Earnings call transcript: Nos SGPS SA Q2 2025 beats EPS forecast, stock drops

Nos SGPS SA reported its second-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of €0.11, compared to the forecasted €0.08. Despite the positive earnings surprise, the company’s stock fell by 4.14% following the announcement. Revenue also slightly exceeded expectations, coming in at €458 million against a forecast of €454.73 million. According to InvestingPro data, the company trades at an attractive valuation relative to its near-term earnings growth, with a proven track record of maintaining dividend payments for 22 consecutive years. The market’s reaction appears to be influenced by broader concerns despite the earnings beat.

Key Takeaways

• Nos SGPS SA’s EPS beat expectations by 37.5%.
• Revenue increased by 3.2% year-over-year to €458 million.
• Stock price decreased by 4.14% post-earnings despite positive results.
• Net income fell 28% due to fewer extraordinary effects, while recurring net income rose by 16%.
• The company is expanding its IT services and has launched new broadband offerings.

Company Performance

Nos SGPS SA demonstrated solid performance in the second quarter of 2025, with revenues rising by 3.2% year-over-year. The company has been expanding its fiber-to-the-home network and IT services, which contributed to the growth. However, net income declined by 28% due to fewer extraordinary effects, although recurring net income showed a healthy increase of 16%. This mixed financial picture, coupled with strategic expansions, reflects the company’s focus on long-term growth.

Financial Highlights

• Revenue: €458 million, up 3.2% YoY
• EPS: €0.11, exceeding forecast by 37.5%
• EBITDA: Increased by 5.9%
• Net income: €58 million, down 28%
• Recurring net income: €57.4 million, up 16%
• CapEx: Reduced by 2% to €91.7 million
• Recurring free cash flow: Increased by 8.8%

Earnings vs. Forecast

Nos SGPS SA exceeded expectations with an EPS of €0.11, a 37.5% surprise over the forecasted €0.08. Revenue also slightly surpassed projections, coming in at €458 million compared to the €454.73 million forecast. This marks a positive deviation from expectations, highlighting the company’s ability to outperform in a competitive market.

Market Reaction

Despite the earnings beat, Nos SGPS SA’s stock dropped by 4.14%, closing at €3.75. The decline may reflect investor concerns over the broader market environment or potential challenges ahead. InvestingPro data shows the stock has experienced a significant -46.15% price return over the past year, with current trading volume averaging 0.03M shares daily. The stock trades near its 52-week range of $0.02-0.05, suggesting potential value opportunity for investors seeking companies with strong dividend histories.

Outlook & Guidance

Looking forward, Nos SGPS SA is focusing on expanding its IT services and expects further EBITDA margin growth. The company has highlighted potential growth in its data center and cloud business, with no anticipated integration costs from the recent acquisition of Clarinet Portugal. InvestingPro analysis reveals 8 additional key insights about the company’s future prospects and financial health, available exclusively to subscribers. The comprehensive Pro Research Report offers detailed analysis of the company’s growth strategy and market position among 1,400+ top stocks.

Executive Commentary

"We believe that we will keep expanding our EBITDA margin for quite some time," said Miguel Almeida, Executive. This optimism is echoed by Manuel Ioannis, Executive Committee Member, who noted, "We can still grow 3x without changing our asset structure." These statements underscore the company’s confidence in its strategic direction and growth potential.

Risks and Challenges

• Competitive pressures in the Portuguese telecom market.
• Economic uncertainty impacting consumer spending.
• Integration of new acquisitions and expansion into IT services.
• Potential regulatory changes in the telecommunications sector.
• Market saturation in core service areas.

Q&A

During the earnings call, analysts questioned the competitive environment and the impact of new market entrants offering discounts. Executives addressed these concerns, emphasizing the company’s strategic focus on efficiency and growth in IT services, as well as the potential for expanding data center capacity.

Full transcript - Nos SGPS SA (NOS) Q2 2025:

Pedro Cotadillas, Head of IR, NOSH: Hello, everyone. Thanks for joining NOSH Second Quarter twenty twenty five Results Conference Call. We’ll have a presentation followed by Q and A as usual. But this time, we’ll start with Manuel Ioannis, who’s the ex co member in charge for B2B. And he will go through some slides on Cloudinet Portugal, to give you a bit more color since this is the first quarter that we are actually consolidating the company.

