Earnings call transcript: EuroTeleSites Q1 2025 sees revenue growth, stock dips

EuroTeleSites AG reported its Q1 2025 earnings, showcasing a 5.9% increase in revenue to €67.7 million compared to Q1 2024. Despite this growth, the company’s stock saw a decline of 2.65% in the latest trading session, closing at €5.24. The company, with a market capitalization of approximately €990 million, highlighted strong operational performance and strategic initiatives aimed at enhancing its market position. InvestingPro analysis reveals an impressive gross profit margin of 88.63%, indicating robust operational efficiency.

Key Takeaways

• Revenue increased by 5.9% year-over-year, driven by portfolio management and new tenants.
• EBITDA rose 9.5% to €59.6 million, reflecting improved operational efficiency.
• Stock fell 2.65% post-earnings, despite positive revenue growth.
• Announced strategic expansions, including potential market entry in North Macedonia.

Company Performance

EuroTeleSites AG demonstrated robust performance in Q1 2025, with revenue climbing to €67.7 million, a 5.9% increase over the same period last year. The growth was largely attributed to effective portfolio management and the addition of new tenants on existing towers. According to InvestingPro data, the company maintains a strong free cash flow yield of 18%, though investors should note its high revenue valuation multiple. The company’s expansion efforts, including the rollout of 36 new sites and securing "build to suit" orders, underline its strategic focus on market growth.

Financial Highlights

• Revenue: €67.7 million, up 5.9% year-over-year.
• EBITDA: €59.6 million, a 9.5% increase from Q1 2024.
• EBITDA After Lease: €40.2 million, up 11.3%.
• Total sites: Net addition of 166 sites.
• Tenant growth: 361 net new tenants.

Market Reaction

Despite the positive financial results, EuroTeleSites’ stock declined by 2.65%, closing at €5.24. The stock’s performance was affected by broader market trends and investor sentiment, which may have been cautious due to macroeconomic factors or sector-specific concerns. InvestingPro analysis suggests the stock is currently overvalued based on its proprietary Fair Value model, though it has delivered an impressive year-to-date return of 11.49%. The stock trades at a P/E ratio of 28.24, with an overall financial health score rated as "GREAT" by InvestingPro’s comprehensive assessment system.

Outlook & Guidance

EuroTeleSites expects revenue growth of approximately 4% for the full year 2025, with capital expenditures projected at 20% of revenues. The company plans to continue its portfolio development and tenant acquisition strategies, aiming to maintain its operational efficiency and competitive edge in the expanding tower infrastructure market.

Executive Commentary

• "We have achieved a nice growth of revenue of 5.9%," said Ivo, Executive, highlighting the company’s successful strategies.
• "We are operating very efficiently already," noted Lars, Financial Executive, emphasizing the company’s operational strengths.
• "The rollout of new sites are more and more attractive to the rest of the players," remarked Ivo, pointing to the company’s strategic market positioning.

Risks and Challenges

• Market Saturation: Increasing competition in the tower infrastructure sector could impact growth.
• Regulatory Changes: Potential regulatory shifts in key markets may affect operations.
• Economic Conditions: Broader economic factors could influence tenant demand and expansion plans.
• Technological Advancements: Rapid changes in technology may require additional investments.

EuroTeleSites AG continues to leverage its strengths in operational efficiency and strategic expansion to drive growth. However, the company faces challenges from market saturation and economic conditions, which could impact future performance.

Full transcript - EuroTeleSites AG (ETS) Q1 2025:

Moritz, Moderator/Host, Eurotillescience: We meet our growth expectations in q one twenty twenty five. Good morning from the Eurotillescience headquarter. Today, I am with Ivo and Das, and we will present you the q one results from 2025. As you’re aware of, you have the opportunity to raise questions after the presentation, so you can already press the question mark and enter your answer so we can come up come up to the q and a once we are done. But now I would

Ivo, Executive/Management, Eurotillescience: like to hand over to Ivo to give us the results. Thank you, Moritz. Good morning from my side. Good morning to our shareholders, to the analysts, Nicole, potential shareholders and all the rest who are joining us this morning. It’s really pleasure that this time, we will see a q one results that we can actually compare to the actual q one results of the previous year.

