9m 2016 financial results - netia · • drop in total rgus in q3 2016 results mainly from...

9M 2016 Financial ResultsOctober 27, 2016

inwestor.netia.pl 2

PLNm

PLNm

PLNm

Total Netia | Key highlights for 9M 2016

1 Adjusted EBITDA excludes as appropriate, one-off costs related to restructuring, integration, M&A activity, impairment

2 Adjusted OpFCF = Adjusted EBITDA less Capex excluding integration capex, capitalised interests from the bank loan, investments related to

the Netia Lite project; Capex = investments in tangible and intangible fixed assets

3 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparatives restated)

Revenues

AdjustedOpFCF2

Adjusted EBITDA1,3

• Revenue was PLN 1,150m for 9M 2016 (-2% y-o-y) and PLN 373m for Q3 2016(-4% q-o-q and -7% y-o-y)

– Profitability stable thanks to cost optimizations despite a continuousrevenue pressure

– Adjusted EBITDA1,3 was PLN 333m for 9M 2016 (-4% r-d-r) and PLN107m for Q3 2016 (-7% q-o-q and -13% y-o-y)

– EBITDA was PLN 325m for 9M 2016 (-6% y-o-y) and PLN 103m for Q32016 (-10% q-o-q and -16% y-o-y)

• Netia generated PLN 197m Adjusted OpFCF2 for 9M 2016 (+6% y-o-y) andPLN 55m for Q3 2016 (-19% q-o-q and -13% y-o-y)

• Net debt at PLN 250m on September 30, 2016 (-16% q-o-q and -22% y-o-y),representing 0.5x of Adjusted EBITDA3 for full 2015 year at PLN 459m

• On September 30, Mr. Cezary Chałupa, B2B General Manager, resigned fromhis position as the member of the Company’s Management Board.The resignation is effective immediately

400 403 390 387 373

0

100

200

300

400

500

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

123112 111 115 107

0

50

100

150

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

6356

73 68

55

0

10

20

30

40

50

60

70

80

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

inwestor.netia.pl 3

Total Netia | Profitability and OpFCF in operational Segments

B2C2,4

1 B2B comprises Business and Carrier customers sub-segments. TK Telekom results not included. 2 B2C comprises Residential and SOHO customers sub-segments3 Operating costs and capital expenditures for Petrotel fully separated from Q1 2015 4 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries ( comparatives restated)

B2B1,4

• Revenue was PLN 184m in Q3 2016, down by 3% compared toQ2 2016 and down by 10% y-o-y

• RGUs at 1,639k (-2% q-o-q, -6% y-o-y)

• Adjusted EBITDAwas PLN 32mwith a margin of 17,6%

• Revenuewas PLN 153m in Q3 2016 (-4% q-o-q and -5% y-o-y)

• Adjusted EBITDAwas PLN 62mwith a margin of 40.6%

PLNmPLNm

Petrotel3,4

• Stable revenue and margins between quarters

PLNm

TK TelekomPLNm

• TK Telekom financial data consolidated from July 21, 2015

2936 34 31 30

7 2 811

10

5 7 3 21

0

5

10

15

20

25

30

35

40

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Revenues Adjusted EBITDA Capex

160 160 155 159 153

42.9%40.5% 42.0% 40.8% 40.6%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

300

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Revenues Adjusted EBITDA margin %

205 200 196 191 184

21.9%21.0%

18.1%19.5%

17.6%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016


6 6 6 66

47.3% 47.8%

40.9% 40.7% 39.8%

0%

10%

20%

30%

40%

50%

0

1

2

3

4

5

6

7

8

9

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016


4inwestor.netia.pl

Total Netia | Total RGUs by product and access type

Comments

Total Netia RGUs On-net and off-net RGUs

• Drop in total RGUs in Q3 2016 results mainly from strategic defocus of lower margin WLR and BSAservices (focus on retention)

• At the end of Q3 2016 the share of on-net RGUs in total Netia services was 57% (+3pp y-o-y)

(’000)(’000)

