Strong third quarter: freenet expects EBITDA and free cash flow at the upper end of guidance

- EBITDA grows by +3.3% compared to 9M/20 to 339.9 million euros

- Mobile Communications EBITDA remains stable, TV and Media EBITDA +22.2% compared to 9M/20

- Free cash flow¹ exceeds quarterly guidance at 60.8 million euros

- Subscriber base expands by 198.1 thousand customers compared to 9M/20 to reach 8.705 million (+2.3%)

- Executive Board expects EBITDA and free cash flow to come in at the upper end of the guidance

Büdelsdorf, 3 November 2021 - freenet AG [ISIN DE000A0Z2ZZ5] today announced its results for the past nine months and third quarter of 2021.

Group: EBITDA margin up 0.8 percentage points to 18.1% compared to 9M/20

The restrictions on economic and social life introduced to limit the spread of coronavirus were gradually lifted during the past nine months of 2021. Cross-border travel increased during the summer months, and all mobilcom-debitel shops and GRAVIS stores have been open again since the beginning of the third quarter. Although the largely subscription-based business model has proved highly viable and is not reliant on bricks-and-mortar retail, the move towards normality nonetheless represents a welcome boost to the freenet Group's operating business. The collaboration with brand ambassador Dieter Bohlen³ that was launched in September is expected to further sharpen the profile of the freenet brand world. As the new 'Chief Entertainment Officer' (without a seat on the Executive Board), his job will be to link the umbrella brand "freenet" to the diverse products and brands in the fields of Mobile Communications, Internet and TV entertainment.

Although more significant catch-up effects still failed to materialise in the third quarter, the freenet Group continued what has been a very successful year so far. The number of high-value subscribers rose by 1.1% to around 8.705 million compared to the end of 2020 (2020: 8.610 million; 9M/20: 8.507 million). The number of own customers grew by 24.0 thousand in the third quarter 2021, an increase in growth of around 50% compared to the prior-year quarter (+16.3 thousand customers). This means that the subscriber base has risen by 198.1 thousand customers (+2.3%) over the last 12 months.

On a year-on-year basis, revenue continued to be influenced by lower hardware sales caused by the temporary closure of mobilcom-debitel shops and GRAVIS stores in the first half of 2021 due to the COVID-19 pandemic. However, there are now signs of a slight recovery that has begun to close the gap. While revenue in the first half of 2021 was still 2.5% down on the previous year, it is now just 1.3% lower at 1,880.8 million euros (9M/20: 1,905.5 million euros). The EBITDA margin rose by 0.8 percentage points to 18.1% (9M/20: 17.3%), causing EBITDA to increase by 10.7 million euros or 3.3% year-on-year to 339.9 million euros (9M/20: 329.2 million euros). This growth is based partly on higher-value revenue components generated by profitability-focused customer growth, and partly on sustainable cost management in all areas.

This positive business performance is also reflected in free cash flow, which exceeded the quarterly guidance of 50 to 60 million euros by reaching 60.8 million euros in the third quarter of 2021. Free cash flow for the first nine months of the year came to 172.9 million euros, almost 5.2% down on the same period last year without taking into account the positive contribution from the Sunrise dividends in 2020¹ (9M/20: 182.4 million euros). This difference can be explained by a positive reporting date-related working capital effect in the third quarter of 2020 as well as the equal distribution of quarterly free cash flows intended for this year.

Mobile Communications segment: a rock-solid cash cow

The German mobile communications market continues to be characterised by rationality even after the complete reopening of bricks-and-mortar retail and the fact that a fair amount of "normality" has now returned to everyday life in Germany. There are no signs of a fundamental increase in competitive intensity or price pressure. As a result, the number of high-value mobile communications customers continued its steady growth from the previous quarters, rising by 31.8 thousand customers (Q2/21: +23.6 thousand, Q1/21: +32.2 thousand). This means that this customer base grew by 1.2% to 7.223 million customers compared to the end of 2020. Of this growth, almost 60 thousand customers were attributable to the postpaid customer base and 27.6 thousand customers to our purely app-based products freenet FUNK and freenet Flex. In the last 12 months, the number of comparatively highly-profitable mobile communications customers has risen by a total of 167.8 thousand (+2.4%), of which 133.7 thousand were postpaid customers.