So going into the management summary, we have achieved a nice growth of revenue of 5.9% versus the q one results of 2024. We have achieved EBITDA growth of almost 10%, EBITDA after list of a little bit of over 10%. But for those details, Lars will have the pleasure to explain to all of you how we’ve reached those nice targets. We have continued with the portfolio development, the number of new tenants, and, of course, the third party tenants, which are very important to us, is growing according to the plans. When it comes to the CapEx, with the €12,300,000, we have done the standard mandatory upgrades of the existing sites that they can support a new tenant and the five g equipment from our anchor tenant and as well has been able to roll out 36 new sites.

On the refinancing part, exciting news that €255,000,000 have been done through a private placement from a one Bulgaria. I can share another good news that in North Macedonia, there is a potential for a third MNO to enter the country. This case is for IG from Hungary. We have signed a letter of cooperation, most likely if they bid on the call that the agency for regulatory has published, which goes through May, most likely, they will be coming to our towers, which is a nice growth of Tennessee for our small market of North Macedonia. And another very good news good milestone for us is that we have received the two orders that we do build to suit for mobile operators who are not part of a one telecom master group.

It’s a symbolic order, but it’s a major achievement for us that we have been already recognized on the markets that we operate as a quality provider and a tower company that anybody can account for. Next, please. So coming to the results, just one previous. Yeah. The sites are growing according to the plans.

The tenants are growing even better, which we’re very pleased. And looking to the margins year over year, quarter over quarter, we’ve seen a nice EBITDA growth of a little bit over 3% compared to the previous year, 88% to 85 and same on the EBITDA after lease, which is even better, almost 4%. This the rest of the numbers are self explanatory, and everything’s publicly available. So what I’m willing to make a point of this is that quarter over quarter, we have 166 net adds of total sites, but the tenants are 361. So we can almost see that we have a double tenants than what we are rolling out.

And this is what we would like to stress out once again that the rollout of the new sites are more and more attractive to the rest of the players, and we’re saving a very high and very nice tenancy development on those particular sites. Even though group wise, we’re still on a 1.24 tenancy ratio. On the new sites, we are almost double that. So the net adds 03/31/2024 of new sites was 31 versus the 03/31/2025 is 25, but I will explain when we come to the CapEx page a little bit of how that has developed. Next, please.

On the CapEx is, again, the blue part of the bars is the mandatory upgrades. These upgrades that we have to invest according to our master lease agreement with our anchor tenant. And for Q1 twenty twenty five, this was $8,000,000 almost 65%, where the rollout, which was $3,200,000 a little bit over 40% is that sorry, 26% is for the new sites. So if we compare quarter over quarter, year over year, we see a more rolled CapEx. But if you see on the net adds of the sites, it’s a little less.

So if somebody would question how is that possible, the answer is that when we were spinning off from a one Telugu, Austria in 2023, the spin off happened in September, there was a very large order during 2023, and the rest of the hours which were not completed by the spin off were finalized q one or q two in 2024. So typical duration for a rollout of new site according to a master lease agreement is twelve months to eighteen months. So that’s why there is some delay and there is a spillover of rollout. So if you go if somebody would like to compare the rollout CapEx versus the net debt, it’s a little bit challenging to compare apples to apples. But we will see that in the next quarter, we will continue with our targets that we have for this year.

And since we achieved on the spot the rollout targets from our anchor tenant for 2024, I’m very confident that we will also do the same thing in 2025. But next, I think with this, I would like to give the floor to my colleague Lars to deep dive into the financials.

Lars, Financial Executive, Eurotillescience: Thank you, Ivo, and warm welcome from my side as well. You see us in a in a good mood in that sense that we are going in the direction that we expected to go. So if I compare the numbers also not only towards the previous year, but also towards the guidance that I briefly also will mention in the later part of the presentation, we can see that we are on track, which is very good. It’s a strong first quarter. I think we’re in line with what we had is actually planned to to implement.