-1.1% -1.4% -1.2%-1.5%

-26 -30 -27-35

-12 -14 -14-14

-31 -28 -23-351,284 1,253 1,218 1,189 1,166

769 756 742 728 715

158 164 168 172 177

70 81 92 100 105

2,280 2,254 2,220 2,189 2,162

0

500

1,000

1,500

2,000

2,500

3,000

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Voice Broadband TV Mobile

-1,1%

-29 -25 -27-29

+3 -5 0-6

-1,4% -1,2%-1,5%

-26 -30 -27-35

1.239 1.242 1.236

1.041 1.013 984

1,.239 1,.242 1,236 1,.231 1,231

1,.041 1,.013 984 959 932

2,280 2,.254 2,.220 2,.189 2,.162

0

500

1,.000

1,500

2,.000

2,.500

3,000

III kw. 15 IV kw. 15 I kw. 16 II kw. 16 III kw. 16

On-net RGUs Off-net RGUs

inwestor.netia.pl 5

PLNm

PLNmPLNm

Total Netia | Revenue development by service

Revenue breakdown by service Data revenue1 breakdown by access

Other revenue2Voice revenue breakdown by access

1 Including revenues from VAS, elsewhere reported as Other Telecommunication revenue2 Includes revenues from TV services

PLNm

137 134 128 122 116

176 177 175 172 167

87 92 88 9290

400 403390 387

373

0

50

100

150

200

250

300

350

400

450

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Voice Revenues Data Revenues Other Revenues

82 84 85 84 82

48 46 44 42 40

45 47 46 47 44

176 177 175 172 167

0

50

100

150

200

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Own network - broadband Regulated access - broadband Own network - other data

59 59 56 55 52

76 73 69 65 62

2 22

22

137 134128

122116

0

20

40

60

80

100

120

140

160

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Own network Regulated access Indirect voice and other

22 23 22 21 21

30 30 29 33 30

3539

3738

39

8792

8892 90

0

10

20

30

40

50

60

70

80

90

100

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Interconnect Wholesale Other

inwestor.netia.pl 6

B2B Overview

7inwestor.netia.pl

B2B Operations |

Comments

Revenue by service

Revenue split and margins

PLNm

• Trends in broadband stable despite a competitive market environment

• Relatively stable profitability despite a strong price pressure thanks to a shift of commercialfocus on services with a higher margin

• Lower total B2B revenue q-o-q mainly due to decrease of wholesale traffic

Adjusted EBITDA margin and Adjusted OpFCF

PLNm

35 36 36 35 36

36 37 36 37 35

44 43 41 41 39

45 45 42 4643

160 160 155 159 153

0

20

40

60

80

100

120

140

160

180

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Broadband Other Data Voice Other services

160 160 155 159 153

42.9%40.5% 42.0% 40.8% 40.6%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

300

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016


inwestor.netia.pl 8

B2B financial performance | Adjusted B2B EBITDA bridge for 9M 2016

• ARPU decline related mainly to a visible price pressure in voice services

• Lower acquisition costs as a result of lower spending on B2B customers equipment

• Lower variable costs reflect a number of optimization initiatives introduced by the Company

Actual

9M 2015

vs

9M 2016

Comments

Increase in Adjusted EBITDA Decrease in Adjusted EBITDA

PLNm

8

1721

8

206

25

312

12

192

50

70

90

110

130

150

170

190

210

230

Adjusted EBITDA9M 2015

RGU reve change ARPU reve change IC and Other Acquisition cost Variable cost Adjusted EBITDA9M 2016

inwestor.netia.pl 9

B2C Overview

10inwestor.netia.pl

B2C Operations |

RGUs by access type

RGUs and ARPU per Customer

Average ARPU per Customer Comments

• Share of on-net RGUs up by 3 pp y-o-y to 47%

• TV cross-sell, higher broadband speeds offeredand unlimited voice keep ARPU per customer at arelatively stable level

• On-net bundling increases number of RGUs percustomer

• Most customer losses are single play off-net voice(WLR) and off-net broadband (BSA)

