23 july 2020 · 2020-07-23 · 2q20 earnings presentation 20 #letsstayconnected 40 42-4 23-1...

2Q20 Results Conference Call23 July 2020

#LetsStayConnected

2Q20 Earnings Presentation

#LetsStayConnected

• All main financial and operational impacts of the pandemic previously highlighted

persisted in 2Q20, to a greater extent, given they lasted almost the entire quarter;

• Resilient performance of core telecom operations, with commercial activity starting to

pick-up with the deconfinement from mid-May;

• Cinema exhibition and distribution contributed with no revenues this quarter, cinemas

reopened on 2 July; Stable performance of remaining Audiovisuals revenue lines;

• Technological investments were lower yoy, due to phasing of deployment plans which

remain on track within the context of the FttH network rollout and phasing of mobile

upgrade investment; Customer Related CAPEX was stable yoy reflecting a pickup in sales

and retention activity with gradual deconfinement from mid-May;

• Robust FCF generation of 53.5 million euros, falling less than EBITDA due to yoy savings in

CAPEX;

• Debt reduction due to postponement of dividend distribution to 3Q20, sustaining solid

capital structure with 1.8x Net Financial Debt / EBITDA AL;

Highlights 2Q20

-7.8%Telco Revenues

-12.1%Consolidated Revenues

-3.5%Telco EBITDA

-7.8%EBITDA

-4.3%Operating CF2

-12.2%Total CAPEX1

1. Excluding Leasings. 2. Including Leasings.2

32Q20 ResultsConference Call

I. Solid telco operating performance

II. COVID 19 Impact gradual deconfinement

III. Resilient financial performance

#LetsStayConnected


#LetsStayConnected

20

40 42

-4

23

-1

19

-5

-25 -26

21 21

47

21

48

2Q19 3Q19 4Q19 1Q20 2Q20

7

13 12

10

15

1

910

8

10

2Q19 3Q19 4Q19 1Q20 2Q20

0

14

75

43

18

9

4 4

-3 -3-1

1

0

2Q19 3Q19 4Q19 1Q20 2Q20

3023

39

6

-18

20

40

-22

-7

0

-22

-34

-1

19

52

3038

28

1621 21

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Mobile Pre-Paid Post-Paid

10

1416

14

3

7

13

24

69

-30

2

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Fixed Broadband Fixed Voice

-2

25

2

-7

0

14

3

7

11 12

23

18

-5 -5 -6

-10-8

-3 -3

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Total Pay TV Fixed Access DTH

Solid performance in Fixed Pay TV, yoy improvements in Fixed BB and Voice; Good growth in post-paid mobile subscribers

Solid telco operating performance

Fixed Access Pay TV – Net Adds [Thousands] Fixed BB and Fixed Voice – Net Adds [Thousands] Mobile – Net Adds [Thousands]

4


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Pay TV growth continues to be supported by network expansion and lower yoy churn

14-12

9

73 6775 76

57

33

68

40

238 15

269*

38

15

66

103

150

5543

-14-17

-60

710

1517

1410 11

1511

6 5 4 37

11

12

2 3

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

-4 0

-2 0

0

2 0

4 0

6 0

8 0

1 0 0

1 20

1 4 0

1 60

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

New HH Passed Fixed Access Pay TV


45

76

41

27

45

3

18

9

4 4

0

5

1 0

1 5

2 0

2 5

3 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

2Q19 3Q19 4Q19 1Q20 2Q20

10091

8076808687

7478

73

8896

848074

7889

79 75 7376 75

1Q1

5

2Q

15

3Q

15

4Q

15

1Q1

6

2Q

16

3Q

16

4Q

16

1Q1

7

2Q

17

3Q

17

4Q

17

1Q1

8

2Q

18

3Q

18

4Q

18

1Q1

9

2Q

19

3Q

19

4Q

19

1Q2

0

2Q

20

NOS network expansion / Fixed Pay TV Net Adds [Thousands] Fixed Residential Churn [Rebased, 1Q15 = 100]

5


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Acceleration of Convergent + Integrated customer growth trend; ARPU under pressure mainly from premium sports revenues


44.9 44.6 44.7 44.242.3

2Q19 3Q19 4Q19 1Q20 2Q20

59.2% 59.1%

59.8%

60.2%

61.0%

2Q19 3Q19 4Q19 1Q20 2Q20

907.2 914.8 930.7 942.3 957.5

5.0 5.1 5.1 5.0 5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10. 0

500.0

550.0

600.0

650.0

700.0

750.0

800.0

850.0

900.0

950.0

1,000.0

2Q19 3Q19 4Q19 1Q20 2Q20

Convergent+Integrated Subscribers, RGUs per Sub [Thousands, Unit]

Convergent+Integrated Penetration of Fixed Access Subscribers [%]

