DGAP-News: freenet raises guidance for 2022 on the back of a strong first half-year

freenet raises guidance for 2022 on the back of a strong first half-year

• EBITDA up +8.4% to 240.9 million euros in the first half of 2022
• Growth and profitability particularly strong in TV and Media segment with EBITDA up +15.7% yoy
• Full-year EBITDA guidance raised to 460-480 million euros
• Free cash flow up +11.1% compared to first half of 2021
• Number of subscribers grows to about 8.9 million (+2.2% compared to 30 June 2021)

Büdelsdorf, 11 August 2022 freenet AG [ISIN DE000A0Z2ZZ5] today published its results for the first half of 2022.

EBITDA margin improves to 19.5% in the first half of 2022

freenet delivered strong business figures, demonstrating the viability, crisis resistance and predictability of its business model in the first six months of 2022. Despite mounting macroeconomic challenges created by rising geopolitical tensions, the company continued to improve its profitability in a dynamic yet rational market environment.

At 1,237.0 million euros, revenues remained stable as expected between January and June 2022 compared to the prior-year period (1,239.0 million euros). This stable performance was partly driven by steady growth in the number of high-value subscribers¹, which rose to 8,868.1 thousand in the first six months of the current year (end of 2021: 8,785.1 thousand). Postpaid ARPU also remained stable compared to the prior-year period at 17.8 euros (prior-year period: 17.9 euros). With consolidated revenues remaining stable, the increased share of revenues from services and the growth in the scalable TV and Media businesss share of total revenues in particular caused quality of revenues to increase further.

Profitability based on EBITDA (or the EBITDA margin) and free cash flow improved more markedly than expected in both of the aforementioned segments during the first six months of this year. EBITDA in the Mobile Communications segment rose by +6.5% compared to the first half of the previous year, while EBITDA in the TV and Media segment recorded double-digit growth of +15.7% in the same period. Profitability based on the EBITDA margin in both segments increased further again quarter-on-quarter. As a result, EBITDA across the Group rose by +8.4% to 240.9 million euros during the first half of 2022, with lower hardware revenues in the Mobile Communications business having no tangible effect on EBITDA. This improved profitability is attributable to strong operating performance and thus increased gross profit in both operating segments as well as sustainable optimisation of overhead costs within the freenet group of companies. It is worth noting that personnel expenses have remained virtually unchanged despite significantly lower positive effects from short-time work (net effect: 10 million euros), the early increase of the freenet minimum wage with effect from 1 April 2022 and the 3-4% average increase in salaries in 2022. Bad debt losses developed in line with expectations, making a positive contribution to EBITDA performance in the Mobile Communications segment in particular. Against this backdrop, free cash flow increased by +11.1% to 124.6 million euros in the first half of the year (prior-year period: 112.2 million euros). This includes a dividend payment of 5.5 million euros from the equity interest in CECONOMY AG.

The positive trend across all performance indicators in freenets Mobile Communications segment underlines the crisis resilience of this business and reaffirms the trend from previous quarters. Stable postpaid ARPU and steady growth in the number of postpaid customers relevant for recurring revenues in the Mobile Communications segment to 7,200.3 thousand (end of 2021: 7,178.0 thousand) resulted in a virtually unchanged high level of revenues (H1/2022: 1,092.1 million euros; H1/2021: 1,099.9 million euros). Revenues from services in this segment rose by +7.7 million euros to 824.0 million euros (prior-year period: 816.3 million euros), again making up the majority of segment revenues at 75.4% (prior-year period: 74.2%). The only factor levelling off this growth at segment level was the decrease in low-margin hardware revenues. The number of customers on app-based tariffs² rose sharply as expected, increasing by +36.2% to exceed the 100,000 mark for the first time as of the end of June 2022 (end of 2021: 88.0 thousand). The temporary effects resulting from the new Telecommunications Act (Telekommunikationsgesetz, TKG) have largely returned to normal.