(’000)

PLN

Customers and RGUs

(’000)-20 -25-29

-22 -23-27

+2 -2-2

-28

-26

-2770 772 770 768 767

972 949 922 899 873

1,741 1,721 1,692 1,667 1,639

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

On-net RGUs Off-net RGUs

56 56 57 56 56

20

25

30

35

40

45

50

55

60

65

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

1.172 1.144 1.111 1.083 1.054

1.741 1.721 1.692 1.667 1.639

1.49x 1.50x 1.52x 1.54x 1.55x

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

-

200

400

600

800

1.000

1,200

1,400

1,600

1,800

2,000

Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Customer locations RGUs RGUs x

11inwestor.netia.pl

B2C Operations |

Broadband ports

RGUs by service

Voice lines

TV services Comments

• TV services at 173k in Q3 2016 (+2% q-o-q and+12% y-o-y)

• Focus on retention in regulated access RGUs

• 57% of broadband customers served directlyvia Netia’s own network (+4 pp y-o-y and +1 ppq-o-q)

• 46% of on-net broadband customers now takeTV services from Netia

(’000)(’000)

(’000)

+5 +4 +4+5

-11 -13 -13-14 -27 -25 -25-30

138 147 154 161 168

241 234 227 220 212

128 123 117 112 108

204 196 188 180 173

711 700 686 674 661

0

100

200

300

400

500

600

700

800

900

1 000

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

Own network - NGA Own network - legacy LLU BSA

155 160 165 169 173

0

20

40

60

80

100

120

140

160

180

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

`

236 230 224 219 214

96 93 89 86 83

478 461 440 424 407

810 783 753 729 704

0

100

200

300

400

500

600

700

800

900

1000

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

Own network LLU (VoIP) WLR

`

inwestor.netia.pl 12

B2C financial performance | Adjusted B2C EBITDA bridge for 9M 2016

Actual

9M 2015

vs

9M 2016

Comments

PLNm

• Revenue decline driven mainly by off-net RGU churn (WLR, BSA, LLU) and on-net ARPU reductions (bundling)

• Lower service cost reflects lower off-net rental payments to incumbent and lower interconnection costs

• Lower variable costs reflect a number of optimization initiatives introduced by the Company

Increase in Adjusted EBITDA Decrease in Adjusted EBITDA

127

105

22

4

1 10

1 339

20

4

15

35

55

75

95

115

135

AdjustedEBITDA

9M 2015

RGU revechange

ARPU revechange

IC and Other Service costchange

Acquisitioncost

Retention

CostsVariable

cost

A&P cost Fixed

costs

AdjustedEBITDA

9M 2016


Netia Group Financial Overview

14inwestor.netia.pl

Financial Performance | Key figures for Q3 2016

• Profitability y-o-y stable despite a continued price pressure in both segments

Comments

Revenues

Adjusted EBITDA1

Margin (%)

(PLN’ 000)

Gross profit

Change (y-o-y%)

Change (y-o-y%)

Gross margin (%)

Adjusted EBIT

Margin (%)

2015

Q3

Depreciation

EBITDA

Margin (%)

Change (y-o-y%))

EBIT

Margin (%)

Q2

380,340

29.0%

111,691

29.4%

7,947

2.1%

110,325

102,378

29.6%

112,622

10,244

2.7%

2015 vs 2016

9m 2015 y-o-y

(1.6%)

(4.0%)

(1.5%)

(27.5%)

9m 2016

1,150,288

29.0%

341,035

29.6%

26,535

2.3%

333,185

(1.3%)306,651

(6.4%)

28.2%

324,845

(50.1%)18,194

1.6%

Q1

388,718

29.2%

110,065

28.3%

8,095

2.1%

113,545

105,450

28.7%

111,489

6,039

1.6%

(10.5%) (9.9%)

(15.5%) (11.8%)

(11.5%) (6.0%)

400,426

30.8%

124,519

31.1%

20,561

5.1%

123,347

102,786

30.7%

122,945

20,159

5.0%

2.6%

(3.1%)