Fixed Residential ARPU [Euros]

6


#LetsStayConnectedSolid telco operating performance

New B2C offers innovation, segmentation and reinforced equipment and additional

• : a new brand with a 100% digital and disruptive value proposition addressing an emergingsegment: Digital Champions;

• Everything is done through the app: customers can subscribe in less than 3 minutes and managetheir services exclusively through an app (no stores, call centres, etc);

• Offer centred on broadband (fixed and mobile) without TV and a new approach to managing the customerrelationship

Digital adults are an increasingly relevant segment:

• 25-44, urban, digital is their natural habitat

• Heavy users of streaming services who do notvalue traditional TV

• Preference for online shopping and financial management

Accelerating transformation and learning process

Digital Ways of working, digital customer experiencedesign, customer behaviour, formats and digital marketing strategies

7


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B2B: Focus on partnership and proximity, ensuring agile and resilient response


• Negative revenue impact from contract renegotiation due to offset by provision of

more data and IT managed services;

• Opportunity for transformation helping clients deal with the challenges of going remote and moving to digital platforms and new

sources of revenues from equipment sales;

• Launch of a digital first, agile development programme targeting the SME segments, with 9 main service offerings in the IT and security

arena;

• Strategic partnerships signed with key cloud platforms in recent months, Google, AWS and Azure, positioning NOS as a preferred,

specialist partner for hybrid cloud solutions.

8


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Pre-COVID19 Post-COVID19 Pre-COVID19 Post-COVID19

FttH deployment on track and best in class technological response to increased traffic volumes


≈ +50%

Fixed DataTraffic

≈ +25%

Mobile Data Traffic

Total Network Coverage [Millions of Homes, including brownfield] Homes Passed with FttH [K Homes, including brownfield] Traffic Evolution [%]

35%FttH

3.21 3.17 3.14 3.10 3.04

0.18 0.22 0.25 0.29 0.35

1.11 1.18 1.22 1.25 1.29

4.49 4.57 4.61 4.64 4.68

2Q19 3Q19 4Q19 1Q20 2Q20

3.4 3.4 3.36 3.34 3.32

0.05 0.12 0.15 0.18 0.220.7 0.7 0.72 0.78 0.87

4.1 4.1 4.08 4.14 4.24

3Q17 4Q17 1Q18 2Q18 3Q18

HFC only HFC and FttH FttH only

717804

926

1,1371,217

1,2881,397

1,4691,543

1,640

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1Q18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

9


#LetsStayConnected

NOS Towering

Competition Authority non-opposition, formalitiesof closure underway

• Competition Authority announced non-opposition to agreement to sell Towering Cellnex on 7 July;

• Final closing dependent on internal formalities

• Once completed, NOS will be able to move ahead with technological optimization initiatives and expansion of our state-of-the-art mobile network;

• 2,000 sites with agreement for additional 400 in 6 years;

• Potential value of 550 million euros, with upfront paymentof approximately 375 million euros;

• OCF impact of 22 million euros in Year 1;

• EV/OCF ~17x (2k sites) and ~25x (full perimeter).

Tower Sale and Mobile Network Sharing


Mobile Network Sharing

10

Ongoing exclusive negotiations with Vodafone

• For a mobile network sharing agreement;

• To enhance investment efficiency;

• To achieve larger and faster coverage of the national territory;

• Deliver a reinforced service with more benefits for customers;

• Significant contribution to the economic and digital development of the country;

• Each operator will maintain exclusive strategic control of their networks and independence in the definition and provision of customer service.


#LetsStayConnected

Cinemas closed throughout 2Q20, opening on 2 July. Good performance in non-Cinema Distribution Audiovisuals revenues


16.718.2

16.6

12.2

8.9

2Q19 3Q19 4Q19 1Q20 2Q20

NOS Audiovisuals Revenues [Millions of Euros]

• Reinforced health and safety and social distancing measures implemented inpreparation for 2 July reopening;

• Online ticket and bar sales encouraged through the NOS Cinemas App;

• Implementation of cost cutting measures rental reduction and decrease oftemporary headcount;

• Sales set for slow recovery given social distancing restrictions and continueddelays in high box-office sales premieres such as Top Gun, Minions, Soul,Wonderwoman and Bodyguard, originally set for 3Q20;

11

12



III. Resilient telco financial performance


#LetsStayConnected


#LetsStayConnectedCOVID 19 Impact gradual deconfinement

Strong growth in the adoption of digital platforms, leveraging on transformation programmedevelopments

NOS App WTF App

+52%Total Users

Post-COVID vs Pre-COVID

+31%Total Users


Website

+19%Daily Sessions


Web self care

+19%Daily Sessions


13


#LetsStayConnectedCOVID 19 Impact gradual deconfinement

Store reopening almost complete and traffic recovering gradually

Stores Open [Before Lockdown, Base 100] Store Traffic [Before Lockdown, Base 100]

100

70

96

Before

Lockdown

During

Lockdown

Now

100

29

91

Before

Lockdown

During

Lockdown

Now

14

15



III.Resilient telco financial performance


#LetsStayConnected


#LetsStayConnected

Revenue decline in Telco driven by premium sports channels, roaming and lower DTH subscribers yoy; Cinemas were closed for the entire quarter in 2Q20.