The dynamic performance of the TV and Media segment exceeded internal expectation. Revenues rose by +9.9 million euros to 148.7 million euros in the first half of 2022 (prior-year period: 138.8 million euros). The increase in revenues in the TV and Media segment was primarily driven by sharp growth in waipu.tv subscribers, which rose by +175.7 thousand to 820.2 thousand (30 June 2021: 644.6 thousand). The number of subscribers in the TV and Media segment grew by +72.0 thousand to 1,561.6 thousand (30 June 2021: 1,489.6 thousand) despite the anticipated decline in freenet TV subscribers (RGU), which fell by -103.7 thousand to 741.3 thousand (30 June 2021: 845.0 thousand). Reflecting its role as a value for money leader in the German IPTV market, waipu.tv recorded the strongest six months of growth since its launch in 2016.

EBITDA guidance raised for the 2022 full year

The Executive Board raised its EBITDA guidance due to the positive and dynamic performance of both the TV and Media as well as the Mobile Communications segment and the continuing positive outlook for the second half of 2022. The company now expects EBITDA of between 460 and 480 million euros for the 2022 full year (previously: 450 to 470 million euros), an increase of +10 million euros (+2.2%) compared to the respective midpoints of the original and new guidance.

The guidance for the other key performance indicators remains unchanged (see 2022 Half-Year Report, page 21) and are based on largely identical assumptions concerning developments in the telecommunications and TV/video market compared to the original guidance. While the Executive Board is continually monitoring the latest geopolitical and macroeconomic changes and developments concerning COVID-19, there is currently no need for any changes to the assumptions underlying the key performance indicators. The medium-term financial ambitions presented at the Capital Markets Day in November 2021 with the target of increasing EBITDA to at least 520 million euros and raising free cash flow to more than 260 million euros by the 2025 financial year continue to apply.

Amortisation of mobilcom-debitel brand adjusted⁴ earnings per share rise to 1.17 euros

In January 2022, the amortisation of the main mobilcom-debitel trademark began on a straight-line basis over a period of 18 months. This move was triggered by focusing more on the freenet umbrella brand as part of a comprehensive brand transformation. Overall, intangible assets totalling 293.2 million euros will be amortised by the end of the first half of 2023.

This resulted in amortisation of 96.3 million euros during the first half of 2022, which, taking into account the resulting deferred tax income, had a negative impact of 82.3 million euros on consolidated profit. To improve comparability with prior-year quarters, freenet will be reporting adjusted earnings metrics⁴ for the next few quarters. The bottom line is that freenet generated adjusted⁴ consolidated profit of 139.6 million euros in the first six months of the current financial year (prior-year period: 82.5 million euros). As a result, adjusted⁴ earnings per share rose to 1.17 euros (prior-year period: 0.74 euros).

Conference call webcast

The conference call covering the results for the first half and second quarter of 2022 will take place on Friday 12 August 2022 at 10:00 (CET). All those interested in attending can follow the conference call via webcast (listen-only mode).

A recording will be made available following the event. The presentation and half-year report are available here.

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¹ Total of postpaid, freenet FUNK, freenet FLEX, waipu.tv customers and freenet TV subscribers (RGU)
² Key figure shown as at the end of the period
³ freenet FUNK and freenet FLEX customers
⁴ Adjusted for effects from the amortisation of the mobilcom-debitel trademark

Note
In the interest of clear and transparent presentation, alternative performance measures (APMs) are used in the financial statements of freenet AG and in ad hoc disclosures pursuant to Art. 17 MAR, in addition to the disclosures defined by the International Financial Reporting Standards (IFRSs). Information on the use, definition and calculation of APMs can be found in the freenet AG 2021 Annual Report from page 38 onwards.
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Contact:
freenet AG
Investor Relations & ESG
Fon: +49 (0)40/ 513 06 778
Mail: ir@freenet.ag
www.freenet.ag