12.3%

Q4

402,697

27.7%

110,303

27.4%

1,084

0.3%

111,557

110,473

25.3%

101,947

(8,526)

(2.1%)

(1.6%)

(54.9%)

(0.3%)

1,169,484

29.7%

346,275

29.6%

36,603

3.1%

347,216

310,614

29.7%

347,056

36,442

3.1%

(7.9%)

(8.6%)

(2.3%)

2016

Q1 2016 Q2 2016

386,874

29.8%

111,767

30.4%

13,094

3.4%

115,196

102,102

29.7%

114,808

12,706

3.3%

390,494

28.4%

111,709

28.6%

3,978

1.0%

110,954

106,976

27.4%

107,128

0,152

0.0%

0.5%

(2.3%)

(3.9%)

1.7%

4.4%

1.9%

Q3 2016

372,920

28.7%

111,559

29.9%

9,463

2.5%

107,036

97,573

27.6%

102,909

5,336

1.4%

(6.9%)

(13.2%)

(16.3%)

1 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparatives restated)


Financial Performance| Adjusted EBITDA reconciliation to Net Results

9M 2016

345,172,289348,107,152Average number of outstanding shares (basic)

0.05EPS (in PLN, basic)

30,28316,107Net Profit +88%

(6,086)(4,707)Net financial expenses +29%

18,19436,442EBIT -50%

(306,651)(310,614)Depreciation and amortization -1%

324,845347,056EBITDA -6%

333,185347,216Adjusted EBITDA1 -4%

Unusual Items:

(4,260)M&A related costs

1,524Restructuring costs na

31,735Profit /(Loss) before tax -62%12,108

18,175Current tax and deferred income tax na(15,628)

PLN’000 9M 2015 Change

(368)(251)Integration costs +47%

(6,574)

1

Reorganization costs (260) 1.651 na

2

1

(100)

Mainly costs related to integration of TK Telekom

2

-98%

0.09

Return of the court deposit 4.000 - na

5

3 „Local Netia” and „Digital Netia” projects costs

-Transformation projects (909) na

-Access network modernization project (139) na

(913)Liquidation costs (1,479) +62%

-Extraordinary events (422) na

3

4

4 Costs of liquidated fixed assets related to the acquisition of subsidiaries

5 Increase of deferred tax asset and tax refund related to the new technologiesacquisition discount

Mainly staff redundancies related to cost of employmentrestructuring in TK Telekom

1 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparative restated)


• Capital investments in the B2C segment reflect mainly customer equipment necessary to connect newresidential customers to Netia’s access network and integration works within the cable networks located inWarsaw and Kraków, access network upgrades and IT licences

• Investments in the B2B segment include mainly extension of transmission network capacity, connecting newbusiness customers and IT licences

• Capital expenditures for the integration of TK Telekom in the amount of PLN 15 million are presented in theB2B segment

Capital investments by Operating Segments1

PLNm

Financial Performance | Capital Expenditure

Comments

1 Including TK Telekom and Petrotel in Other

84 87

7155

10

9

166

152

0

20

40

60

80

100

120

140

160

180

9M 2015 9M. 2016

B2B B2C Other


• Netia delivered a set of solid financial results for Q3 2016, demonstrating relativebusiness resilience against a visible competition and price pressure in a difficultmarket environment for both commercial divisions

• The Group’s financial standing remains very strong with a leverage at a convenientlevel below 0.5x of the 2015 Adjusted EBITDA at PLN 459m

• On September 30, Mr. Cezary Chałupa, B2B General Manager, resigned from hisposition as the member of the Company’s Management Board. The resignation iseffective immediately

Conclusions


Disclaimer

Some of the information included in this material contains forward-looking statements. Readers are cautioned that any such forward-looking statements are not

guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as

a result of various factors. For a more detailed description of these risks and factors, please see Netia's most recent financial report and press release. Netia

undertakes no obligation to publicly update or revise any forward-looking statements.

9m 2016 financial results - netia · • drop in total rgus in q3 2016 results mainly from...

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