Resilient financial performance

* Revenues adjusted for the regulatory imposition of international call caps within Europe.

365.6 370.5 366.4

345.4

321.3 321.7

3.0%1.0% 0.5%

-3.0%

-12.1% -12.1%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10. 0%

15. 0%

20. 0%

200.0

220.0

240.0

260.0

280.0

300.0

320.0

340.0

360.0

380.0

2Q19 3Q19 4Q19 1Q20 2Q20 2Q20*

347.0 347.4 346.6332.9

319.9 320.3

2.1%-0.1% 0.3%

-2.2%

-7.8% -7.7%

-10.0%

-5.0%

0.0%

5.0%

10. 0%

15. 0%

20. 0%

200.0

250.0

300.0

350.0

400.0

2Q19 3Q19 4Q19 1Q20 2Q20 2Q20*

29.1

33.630.3

21.8

8.9

14.0% 15.6%

1.8%

-15.5%

-69.2%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20. 0%

40. 0%

60. 0%

80. 0%

0.0

5.0

10. 0

15. 0

20. 0

25. 0

30. 0

35. 0

40. 0

2Q19 3Q19 4Q19 1Q20 2Q20

Consolidated Revenues and YoY Change [Millions of Euros, %] Telco Revenues and YoY Change [Millions of Euros, %] AV & Cinema Revenues and YoY Change [Millions of Euros, %]

16


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2.9%

0.9%

1.8% 0.9%

2.3%

3.5%

0.9%

1.7%

1.5%

2.5%

4Q17 1Q18 2Q18 3Q18 4Q18

Not Adjusted Adjusted*

Relative resilience in Consumer and B2B, while Wholesale & Others were impacted by roaming and mass calling services decline in the context of the COVID-19 pandemic

1.0%

1.4%

0.3%

2.0%-0.2%1.3%

-1.1%

1.2%

1.1% -0.8%-0.7%

16.8%

-7.3%

-20.1%

-26.6%1Q19 2Q19 3Q19 4Q19 1Q20

Consumer Business Wholesale & Others

* Revenues adjusted for the regulatory imposition of international call caps within Europe.

1.4%0.3%

2.0%

-0.1% -3.0%

-1.1%1.2%

1.1%

0.0%-5.0%

16.8%

-7.3%

-20.3%

-30.4%

-50.1%

2Q19 3Q19 4Q19 1Q20 2Q20

2.1%

-0.1% 0.3%

-2.2%

-7.8%

3.1%

0.2% 0.5%

-2.0%

-7.7%

2Q19 3Q19 4Q19 1Q20 2Q20

Telco Revenue Growth [%] Consumer, Business, Wholesale & Others YoY Change [%]


17


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13.0

15.7

14.0

10.9

5.3

44.8% 46.7% 46.3%50.1%

58.8%

40. 0%

60. 0%

80. 0%

100.0%

120.0%

140.0%

0.0

2.0

4.0

6.0

8.0

10. 0

12. 0

14. 0

16. 0

18. 0

2Q19 3Q19 4Q19 1Q20 2Q20

158.2 157.0

121.9

141.8

152.6

45.6% 45.2%

35.2%

42.6%

47.7%

20. 0%

25. 0%

30. 0%

35. 0%

40. 0%

45. 0%

50. 0%

55. 0%

60. 0%

65. 0%

70. 0%

80. 0

90. 0

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

2Q19 3Q19 4Q19 1Q20 2Q20

171.2 172.7

135.9

152.7157.9

46.8% 46.6%37.1%

44.2%49.1%

0.0%

10. 0%

20. 0%

30. 0%

40. 0%

50. 0%

60. 0%

70. 0%

80. 0%

90. 0%

100.0%

50. 0

70. 0

90. 0

110.0

130.0

150.0

170.0

190.0

2Q19 3Q19 4Q19 1Q20 2Q20

COVID-19 impact felt at the EBITDA level, despite declining less than Revenues in both Telco and Cinema & Audiovisuals

-7.8%yoy

-3.5%yoy

-59.6%yoy

Consolidated EBITDA, EBITDA Margin [Millions of Euros, %] Telco EBITDA, EBITDA Margin [Millions of Euros, %] AV & Cinema EBITDA, EBITDA Margin [Millions of Euros, %]


18


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Net Income decline due to COVID-19 impact at the EBITDA level

1.1

(103.1)

(3.8) (5.9) (11.9)(0.0)(0.9)

(101.2)

(3.8) (5.6) (7.5)

6.3

Share of JV

results

D&A Other

expenses

Net Fin.

