Ziggo N.V. Q Results. October 19, 2012

Transcription

1 Ziggo N.V. Q Results October 19, 2012

2 Disclaimer This document does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or any other jurisdiction. Various statements contained in this document constitute forward-looking statements as that term is defined by U.S. federal securities laws. Words like aim, anticipate, believe, continue, could, estimate, expect, intend, may, plan, potential, predict, project, should, and will and similar words identify these forward-looking statements. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of these assumptions, risks and uncertainties are beyond our control. Accordingly, actual results may differ materially from those expressed or implied by the forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we operate. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated results or events: general economic trends and trends in the information, communications and entertainment industries; the competitive environment in which we operate; fluctuations in interest rates; consumer disposable income and spending levels, including the availability and amount of individual consumer credit; changes in consumer television viewing, broadband internet and telephony preferences and habits; consumer acceptance of existing service offerings, including our standard TV, digital pay TV, broadband internet and telephony services; consumer acceptance of new technology, programming alternatives and broadband internet services that we may offer; our ability to manage rapid technological changes; our ability to maintain or increase the number of subscriptions to our standard TV, digital pay TV, broadband internet and telephony services and our average monthly revenue per user; our ability to handle network and IT disruptions and to handle large volumes of customer service contacts; our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the outcome of any pending or threatened litigation; changes in, or failure or inability to comply with, government regulations in the Netherlands and adverse outcomes from regulatory proceedings; government intervention that opens our distribution network to competitors; uncertainties inherent in the development and integration of new business strategies; capital spending for the acquisition and/or development of telecommunications networks and services; the availability of attractive programming for our digital TV services at reasonable costs; the loss of key employees and the availability of qualified personnel; and events that are outside of our control, such as terrorist attacks, natural disasters or other events that may damage our network. We caution readers not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this document, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. 1

3 Operational highlights Q Balanced growth in Q3 Total RGUs increased by 17k (q-o-q) and 166k y-o-y (2.4%) resulting in 7.1 million RGUs All-in-1 bundle increased by 20k (q-on-q) subscribers and 148k y-on-y (12.1%) to 1.37 million; penetration of 48.6% of customer base Total internet increased by +16k RGUs (q-o-q) and 107k y-on-y (6.5%) Total telephony increased by +23k RGUs (q-o-q) and 156k y-on-y (11.9%) Strong B2B growth Approx. 3,000 new subscribers for Office Basis, Office Plus and Internet Plus Marketing activities at a planned lower level during the summer period All-in-1 campaigns started in September with an emphasis on the fourth quarter Continued development of new services: TV app 3.0 (ios and now also for Android) Streaming music service: Ziggo Muziek Successful 1 st phase of Ziggo HomeZone pilot 2

4 Financial highlights Q Strong EBITDA growth in period of lower marketing efforts Total revenue up 1.2% to 380.1m (y-o-y) Up 4.4% excluding other revenue Limited growth of telephony usage revenue of 1.5% B2B revenue up 23.5% to 26.8m (y-o-y); organically 16.5% Adjusted EBITDA up 8.1% to 227.0m (y-o-y) Net income up to 72.4m from minus 1.3m (y-o-y) Free Cash Flow up by 30.0% to 183.4m (y-o-y) Leverage down to 3.41x at the end of Q Q3 2011: 3.98x Q2 2012: 3.54x 3

5 Consumer Growth in RGUs driven by triple-play RGUs Triple-play subscribers ( 000) ( 000) +1.7% +11.8% 6,828 1,295 6,941 1,441 Telephony 1,144 1,183 1,241 1,278 1,336 1,368 1,387 1,639 1,733 Internet Digital pay TV 2,101 2,231 Analog and digital TV Analog TV only Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Notes: Penetration for digital TV is 79.1%, up almost 8%-pt from 71.2% in Q Internet subscribers up 94k or 5.8% y-o-y Telephony (+146k y-o-y) is growing in line with the growth in All-in-1 bundle (+148k y-o-y) Telephony subscribers increasingly move to fixedline flat-fee subscriptions, currently 21% Q3 standard TV net loss slightly above last year (31k vs. 29k) Continued growth in triple-play subscribers 146k or 11.8% y-o-y 19k or 1.4% q-o-q All-in-1 bundle penetration is 48.6% of consumer customer base RGUs are calculated as the sum of total TV subscribers, digital pay TV subscribers, internet subscribers and telephony subscribers Digital TV subscribers are subscribers that activated one or more smartcards; Digital pay TV subscribers have subscribed to one or more additional digital pay TV packages 4

6 ARPU Growth All-in-1 bundle increases RGUs per customer and blended ARPU RGUs per customer Blended and All-in-1 ARPU ( 000) ( ) +6.3% +7.8% Q4 10 Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Q4 10 Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Blended All-in-1 (excluding usage and digital pay TV) Continued uptake of All-in-1 bundle drives growth in RGUs per customer RGUs per customer up 6.3% y-o-y Limited increase in number of subscribers for digital pay TV Y-on-y increase in blended ARPU by 7.8% Q3 ARPU growth affected by: Decline of telephony usage ARPU Growth in RGUs per customer from All-in-1 Revenue growth from digital pay TV 2011 ARPU growth benefited from 2011 price increases (in contrast to 2012 ARPU growth) 5

