Magyar Telecom B.V. Investor Presentation Q3 2016

Transcription

1 Magyar Telecom B.V. Investor Presentation Q David Blunck, EO Invitel Group Ákos Balogh, O Invitel Group November 29, 2016

2 Safe Harbor Statement 2 This presentation of Magyar Telecom B.V. (the ompany ) contains forward-looking statements. These and all forward-looking statements are only predictions or statements of current plans that are constantly under review by the ompany. orward-looking statements by their nature address matters that are, to different degrees, uncertain. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual results could differ materially from those expressed in the forward-looking statements for a variety of reasons, including but not limited to: fluctuation in foreign exchange rates and interest rates; changes in Hungarian and entral and Eastern European economic conditions and consumer and business spending; the amount that the ompany invests in new business opportunities and the timing of those investments; the mix of services sold; competition; management of growth and expansion; future integration of acquired businesses; the performance of IT Systems; technological changes; the ompany's indebtedness; and government regulation. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the ompany's financial reports, which are available on the ompany s website, Accordingly, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. The ompany does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date the statements are made.

3 Overview 3 Performance tracking with management expectations Q3 Adjusted EBITDA is up 3%, year-to-date flat with prior year Reaffirming full year guidance of slight EBITDA growth Year-to-date Gross Margin from iber/opper TV up 24%, Datacenter & IT Services up 17% Programming fees introduced by leading commercial channels passed through to customers orporation Tax rate reductions, Employer Payroll harge reductions and Minimum Wage increases in 2017 net savings to Invitel and indirect boost to customer spending power

4 Residential Unit ustomer Metrics (1) 4 TTx opper ble Residential SB Small Business ustomers (#) ARPA (HU) RGUs (#) RGU/ustomer (#) Penetration % Average revenue per customer Revenue generating units ustomers / Homes Passed k 337k SB 675k 700k 31% 31% 11,330 SB 10,630 30% 30% 24% 205k 180k 6,140 6,360 5, k 323k % 90k 46k 13k SB 90k 67k 13k SB 5,470 5,360 5,110 4,740 4, k 123k 23k SB 198k 180k 23k SB 1.8 SB % 17% Q3-15 Q3 Q3-15 Q3 Q3-15 Q3 Q3-15 Q3 Q3 15 Q3 On-net customers and RGUs at end of period excluding mobile broadband RGU and off-net customers. ARPA excludes equipment sales, DVB-T and insurance brokerage revenue

5 Residential Unit ustomer Metrics (2) 5 In-LTO TTx In-LTO opper ble Invitel Triple-play % Multi-play % TV uptake % TV ustomer % hurn % 3P / Total ustomers 2P+3P / Total ustomers Sales with TV / Total sales TV customers / Total customers Quarterly average annualized 67% 40% 30% 18% 70% 44% 36% 20% 99% 99% 71% 69% 68% 64% 55% 55% 76% 65% 61% 46% 80% 74% 70% 54% 91% 91% 74% 73% 52% 47% 24% 22% 12.5% 12.0% 11.5% 11.0% 13.0% 12.9% 12.5% 10.7% Q3 15 Q3 Q3 15 Q3 Q3 15 Q3 Q3 15 Q3 Q3 15 Q3 On-net Residential customers at end of period

6 Residential Network Metrics 6 In-LTO TTx In-LTO opper ble Invitel Homes Passed (HP) by Technology High-speed HP High-speed HP % iber GPON 105k opper IPTV VDSL 292k Not IPTV capable 155k (18%) 291k (35%) 397k (47%) 843k In-LTO HP 521k 318k TTx + D3 603k 397k % of TTx / In-LTO, % of D3 / ble HP 69% 70% 46% 38% 53% 47% Docsis3 ble Digital 200k Not Docsis3 capable 87k (30%) 206k (70%) 293k ble HP 203k 206k Q3-15 Q3 Q3-15 Q3

