property, mill and equipment and you watch a distinction here that depreciation due ought the included PPA write-offs are above the investments.
The increase at goodwill can exist seen due ought the fact, well, that we took above World4You and the delta at the econmic goods is due ought the decreased book values of Tele Columbus and Rocket Internet although we've briefly mentioned earlier.
The accounts receivable appear the increased enlarge -- or the expansion of business, and with harmony assets, you watch the increased [fees] of hardware.
The increase at the next row and we own inventories, the prepaid expenses and other goods comes from the fact that payments were made because the contingent model that we've got with Deutsche Telecom. We've got increased inventories, again, due ought the affair model and the increase at use of -- increased use of hardware. consequently at the purpose of the year, we've used purchasing advantages and tax goods and -- which diluted delta with the tax receivables at other places -- or tax liabilities. And money and money equivalents and this although noise is used due ought the increased use of hardware.
Now let's vacation ought the liabilities side. Let's commence with equity. The increase is due ought the healthy results minus dividends and the fragment buyback at Drillisch. And net indebtedness that you watch and the tax protect of EUR 1.881 billion is a leverage of some 1.6x EBITDA at 2018, and the increase is although noise reflected by the topics that you already own heard about, the increase of hardware and the World4You acquisition.
Now liabilities due to, well, business accounts payable although noise due ought the expansion of affair too although increase of some deadline which moved into the next year.
The other positions above the liabilities side. There aren't any big changes. It people exist worthy mentioning the increase at other liabilities, and at accordance with IFRS 15, future visitor payments obligations were lay into the remains part because the first time. And finally, let's accept a emerge at the free money flow and at operating fashion, we ended the year with EUR 350 million. The reduction although opposed ought the foregoing year where we were final year is due ought the increased hardware affair and the onetime increase at working major positions, because instance, with inventories although we've impartial seen, and consequently this is at design or this is entirely at row with what we had given the guidance for. And this brings me ought the purpose of my presentation. And we are identical voluntary ought reply questions and ought enter ought a well discussion with you. Thank you identical much. ago we vacation into the question-and-answer session, entertain wait because until we favour the microphone and condition your assign because the people above the phone and the webcast. consequently somebody at the first line, Mr. Jungfleisch.
Questions and Answers
Martin Jungfleisch, Kepler Cheuvreux, research section - Junior Equity research Analyst [1]
Right. Martin Jungfleisch. I've got a little questions above affair -- above the affair Applications segment. Q4 was fairly weak. if you emerge at the sales and EBITDA, and you lost 10,000 clients. Was this only due ought the platform consolidation and TV advertising? Or were there other factors although well? And secondly, because 2019, the outlook. What's your preference, a [few] expansion or visitor increase and something above the latent IPO although it was said sometime -- are there any key figure that you used to alike ought arrive ought begin the IPO process, because instance, I don't know, organic growth or I don't know, visitor figures? Those are my questions.
Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [2]
Let's begin with the first question. You said that visitor growth at Q4 slowed down a bit. And yes, you've given the reply yourself. consequently we own the rebranding although because although the purpose of fourth quarter, and thus, we -- at the foregoing months, we reduced our marketing spending. consequently the churn certainly happens at the -- above the identical evaluate although before, except the growth activation is -- goes down. consequently this was expected. And consequently now hind -- now that the rebranding is complete, we'll watch the opposite trend.
Would you alike ought perform the others?
Frank Krause, United Internet AG - CFO & Member of the Management Board [3]
I can perform the others, sure. Yes. You asked almost our -- well, what almost 2019 visitor growth or [ARPU] expansion. at affair Applications, I'd state we attitude ought concentrate above our profitability, integration platform. consequently we finished completely rebranding. That is noise the headline and at which we're going ought perform 2019. You asked almost the IPO considerations that we are -- yes, we are considering an IPO together with Warburg Pincus, except there's no concrete time line. except yesterday, at the supervisory meeting, I learned that there has been some readiness habit ought watch what they own ought do, financially speaking. consequently we are working above it, we're dealing with it, except it's no something that's going ought exist accident -- ought happen anytime identical soon.
Next question.
Fathima-Nizla Naizer, Deutsche coast AG, research section - research Analyst [4]
Nizla Naizer, Deutsche Bank. I weigh this is linked ought the Drillisch conversation although well. Drillisch has said that they own EUR 2.8 billion of consortium debt arranged and although noise mentioned that United used to exist voluntary ought finance sure quantity although well. impartial wanted ought know what is your econmic flexibility. How much are you voluntary ought expend although the parent? And at condition of an intercompany lend or something of the kind ought add ought that EUR 2.8 billion? That's question one. And question two, are -- is there anything else interesting out there because United? You own stake at Tele Columbus, used to that frontier any other investment happen external of this 5G spectrum conversation? And some color above your scenery because that future order because United used to exist great.
Ralph Dommermuth, United Internet AG - Founder, CEO & Member of the Management Board [5]
Let me begin at the end. We are no looking at any larger acquisitions. Tele Columbus currently is no a question because -- I mean, never state never, obviously. except there are no modern considerations concerning Tele Columbus. consequently we don't own any plans because any larger investments, quite -- other than 5G. You asked almost the role of the econmic -- or the flexibility, how much used to we exist voluntary ought finance the company. I cannot talk you although otherwise our competition used to impress at ought the Federal Network Agency. We've been -- we weren't thinking exact with -- well, I intend EUR 2.8 billion of an intercompany loan. We scenery we'd own ought disclose that. Our lawyers said so, except then -- and we did that, and then no, it wasn't -- it was collusive action. We weren't allowed ought perform it although then everybody could read what we were doing. consequently we mustn't invent any mistake although we are at the middle of this auction. consequently we -- except allow me award you impartial a sensation of how -- and then we don't wish ought favour into too much debt and ought indebt ourselves too much, except we are no fearful of getting into debt at the first lay impartial although -- I mean, especially because use rates are consequently low at the moment. consequently we own some headroom that we -- headroom at the United Internet, except -- and we although noise can enlarge our lines within United Internet, impartial although we can widen them at 1&1 Drillisch. And if you weigh almost what if and what if and what if, we could -- because instance, our hosting business. The debt that we own at United Internet is debt that the hosting affair has although when Warburg Pincus made an investment, and we went into debt above the hosting affair I weigh EUR 1.6 billion internal debt that we are providing ought hosting. And we could own -- we could finance that at the nonrecourse, and this is something that Warburg Pincus is focusing -- use has -- own been [lowered], and we agreed above fixed use rates at the time, and Warburg said we've got large offers and we could finance that more cheaply externally. We said, no, we don't wish ought finance it more cheaply externally although it's business, it's although we're taking the lend at a inexpensive evaluate internally and that we're passing above ought hosting. except if we wanted ought -- well, it's an arbiter's seal, and we could purpose that, and we definitely could empty up our margin. We've got headroom at United Internet. We could add loans. We could own loans at 1&1 Drillisch, and we however wouldn't favour -- impress external of the government's framework that we've got with the banks. consequently we've got some air, and if that wasn't enough, then we could own external financing because the hosting business. except I cannot talk you what total this is although alike I said, I've got the discussion if this wasn't a -- entertain don't accept this although us wanting ought lay total of this at the -- into the frequencies. This is no the statement that we wish ought lay this -- total of this into the frequencies.