Expenses

Income Taxes Discontinued

Op.

47.7 47.9

5.4

-10.4

45.3

2Q19 3Q19 4Q19 1Q20 2Q20

1

(103)

(4) (6) (12)

0 0 0 0 0

(120.0)

(100.0)

(80.0)

(60.0)

(40.0)

(20.0)

0.0

20.0

Share of JV

results

D&A Other

expenses

Net Fin.

Expenses

Income

Taxes

2Q19 2Q20

-5.0%yoy

Consolidated Net Income [Millions of Euros] Cost breakdown below EBITDA [Millions of Euros]


19


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Customer CAPEX stable yoy with pick-up in commercial activity as from mid-May; Decline in Technical CAPEX due to completion of Single RAN upgrade and pending 5G visibility

80.8 85.4 92.5 87.0 81.7

6.8 6.37.7

7.35.5

87.6 91.7100.2

94.387.3

1Q18 2Q18 3Q18 4Q18 1Q19

Telco AV & Cinema

27.8 31.6 30.4 35.626.6

19.4

36.1

18.216.0

23.9

47.1

67.7

48.6 51.7 50.6

3Q17 4Q17 1Q18 2Q18 3Q18

Baseline NW Exp, Subst, Integration & Others

89.5 83.6 89.7 81.8 79.4

5.68.7

10.06.4 4.1

95.2 92.299.7

88.283.5

2Q19 3Q19 4Q19 1Q20 2Q20

38.530.6 34.2 29.8

39.8

19.6

16.918.4

18.78.2

58.1

47.552.6

48.5 48.0

2Q19 3Q19 4Q19 1Q20 2Q20

31.4

36.1

37.0

33.4

31.4

9.1% 10.4% 10.7% 10.0% 9.8%

0.0%

5.0%

10. 0%

15. 0%

20. 0%

25. 0%

30. 0%

35. 0%

40. 0%

45. 0%

50. 0%

28. 0

29. 0

30. 0

31. 0

32. 0

33. 0

34. 0

35. 0

36. 0

37. 0

38. 0

2Q19 3Q19 4Q19 1Q20 2Q20

Total, Telco and AV & Cinema CAPEX Excl. Leasing Contracts[Millions of Euros] Technical CAPEX [Millions of Euros] Customer CAPEX, % of Telco Revenues [Millions of Euros, %]


20


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FCF declining less than EBITDA due to lower CAPEX yoy

-4.3%yoy

-2.3%yoy

* After lease payments.

-6.4%yoy

57.1

44.4

2.4

34.6

53.5

0.0

10. 0

20. 0

30. 0

40. 0

50. 0

60. 0

2Q19 3Q19 4Q19 1Q20 2Q20

65.2

57.9

20.4

44.4

62.4

0.0

10. 0

20. 0

30. 0

40. 0

50. 0

60. 0

70. 0

2Q19 3Q19 4Q19 1Q20 2Q20

76.180.4

36.2

64.5

74.3

0.0

10. 0

20. 0

30. 0

40. 0

50. 0

60. 0

70. 0

80. 0

90. 0

2Q19 3Q19 4Q19 1Q20 2Q20

EBITDA Total CAPEX Excl. Leasings [Millions of Euros] Operating Cash Flow* [Millions of Euros] Free Cash Flow [Millions of Euros]


21


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1,220.2 million EurosNet Debt Including Leases

2.7 yearsTotal Average Maturity

1.3%

1.8xNet Financial Debt / EBITDA After Leases

488.1 million EurosCash and Liquidity Position*

Solid capital structure with leverage ratio now at 1.8x, average cost of debt remains low. BS to strengthen further with cash-in from Tower sale.

* Includes non-issued financing lines.

1,009.4 million EurosNet Financial Debt

1,130.3 1,089.3 1,093.6 1,062.11,009.4

2.0x 1.9x 1.9x 1.9x 1.8x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

175.0

375.0

575.0

775.0

975.0

1,175.0

1,375.0

2Q19 3Q19 4Q19 1Q20 2Q20

1.5%1.4%

1.3%1.1%

1.3%

2Q19 3Q19 4Q19 1Q20 2Q20

Net Financial Debt, Net Financial Debt/EBITDA After Leases[Millions of Euros, X] Average Cost of Debt [%]


22

Q&A

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2Q20 Results Conference Call23 July 2020

23 july 2020 · 2020-07-23 · 2q20 earnings presentation 20 #letsstayconnected 40 42-4 23-1...

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