7 inancial Information for the quarter ended September 30, or the quarter ended or the quarter ended September 30, hange hange September 30, hange hange % % (in thousands of EUR) (in millions of HU) Revenue 35,008 35,046 (38) (0%) 10,891 10,944 (53) (0%) Segment ost of Sales (7,543) (7,073) (470) (7%) (2,346) (2,209) (137) (6%) Segment Gross Margin 27,465 27,973 (508) (2%) 8,545 8,736 (191) (2%) Segment Gross Margin % 78% 80% 78% 80% Adjusted Operating Expenses 1 (13,877) (14,857) 980 7% (4,314) (4,648) 334 7% Revenue % (40%) (42%) (40%) (42%) Adjusted EBITDA 2 13,588 13, % 4,231 4, % Adjusted EBITDA Margin % 3 39% 37% 39% 37% Non-recurring Items (345) 60 (405) (671%) (107) 15 (122) (826%) EBITDA 2 13,243 13, % 4,124 4, % EBITDA Margin % 3 38% 38% 38% 37% The average EUR:HU exchange rates were in Q and in Q (1) Adjusted Operating Expenses do not include non-recurring items presented below Adjusted EBITDA (2) EBITDA and Adjusted EBITDA are non-irs financial measures. (3) EBITDA Margin % and Adjusted EBITDA Margin % are EBITDA and Adjusted EBITDA as a percentage of Revenue

8 inancial Information for the period ended September 30, or the period ended or the period ended September 30, hange hange September 30, hange hange % % (in thousands of EUR) (in millions of HU) Revenue 104, ,293 (3,519) (3%) 32,706 33,464 (758) (2%) Segment ost of Sales (22,323) (21,752) (571) (3%) (6,968) (6,722) (246) (4%) Segment Gross Margin 82,451 86,541 (4,090) (5%) 25,738 26,742 (1,004) (4%) Segment Gross Margin % 79% 80% 79% 80% Adjusted Operating Expenses 1 (47,484) (51,218) 3,734 7% (14,822) (15,827) 1,005 6% Revenue % (45%) (47%) (45%) (47%) Adjusted EBITDA 2 34,967 35,323 (356) (1%) 10,916 10, % Adjusted EBITDA Margin % 3 33% 33% 33% 33% Non-recurring Items (2,021) (2,420) % (631) (748) % EBITDA 2 32,946 32, % 10,285 10, % EBITDA Margin % 3 31% 30% 31% 30% The average EUR:HU exchange rates were in Q1-Q and in Q1-Q (1) Adjusted Operating Expenses do not include non-recurring items presented below Adjusted EBITDA (2) EBITDA and Adjusted EBITDA are non-irs financial measures. See the reconciliation to net income on slide 9 (3) EBITDA Margin % and Adjusted EBITDA Margin % are EBITDA and Adjusted EBITDA as a percentage of Revenue

9 EBITDA Reconciliation to Net Results for the period ended September 30, or the period ended or the period ended September 30, hange hange September 30, hange hange % % (in thousands of EUR) (in millions of HU) EBITDA 1 32,946 32, % 10,285 10, % EBITDA Margin % 2 31% 30% 31% 30% Depreciation and amortization (27,931) (30,270) 2,339 8% (8,719) (9,354) 635 7% inancing expenses, net (11,067) (10,938) (129) (1%) (3,455) (3,380) (75) (2%) oreign exchange gains / (losses), net 19 (38) % 6 (12) % Gains / (losses) on derivatives 47 (74) % 15 (23) % Taxes on net income (1,809) (1,892) 83 4% (565) (584) 19 3% Net profit / (loss) for the period (7,795) (10,309) 2,514 24% (2,433) (3,186) % Headcount 1,152 1,163 (1) EBITDA is a non-irs financial measure (2) EBITDA Margin % is EBITDA as a percentage of Revenue

10 Segment Revenue & Gross Margin for the period ended September 30, Revenue Gross Margin or the period ended or the period ended September 30, hange hange September 30, hange hange % % (in millions of HU) (in millions of HU) opper 8,178 9,184 (1,006) (11%) 6,964 7,986 (1,022) (13%) iber 3,470 2,235 1,235 55% 2,612 1, % ble 4,648 4, % 3,417 3, % Offnet 921 1,137 (216) (19%) (141) (24%) Small Business 1,395 1,558 (163) (10%) 1,329 1,467 (138) (9%) Residential Unit 18,612 18, % 14,772 15,004 (232) (2%) Enterprise & Government 6,893 6, % 4,813 4,916 (103) (2%) Midsize 2,862 2,922 (60) (2%) 2,456 2,487 (31) (1%) orporate 9,755 9,756 (1) (0%) 7,269 7,403 (134) (2%) Wholesale 4,339 5,171 (832) (16%) 3,697 4,335 (638) (15%) orporate Unit 14,094 14,927 (833) (6%) 10,966 11,738 (772) (7%) Total 32,706 33,464 (758) (2%) 25,738 26,742 (1,004) (4%) Recurring Business 31,368 31,782 (414) (1%) 25,097 25,591 (494) (2%) Project Type 1,338 1,682 (344) (20%) 641 1,151 (510) (44%) Total 32,706 33,464 (758) (2%) 25,738 26,742 (1,004) (4%) opper & iber TV 2,737 2, % 1, % Datacenter & IT Services 2,492 1, % 1, %