Postpaid ARPU maintained its positive trend in the third quarter, rising by 2.2% quarter-on-quarter to 18.4 euros (Q2/21: 18.0 euros). Postpaid ARPU is benefiting from increasing customer mobility, including an increase in roaming revenues. This positive development also reflects the (data-supported) smart pricing recently introduced in some areas. Postpaid ARPU also recovered compared to the first nine months of the previous year, and at 18.1 euros is only 0.2 euros below the previous year's figure of 18.3 euros. Revenue from postpaid services (MSR) reflects the upward trend in both customer numbers and postpaid ARPU, rising by +1.3% year-on-year to 1,155.7 million euros (9M/20: 1,140.5 million euros). While Mobile Communications revenue increased slightly compared to the previous quarter (+4.3 million euros), year-on-year performance continued to be impacted by lower hardware sales in bricks-and-mortar retail in the first half of 2021 due to the COVID-19 pandemic (-32.7 million euros compared to 9M/20). Thanks to our profitability-focused customer growth, combined with effective cost management, positive effects from short-time work and persistently positive customer payment behaviour, there have been no adverse impacts on gross profit and EBITDA. At 277.5 million euros, segment EBITDA reached the previous year's level (9M/20: 277.2 million euros).

TV and Media segment: waipu.tv customer base defies seasonality

The TV and Media segment continued to grow for the third successive quarter. The IPTV product waipu.tv defied the customary negative seasonality caused by the summer vacation season, adding 23.9 thousand customers in the third quarter of the year (Q3/20: +5.4 thousand) to reach a subscriber base of 668.5 thousand. This corresponds to a +31.2% increase (+159.0 thousand subscribers) compared to 30 September 2020 (509.5 thousand subscribers). By contrast, the freenet TV customer base fell by a further 31.7 thousand revenue-generating users (RGU) to 813.4 thousand (30 September 2020: 942.0 thousand customers).

Last year's price adjustment at freenet TV and profitability-focused customer growth at waipu.tv caused revenue in this segment to rise by +9.7% or +18.5 million euros compared with the first nine months of 2020. This includes a revenue effect of around 1.5 million euros from an EXARING AG (waipu.tv) media barter transaction recognised in the first quarter of 2021 that does not affect EBITDA. Overall, revenue amounted to 209.4 million euros (9M/20: 190.9 million euros). On the back of higher revenue and an EBITDA margin of 34.4%, 3.5 percentage points higher than the previous year, segment EBITDA increased by +22.2% (+13.1 million euros) to 72.1 million euros (9M/20: 59.0 million euros). This sharp increase was due to price/volume effects, a general improvement in profitability, and continuing efficiency measures (particularly at freenet TV). waipu.tv remains the main growth driver and was responsible for just under 7.0 million euros of the increase in EBITDA.

Executive Board expects EBITDA and free cash flow to come in at the upper end of the guidance

Based on the highly positive performance of the TV and Media segment, considerable stability in the Mobile Communications business and the continuing positive outlook, the Executive Board lifted its forecast for the EBITDA and free cash flow financial performance indicators when it published the 2021 half-year figures.

Since then, EBITDA has been expected to be in a range between 430 and 445 million euros (previously: 415 to 435 million euros) and free cash flow between 215 and 230 million euros (previously: 200 to 220 million euros). The forecast for the full year 2021 remained unchanged for all other financial and non-financial performance indicators.

Based on the results reported for the third quarter of 2021, the Executive Board expects both EBITDA and free cash flow to come in at the upper end of guidance.

Virtual Capital Markets Day 2021 and results as of September 2021 (3rd quarter)

freenet AG will host a virtual Capital Markets Day from 10:00 a.m. to 12:30 p.m. (CET) on Thursday, 4 November 2021. Management will present the results for the third quarter of 2021 and discuss market opportunities, focus areas for the coming years and long-term financial trends during the event. The live video webcast can be followed via this LINK and will also be available on the website after the event.

The corresponding presentation (incl. 3rd quarter 2021) will be published on the Investor Relations website before the stock exchange opens on the day of the event (4 November 2021).

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¹ Q1-Q3/2020 free cash flow adjusted for dividend from Sunrise (Q2/2020: 46.0 million euros) and corresponding interest payments on the syndicated bank loan (Q1-Q3/2020: approx. 8.2 million euros).
² Sum total of postpaid customers, freenet FUNK customers, freenet Flex customers, freenet TV subscribers (RGU) and waipu.tv subscribers.
³ A successful German entertainer, musician and producer.
⁴ freenet FUNK/freenet Flex customers.

Note

In the interest of clear and transparent presentation, alternative performance measures (APMs) are used in the financial statements of the freenet Group 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 Group 2020 Annual Report from page 46 onwards.

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