freenet Group grows EBITDA, free cash flow and subscriber numbers in successful first quarter
 

- EBITDA rose by +4.4% compared to Q1/20 due to growth in the TV business

- Free cash flow increased significantly by 9.6 million euros to 59.5 million euros in Q1/21

- Subscriber base continues to grow steadily, up +0.4% in Q1/21 to 8.6 million

- Covid-19-related decline in revenue more than compensated on the earnings side

- Executive Board confirms guidance for the 2021 full year in all dimensions
 

Büdelsdorf, 05 May 2021 - freenet AG [ISIN DE000A0Z2ZZ5] today announced its results for the first quarter of 2021.
 

Group: Sharp increase in consolidated EBITDA

The challenges of the past year relating to the Covid-19 pandemic continued in the first quarter of 2021, with massive disruption to economic and social life. The strict lockdown imposed by the federal government in mid-December 2020 impacted the operating activities of all companies, including the freenet Group, for an entire quarter for the first time. Even in these circumstances, our business model - based on long-term customer relationships and flexible sales structures - proved highly resilient yet not entirely immune to the effects of the crisis.

Despite Covid-19 restrictions, the subscriber base grew slightly, rising by +0.4% compared to the end of 2020 to 8.648 million customers. This meant that the number of customers increased by 218.0 thousand (+2.6%) compared to the first quarter of 2020. By contrast, revenue, particularly of hardware sales, suffered in the wake of Covid-19-related closures of GRAVIS and mobilcom debitel stores, falling by almost 30 million euros to 619.2 million euros (-4.6% compared to Q1/20). Although this decline was significant, it had hardly any negative impact on the Group's profitability.

The EBITDA margin improved by 1.5 percentage points to 17.6% thanks to the Group's strong operating and financial performance, resulting in a 4.6 million euro increase in EBITDA compared to the previous year (Q1/21: 108.8 million euros; Q1/20: 104.2 million euros). This improvement was driven by the good operating performance in the TV and Media segment, which makes a continually increasing contribution to consolidated EBITDA amounting to around 20% in the first quarter of 2021, with cost savings being a second key factor.

This positive business performance is also reflected in free cash flow, which rose by +19.2% year-on-year to 59.5 million euros (Q1/20: 49.9 million euros). The increase of almost ten million euros primarily results from the rise in EBITDA, lower interest payments due to the massive reduction in debt during financial year 2020, and a slight improvement in working capital. The latter also includes positive catch-up effects from the 2020 Christmas season.

Mobile Communications segment: Mobile Communications business demonstrates its resilience

The first quarter 2021 was impacted throughout by lockdown measures that resulted in the closure of most of freenet's own stores as well as all other important bricks-and-mortar points of sale such as Media Markt and Saturn. In what continued to be a rational market environment, the freenet Group thus focused its Mobile Communications activities on non-retail-based sales channels. As a result, the number of high-quality Mobile Communications customers rose by +0.5% to 7.168 million customers compared to the end of 2020 (+32.2 thousand), despite the restrictions. Our purely app-based products included in this figure contributed +11.5 thousand customers to this growth, while the postpaid segment added a further +20.7 thousand customers. This means that the number of freenet FUNK and freenet Flex customers has almost doubled (+93.5%) within a year, while the postpaid customer base grew by +174.4 thousand customers during the same period.

The development of postpaid ARPU reflects the roaming headwinds created by Covid-19 restrictions as well as lower use of variable ARPU elements (e.g., data top-ups). As a result, postpaid ARPU in the first quarter was 17.8 euros, a decline of 0.6 euros (-3.2%) compared to the previous year but virtually unchanged from the previous quarter (18.0 euros). Corresponding revenue from postpaid services thus totalled 378.9 million euros for the first quarter (-0.9% compared to Q1/20; -0.6% compared to Q4/20). The development of Mobile Communications revenue was dominated by a 26.0 million euro decline in the low-margin hardware business (Q1/21: 112.0 million euros vs. Q1/20: 138.0 million euros) due to the closure of mobilcom debitel and GRAVIS stores during lockdown. The developments had hardly any impact on gross profit and were fully offset by lower personnel expenses and loss allowances at segment EBITDA level. At 91.7 million euros, EBITDA in the Mobile Communications segment was therefore almost identical to the previous year's figure (Q1/20: 91.6 million euros).

TV and Media segment: waipu.tv drives growth

The TV and Media segment remains largely unaffected by the impact of Covid-19 and continued to grow at the start of 2021. Demand for our convenient waipu.tv IPTV product remains high. The subscriber base grew by a further 39.2 thousand in the first quarter of 2021, in line with the average for recent quarters (Ø 2019/2020: approx. +40 thousand subscribers), to reach a subscriber base of 611.7 thousand as of the end of March 2021. This corresponds to a +35.2% increase in the IPTV customer base compared to the same quarter last year (+159.2 thousand subscribers).
 

The adjustment effect in the freenet TV customer base continued as expected after the price increase in May 2020, albeit at a steadily decreasing rate (Q3/20: -6.3%; Q4/20: -4.3%; Q1/21: -3.7%). At the end of the first quarter, the number of revenue-generating users (RGU) was 868.3 thousand, almost 150 thousand customers below the prior-year quarter (31 March 2020: 1,016.9 thousand customers). Overall, customer figures are expected to stabilise further over the next few months.
 

Revenue in the TV and Media segment benefited from the price adjustment at freenet TV and steady growth in the IPTV customer base (waipu.tv), accompanied by an improvement in ARPU caused by increases in the prices of individual subscription products. As a result, revenue increased by +14.6% year-on-year to 69.5 million euros in the first quarter of 2021 (Q1/20: 60.7 million euros). This includes revenue effect of around 1.5 million euros from an EXARING AG media barter transaction that does not affect EBITDA.
 

Segment EBITDA reached 22.0 million euros, rising by +41.7% compared to the same quarter last year (Q1/20: 15.5 million euros). This sharp increase was due to revenue/sales effects, a general improvement in profitability, and continuing efficiency measures (particularly at freenet TV). waipu.tv remains the main driver and was responsible for almost half of the increase in EBITDA (+3.0 million euros compared to Q1/20).
 

Guidance confirmed for 2021 as a whole

Executive Board confirms the guidance for the 2021 full year. Freenet therefore continues to expect revenue to remain stable in 2021, with EBITDA coming in between 415 and 435 million euros and free cash flow between 200 and 220 million euros. Growth expectations regarding the relevant customer groups also remain unchanged, i.e. moderate growth for postpaid customers, moderate decrease for freenet TV subscribers (RGU) and solid growth for waipu.tv subscribers.
 

Investor and analyst conference call webcast

freenet AG will host an investor and analyst conference call at 10:00 a.m. (CEST) on 06 May 2021. All those interested in attending can follow the conference call via webcast at (LINK).

A recording will be made available on the website (LINK) following the event.

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¹ Sum total of postpaid customers, active freenet FUNK customers, freenet Flex customers, freenet TV subscribers (RGU) and waipu.tv subscribers.

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Contact:
freenet Group
Investor Relations & ESG
Phone: +49 (0)40/ 513 06 778
E-Mail: [email protected]
https://www.freenet-group.de