You know that our main driver is, of course, how to monetize the existing infrastructure, but also how to increase the infrastructure. Those are the focus points. And having said so, you can see and it’s reflected in the revenues, we can see a growth in revenues between q one twenty twenty four in the amount of 63,900,000.0, up by 5.9% to 67,700,000.0 in q one twenty twenty five. Don’t be surprised if you see q three and q four in 2024 a bit higher. You might remember our last video call in which we have presented that we had some historical topics to fulfill if you wish.

So we have some onetime effects in Q3 in the 68,000,000 but also in the €71,400,000 And therefore, the comparison is really straight if you also go between q one and q one twenty twenty five. Having said so, the EBITDA itself increased by 9.5%, which means reaching 59,600,000.0 coming from 54,400,000.0 in q one twenty twenty four. And as mentioned, I think there are main three main drivers that help us to develop and to increase the revenues. It’s mainly driven by the so called portfolio management, portfolio development. This is what Ivo mentioned through the new sites that we are developing and in operating.

Secondly, the new tenants also on the existing towers, of course. And lastly, also according to the MLA, the price increase that we can apply through indexation pass through. You all know that it’s kept by 3%, but this is exactly what we have done in April 2024. Next slide, please.

Moritz, Moderator/Host, Eurotillescience: Also

Lars, Financial Executive, Eurotillescience: on the EBITDA after leases, it looks quite promising in a growing direction. So we see a plus 11.3% increase up to 40,200,000 in Q1 twenty twenty five coming from 36.2 in Q1 twenty twenty four. If we also look at the overall cash flow, and here we state the cash flow from operations minus CapEx paid, you can see a slight increase in Q1 twenty twenty five, which is driven also by the fact that Ivo mentioned the projects are ongoing. So the spend of CapEx is in plan aligned with what we plan to implement. You all remember that we are actually planning to reinvest approximately 20% of our revenues this year again into CapEx.

And I think there, we are on track as well. The number that you can see here, the reason for the slightly higher cash flow is that you can see here CapEx paid. So not all of the ongoing projects are yet paid. So this number might arrive through the next few quarters as well. We would also like to give you a quick update on our financing situation.

You all remember that we started with 1,000,000,000 of debt, 500,000,000 loan, 500,000,000 term loan. And and, of course, during the IPO time, you all remember that we had quite high framework interest rates, and we constantly strive to optimize the those interest rates. Last year, we have paid overall 54,000,000 in interest, and the your goal is not only to deleverage, to bring it down. And you remember when we reported on q four twenty twenty four, we could present already a much better leverage of 6.2. And the other, of course, goal is to really reduce the current payments.

And what are we doing at the moment? Because what we have implemented is that we out of the term loan portion, we refinanced 255,000,000 through a private placement. The maturity of this private placement is q four twenty twenty six. It’s fixed with 3.029%. Those of you who’ve already looked it on our web page, we also mentioned the details so you can see all of the the details transparently online.

In addition to the $2.55, we also have still in place the private placement from last year, which lasts until July 2028 in the amount of 180,000,000. And then last but not least, of course, the untouched 500,000,000 5 year bond. The RCF is still in place. As you know, we use it as a buffer. And if you do the math, of course, you can see that last year, we have already refinanced 30,000,000 of debt, which was the net income of last year’s result.

And therefore, we keep also our promise. We don’t spend the money elsewhere. We really use it to reduce the debt, and a similar situation occurs in 2025. And since it’s q one, it’s early in the year, but I think you all are aware and you all remember our guidance for 2025 and midterm. We stick to what we have promised before, so we expect revenue growth until year end at around approximately 4%.

You all remember that we have slightly reduced this expectation driven by the fact that the previous year with 8% or even higher percent if you add the onetime effects was very successful. And therefore, of course, currently, we’re taking up with the revenue growth. All the other parameters stay the same. CapEx is mentioned. And I think also on the operational side, we are continuing to implement what we expected.

And having said so, this was a strong, challenging, but I think a very positive first quarter for us. And I think we’re happy to answer any of your questions in case there are any. Many thanks, Igor and Lars. Let me see if we already have some questions.

Moritz, Moderator/Host, Eurotillescience: So I see one question. I will read out loudly so that everyone know what we are speaking about. Can you please comment on the cost of service in q one, which declined significantly? Part of that was expected given previous one offs, but €5,000,000 is even lower. Can you give us a normalized run rate estimate per quarter or for the year?