7 Revenues Continued growth by bundles, digital pay TV and business market Quarterly revenue by product line ( m) +1.2% Other B2B Telephony Internet Digital pay TV Standard TV Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Q vs. Q (y-o-y) Bundle revenue grew by 13.1% to 170.4m; 48.2% of total consumer revenues Digital pay TV revenue continued to grow by 12.1% y-o-y to 42.0m in Q Telephony usage revenue up 1.5% y-o-y to 42.3m B2B revenue up by 23.5%, excl. Breezz 16.5% Q vs. Q (q-o-q) Bundle revenue grew by 1.7% Digital pay TV revenue in line with previous quarter Telephony usage revenue down 7.7% due to seasonal pattern strengthened by Reduced FTA rates per August 1, 2012 Lower average call minutes per user Higher share of free on-net calling 6

8 Revenues y-o-y comparison of one-off effects Telephony Usage Q3 telephony usage revenue up 0.6m or 1.5% y-o-y Q3 telephony usage ARPU down by 10.0% y-o-y Implementation of new call rates per September 1, 2011 Reduced FTA as per August 1, 2012 ( 1.2m lower revenue for Q3) Lower average call minutes per subscriber (AMPU) of 7.8% y-o-y Reduction in billable minutes per subscriber Increase in share of free on-net call minutes (total call minutes up 2% vs. total on-net up 11%) Digital Pay TV As per September 2011 new TV proposition launched Re-allocation of premium theme channels into TV Plus and TV Extra Movement of all our subscribers into three TV packages led to a step up in revenue of 0.5m per month since September 1, 2011 Shift towards flat-fee packages (now 21% of tel. subscribers) Subscriber base up 146k or 11.3% y-o-y Gross margin on telephony up by 10% September 2012 is the first month where like-for-like comparison to last year is possible Revenue decline of 10.8% y-o-y Revenue per call minute declined by 8.5% y-o-y Impact of lower FTA rates of 600k per month 7

9 Revenues Continuous growth of subscription revenue Quarterly revenue breakdown ( m) Recurring consumer revenue from subscriptions including flat-fee telephony bundles increased by +1.2% 10.8m, or 3.6%, in Q versus Q Other B2B Usage Subscription Limited price increase for TV-only on April 1 st 2012 vs. general price increase in Q mitigates growth by 2.5m Strong y-o-y growth in VoD and pay-per-event transactions by 140% compared to Q3 2011, albeit from a small base Note: Revenue from flat-fee fixed line telephony subscriptions included in subscription instead of usage 8

10 COGS and Gross Margin Higher Gross Margin as a result of a lower number of STBs sold y-o-y Quarterly COGS ( m) As % of revenue 19.8% 19.6% 21.0% 18.3% 20.3% 20.0% 18.5% Y-o-y decrease in COGS for Q as a result of a lower volume of itv STBs sold Lower number of itv and HD STBs sold compared to Q (at a lower average sales price): Q Q itv STB 69,000 29,000 HD STB 69,000 11,000 CI+ module 11,000 4,000 Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Digital pay TV with lower margin grew as a percentage of total revenue from 10.0% in Q to 11.0% in Q resulting in a lower overall gross margin Continuing trend of increasing content costs for standard TV Gross margin on telephony increased by 10% mainly due to reduction of FTA rates and increased subscriber base Note: Cost of goods sold includes the costs for purchases of materials and services directly related to revenues and consists of author rights, signal costs and royalties that we pay to procure our content, interconnection fees that we pay to other network operators, materials and logistics costs relating to the sale of set-top boxes and materials used to connect customers to our network 9

11 Operational Expenses Limited marketing & sales activities in summer period 86.6 Change in Opex, Q Q ( m) Operating expenses decreased by -4.3% y-o-y to 82.9m in Q as a result of lower marketing activities during the summer period % Opex as % of revenue at 21.8% Q compared to 23.1% in Q Marketing & Sales expenses down by 34.7% Campaigns for migration to the new TV proposition in Q Start of the branding campaign in Q Higher sales costs and reseller fees in Q Personnel cost in Q increased by 5.9% y-o-y Number of FTEs increased by 4.6% y-o-y Personnel Contracted work Marketing & Sales Office expense & Other Average salary cost increased by 3.8% Increase partly offset by higher capitalized personnel expenses Contracted work declined in Q as a result of lower call volumes (over 30%) and a lower level of activity in customer services 10