11 pital Expenditure for the period ended September 30, or the period ended September 30, or the period hange hange ended September 30, hange hange % % (in thousands of EUR) (in millions of HU) Variable pex 12,886 11,872 (1,014) (9%) 4,022 3,669 (353) (10%) ixed pex 4,934 4,016 (918) (23%) 1,540 1,241 (299) (24%) Base pex 17,820 15,888 (1,932) (12%) 5,562 4,909 (652) (13%) Base pex % 17% 15% 17% 15% Data center expansion 1,473 - (1,473) n/a (460) n/a TTx / Residential upgrades and Backbone development 557 6,753 6,196 92% 174 2,087 1,913 92% Other 163 1,378 1,215 88% % Project pex 2,193 8,131 5,938 73% 685 2,513 1,828 73% Project pex % 2% 8% 2% 8% Total pex 20,013 24,019 4,006 17% 6,247 7,422 1,175 16% Total pex % 19% 22% 19% 22%

12 sh low Statement for the period ended September 30, sh low Statement or the period ended September 30, (in thousands of EUR) Net cash provided by operating activities excluding interest paid 28,347 27,803 Purchase of property, plant and equipment and intangible assets (22,907) (21,632) Proceeds from sale of property, plant and equipment and intangible assets 303 1,825 Net cash used in investing activities (22,604) (19,807) sh flow available for debt service 5,743 7,996 Interest paid (5,520) (5,411) Net cash used in financing activities including interest paid (5,520) (5,411) Effect of exchange rate changes on cash and cash equivalents 12 (36) sh flow after debt service 235 2,549 sh and cash equivalents at beginning of period 21,664 20,823 sh and cash equivalents at end of period 21,899 23,372

13 Balance Sheet 13 As of September 30, As of June 30, As of March 31, As of December 31, (in thousands of EUR) Non-urrent Assets Intangible Assets 24,633 23,111 23,246 23,832 Property, Plant and Equipment 178, , , ,940 Other Non-urrent inancial Assets , , , ,815 urrent Assets sh and sh Equivalents 21,899 20,460 22,012 21,664 Trade and Other Receivables 17,008 14,349 17,338 17,225 Other urrent Assets 1,403 1,508 1,493 1,444 40,310 36,317 40,843 40,333 Total Assets 243, , , ,148 Equity Share pital 297, , , ,148 Reserves 137, , , ,848 umulative Translation Reserve (79,671) (83,870) (82,673) (82,089) Accumulated Losses (318,073) (317,580) (315,936) (309,895) Non-ontrolling Interest ,253 33,547 36,397 43,022 Non-urrent Liabilities Borrowings 159, , , ,705 Other Non-urrent Liabilities 8,222 8,330 8,651 8, , , , ,662 urrent Liabilities Trade and Other Payables 16,780 21,499 21,920 19,076 Other urrent Liabilities 22,231 15,555 21,970 20,388 39,011 37,054 43,890 39,464 Total Equity and Liabilities 243, , , ,148

14 Other inancial Information 14 As of September 30, 2016 (in thousands of EUR) Balance Sheet Data (at period end): sh and cash equivalents 21,899 Third party debt 1 159,282 Other Pro-forma inancial Data: Annualized Adjusted EBITDA 2 48,342 Net third party debt 3 137,383 Ratio of Net third party debt to Annualized Adjusted EBITDA 2.8x (1) Third party debt includes long term debt from the 2013 Notes but excludes liabilities relating to finance leases and liabilities relating to derivative financial instruments (2) Annualized Adjusted EBITDA is calculated by multiplying Adjusted EBITDA before Utility Tax for the nine month period ended September 30, 2016 by 4/3 less Utility Tax for the full year of 2016 in the amount of 5.2 million recorded in January Annualized Adjusted EBITDA is a non-irs financial measure (3) Net third party debt equals third party debt less cash and cash equivalents