Lars, Financial Executive, Eurotillescience: I think, first of all, it’s important to mention that you rightly commented that the comparison, therefore, needs to consider also the onetime effects not only on the revenue side, but also on the cost side. Therefore, this is the major effect, of course. The run rate now will will be approximately on the level that we expect at the moment. You all know that we are operating very efficiently already. We’re managing these almost 14,000 towers with approximately 200 FTEs.

We’re very actually efficient also on the maintenance side. Those are the two aspects in our costs. And having said so, we expect that the growth that we are at the moment generating does not rely actually on growing also on the on the on the OpEx side. And therefore, we always try to keep OpEx as stable as possible. There are inflation effects in in that we need to consider.

But I think to give you a precise runway, it’s a bit too early in the year. But the indication that I just gave is is that we really try to keep the margins, and Ivo have mentioned them. So they are already on a on a very high level also compared, by the way, to towards our peers. Many thanks, Lars. So at the moment, I don’t see any further questions.

So we will wait thirty four further seconds. And maybe let me use the time to also highlight that we have our second AGM on

Moritz, Moderator/Host, Eurotillescience: the June 4. So everyone who has the chance, we are welcoming you to join our second AGM at the end quarter. Vienna. Alright. Since I don’t see any further questions, we say thank you very much for your attention.

Here, another is one one more question. So we will, of course, speak about that. The first question is, could you please share the names of the two MNOs from which you received build to suit orders and the size of the orders?

Ivo, Executive/Management, Eurotillescience: So, unfortunately, I cannot share the names. And as I mentioned, the size of the orders are symbolic, but for ours, a big milestone that we can get orders from others. And the second question is?

Moritz, Moderator/Host, Eurotillescience: The second question, could you please share the tenancy ratio for the new sites?

Ivo, Executive/Management, Eurotillescience: So the tenancy ratio, it there’s a no okay. So the tenancy ratio is a little bit above 1.4.

Moritz, Moderator/Host, Eurotillescience: And the third question, are the order changes at the request of the anchor tenant included in the CapEx guidance for 2025?

Ivo, Executive/Management, Eurotillescience: Yes. They are included.

Moritz, Moderator/Host, Eurotillescience: Okay. Thank you very much. Then we have one more question. Could you also please share how big the interest savings after the refinancing?

Lars, Financial Executive, Eurotillescience: The you’re aware that, of course, it depends a little bit what are our joint predictions until year end because the variable part with the term loan was linked to the Euribor. So we can only predict actually what we would have paid until year end. To give you a very broad number, we assume that through the refinancing, we save something at around 800,000 until year end. And there is, of course, another effect expected in 2025 because the maturity is lasting until the end of twenty sorry, 2026. So next year, there will be a second effect as well.

Okay.

Moritz, Moderator/Host, Eurotillescience: Thank you very much, Vas. And I see one more question. You have switched from a term loan which required principal payments and could be prepaid to private placement, which appear to be a bullet payment. How can

Lars, Financial Executive, Eurotillescience: you deliver and not just build cash? Can you prepare these placements without penalties? Well, you can find any details on the private placement online as mentioned, so also with the contractual details that you might need to assess the private placement. Of course, we will have a a p and l effect for doing the prepayment of the term loan. So you will, at the end of the year, see a negative financing effect because we need to write off the remaining, actually, asset side for the financing cost of the term loan.

But nevertheless, from a cash perspective, it made sense to really implement the new financing. Having said so, this gives us two advantages in addition to the lower interest payments. The first one is that we shift a little bit further towards a fixed rate. So we now have 80% secured. And secondly, also, gives us the opportunity to to do a refinancing and to consider also a bigger refinancing until the end of next year.

And here we talk, of course, about mainly the private placement two, which is the 255,000,000.

Moritz, Moderator/Host, Eurotillescience: Thank you so much. Thank you so much, Lars. For the moment, I don’t see any further questions. So if that’s the case, then thank you once again. And if there are any further questions, please just feel free to reach us out, and we will come back, of course, to answer to you.

Ivo, Executive/Management, Eurotillescience: Many thanks. Thank you. Thank you.

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