12 Adjusted EBITDA Continued Adjusted EBITDA growth ( m) Quarterly adjusted EBITDA As % of revenue 56.9% 56.9% 55.9% 56.2% 55.8% 56.7% 59.7% Strong growth of adjusted EBITDA by 8.1% versus Q mainly due to: Higher gross margin (less STB sold) by 2.5% OPEX as a % of revenue declined by 1.3% Adjusted EBITDA strongly up sequentially due to Higher gross margin Lower personnel costs Reduction of marketing & sales expenses Q1 11 Q2 11 Q4 11 Q1 12 Q2 12 Note: Adjusted EBITDA does not include IPO related expenses 11

13 Net financial expense Decrease of interest expense due to deleveraging and conversion of shareholder loans to equity at IPO Quarterly net financial expense ( m) Fair value results on derivative financial instruments Amortization funding costs Bank & financing fees Interest on bank debt and notes Interest expense substantially down compared to Q No interest on shareholder loans ( 54m) which were converted into equity at IPO 66 Interest on shareholder loans Lower average gross debt of 188m compared to the end of Q Blended interest rate in Q was 6.7% vs. 8.1% in Q Fair value losses on derivatives in Q mainly as result of changes in the market-to-market value of the outstanding IRS due to lower swap rates 12

14 Capital Expenditures Lower quarterly capex due to timing of investments in equipment Capital expenditures Capital expenditures Q ( m) (%) Customer installations Customer installations 20% 32% Maintenance & other Network growth % Maintenance & other Network growth Capex in Q was 61.6m, down 16.7% y-o-y from 73.9m in Q Relatively low investments in network growth due to phasing of investments in equipment and licenses Lower number of modems shipped and a lower number of installations in Q Strong increase in other investments mainly related to our core infrastructure and systems to facilitate new services such as mobility and TV Everywhere Note: Our capital expenditure and investments relate primarily to extending, upgrading and maintaining our network, installation of new customers and the cost of cable modems. Capital expenditure also includes increases in intangible assets, primarily expenditures on software, which we capitalize. Set-top boxes are sold to customers and therefore recognized as cost of goods sold and not capitalized 13

15 Free Cash Flow Increase in FCF from higher EBITDA and lower Capex Free Cash Flow ( m) EBITDA % Movement in provisions Change in net working capital Capex % Other cash used in investing activities Actual Q Actual Q % change Free Cash Flow % Free Cash Flow increased by 30% compared to Q as a result of: Increased EBITDA Increased cash inflow from decrease in net working capital Decrease of CAPEX Free Cash Flow margin increased to 48.3% of revenues (42.5% YTD) Free Cash Flow as a % of revenues 48.3% 37.5% Capex as a % of revenues 16.2% 19.7% 14

16 Capital Structure Continued deleveraging Commentary Net Debt / EBITDA Leverage reduced to 3.41x from 3.87x at year end x 9.0x EBITDA / interest cover of 3.97 (EBITDA Capex) / interest cover of x x x x 3.41 PF 2006 PF Q Net Debt / EBITDA Net Leverage Covenant EBITDA / Interest (1) (EBITDA Capex) / Interest (2) 1.75x 2.06x 1.33x 1.47x 2.29x 1.69x 2.76x 3.14x 1.85x 1.98x 3.97x 2.10x 1.16x 1.54x 1.60x 2.14x 2.20x 2.84x PF Q EBITDA / Interest Interest Cover Covenant PF Q (EBITDA Capex) / Interest (1) Interest for PF 2007 numbers is as reported in the Company s audited financials (unadjusted). PIK interest on Mezzanine is included for comparison purposes. (2) Capex excludes Capex related to the integration of our predecessors. 15

17 Net Debt Further reduction of Net Debt As per September 30, 2012 in m x LTM adj. EBITDA Margin/ Coupon Maturity Term loan B (extended) x E % Mar-17 Term loan E (Senior Secured Notes) x 6.125% Nov-17 Term loan F x E % Sep-17 Total Senior Debt 1, x Senior Unsecured Notes 1, x 8.000% May-18 Total Debt 3, x Cash and cash equivalents x Total Net Debt 2, x (1) (1) As per end of Q3 2012, the average maturity is approx. 5.2 years As per the end of Q approx. 81% of the total floating interest rate borrowings is hedged through interest rate swaps Prepayment on our credit facility No prepayments during Q m during H (1) Adjusted LTM EBITDA as of Q of 874.6m does not include costs related to the IPO of Ziggo N.V. 16

18 Management Agenda and Outlook 2012 Management Agenda Outlook 2012 Executing marketing campaigns with strong focus on All-in-1 bundle Executing strategic roadmap for product innovation Continuation of market trend towards triple play Revenue from core business, excl. telephony usage, expected to develop in line with our plans for 2012 Downward trend in telephony usage expected to continue Due to a more competitive market environment, subscriber acquisition costs expected to increase Confident to meet current EBITDA consensus for full year 2012 ( 878.2m) Capex in 2012 expected to be between m Intention to distribute 220m dividend over 2012 results Interim dividend of 110m distributed in Sept

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