15 Reaffirming 2016 inancial Expectations 15 Revenue slightly down EBITDA Adjusted EBITDA slightly up pex up to 26% of revenue sh balance above 22m

16 Appendix 16

17 Quarterly Proforma Gross Margin Q Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (in thousands of EUR) (in millions of HU) opper 8,828 8,722 8,300 7,828 7,726 7,381 7,190 2,726 2,669 2,593 2,446 2,411 2,314 2,239 iber 1,693 1,809 1,946 2,270 2,562 2,802 3, ble 3,525 3,568 3,508 3,537 3,636 3,641 3,671 1,088 1,092 1,096 1,106 1,135 1,141 1,142 Offnet Small Business 1,657 1,588 1,504 1,486 1,462 1,420 1, Residential Unit - new 16,397 16,329 15,832 15,646 15,880 15,730 15,712 5,063 4,998 4,944 4,890 4,955 4,929 4,888 hanges Residential Unit - previously reported 15,475 15,439 14,994 14, ,779 4,726 4,681 4, Enterprise & Government 5,392 5,369 5,147 5,147 5,220 5,048 5,152 1,665 1,642 1,608 1,609 1,629 1,582 1,603 Midsize 2,704 2,678 2,668 2,602 2,645 2,642 2, orporate - new 8,096 8,047 7,815 7,749 7,865 7,690 7,733 2,500 2,462 2,441 2,422 2,454 2,410 2,406 hanges (2,001) (2,119) (2,326) (2,983) (618) (650) (725) (931) orporate - previously reported 10,097 10,166 10,141 10, ,118 3,112 3,166 3, Wholesale - new 5,525 4,173 4,326 5,421 4,054 3,767 4,020 1,706 1,277 1,351 1,694 1,265 1,180 1,251 hanges 1,079 1,229 1,488 2, Wholesale - previously reported 4,446 2,944 2,838 3, , , orporate Unit - new 13,621 12,220 12,141 13,170 11,919 11,457 11,753 4,206 3,739 3,792 4,116 3,719 3,590 3,657 hanges (922) (890) (838) (858) (284) (272) (263) (266) orporate Unit - previously reported 14,543 13,110 12,979 14, ,490 4,011 4,055 4, Total Gross Margin 30,018 28,549 27,973 28,816 27,799 27,187 27,465 9,269 8,737 8,736 9,006 8,674 8,519 8,545

18 18 Non-IRS inancial Measures Magyar Telecom B.V. has included certain non-irs financial measures in this presentation, including EBITDA and Adjusted EBITDA. Reconciliations of the differences between EBITDA and Adjusted EBITDA and the most directly comparable financial measure calculated and presented in accordance with IRS is included in this presentation. The non-irs financial measures presented are by definition not a measure of financial performance or financial condition under IRS and are not alternatives to operating income or net income/loss reflected in the income statement and statement of comprehensive income (loss) and are not necessarily indicative of cash available to fund all cash flow needs. These non-irs financial measures used may not be comparable to similarly titled measures of other companies. Management uses these non-irs financial measures for various purposes including: measuring and evaluating the ompany s financial and operational performance and its financial condition; making compensation decisions; planning and budgeting decisions; and financial planning purposes. Magyar Telecom B.V. believes that presentation of these non-irs financial measures is useful to investors because it (i) reflects management s view of core operations and cash flow generation and financial condition upon which management bases financial, operational, compensation and planning decisions and (ii) presents a measurement that equity and debt investors and lending banks have indicated to management is important in assessing the ompany's financial performance and financial condition. While Magyar Telecom B.V. utilizes these non-irs financial measures in managing its business and believes that they are useful to management and to investors for the reasons described above, these non-irs financial measures have certain shortcomings. In particular, these EBITDA and Adjusted EBITDA measurements do not take into account changes in working capital and financial statement items below income from operations, and the resultant effect of these items on the ompany s cash flows. Management compensates for the shortcomings of these measures by utilizing them in conjunction with their comparable IRS financial measures. The information in this presentation should be read in conjunction with the financial statements and footnotes contained in the ompany's financial reports.