Then we our CFO will go through the rest of the presentation before Q and A. And I’ll hand you over to Manuel.

Manuel Ioannis, Executive Committee Member, NOSH: Thank you, Pedro. Hi, everyone. I’d like to give you a quick update on Clarinets and to explain why we believe that we have now on IT a much bigger and better growth engine. The first note is that Clarinets acquisition that boosts NOS exposure to a four times larger and faster growing market. Basically, the we estimate the telco market in Portugal to be the B2B market in Portugal to be worth €1,100,000,000 and the IT market in Portugal to be worth around 4.6% with basically much, much higher structural growth.

We believe that this growth is possible to basically while driving expansion in key purchase areas where either we have significant competitive advantages or have a high growth potential. We’ll see that in the next page. We can we’ll be able to reinforce our position in Managed services and in professional services as well. Actually, basically, we doubled the size of our IT services business with the acquisition of Clarinet. And we also believe that even the resale part of the business is key in the sense that it puts the Nord Group in the center of the deal flow over the key manufacturers in Portugal of hardware and software and that presents a very relevant opportunity for services growth as most of the manufacturers will tell you.

The second is that IT brings or this acquisition brings relevant scale and a full breadth of not only solid offer, partnerships and talents to our IT business. First of all, Clarinet brings the set of practices that we aim to be present in the IT arena and the full breadth. So it is a great way to structure the way we look at the IT business and and the practices of cloud and infrastructure, application, security, workplace, data and AI, and third party software. We believe that these are the exact arenas where we want to be present, where we believe we have the synergies and the competencies. And we believe that we now have the full breadth with which to address the market.

The second is that we are, as as a group now, very relevant to a number of key part technology partners in this market. The transversal partners of Microsoft, HPE, and HP, and the practice specific partners of Cisco, AWS, Cloudflare, Dell, Adobe, EasyVista, Fortinet, Palo Alto, and Google. I believe these are very relevant names in the technology arena, and I believe that they all regard Pinnant Group as a relevant partner in Portugal. The third note is that we have, now as a group, a very relevant scale, and a very relevant competence. We have 19 plus FTEs managing professional and managed services in IT in Portugal, a very large engineering team and over 200 cloud certifications with which to help our Portuguese customers address their digital transformation needs.

We believe that we with this acquisition, we have a very relevant growth lever support. First of all, we have an increase actually a very significantly increased sales footprint in enterprise and mid market, which crossing with full breadth of IT services brings up full potential that is very relevant for the future. The second is we have practices in our portfolio, namely cloud, cyber security and data and AI, which have in themselves a very high potential for growth. And third, we have a strategic cooperation with Clarinet Group that benefits us both ways. First of all, the ability to serve customers.

And the second, to leverage the scale of our practices in multinational environment of the Clarinet Group. So in back to the beginning of my very short presentation. Darriere was to say that we have a bigger and better growth engine for IT with which to show you progress in the next few quarters.

CFO, NOSH: So good morning, and once again, welcome to our conference call. Just an additional comment on Clarinet. This quarter, we fully consolidated Clarinet Portugal for the first time. And for consolidation purposes, in accordance with IFRS 15, revenues from contracts where Clarinet acts as an agent should be recognized on a net basis. Therefore, the EUR $216,000,000 of Clarinet gross revenues of 2024 under the Portuguese GAAP must now be consolidated for EUR 130,000,000 of net revenues.

It’s a 40% adjustment, but only for consolidation purposes. Well, now following the update on Clarinet Portugal, we will now briefly review the quarterly results and then open for Q and A. The main highlights for this quarter are strong operational performance with RGU trends significantly improving quarter on quarter, consolidated top line revenues growing year on year and EBIT increasing faster than revenues with AI and transformation programs progressing well. And operational performance, CapEx reduction and working capital improvement, pushing recurring free cash flow and a solid balance sheet with leverage below reference level despite the acquisition of Clarinet Portugal and the dividend payment. So a quick overview on our main KPIs.

Revenues increased by 3.2% and EBITDA rose 5.9 This positive performance along with a CapEx reduction of minus 2% led to improved EBITDA minus CapEx of 22%. Recurring free cash flow, excluding extraordinary income related to legal procedures and Cellnex tower sale increased 8.8%. And net income, also excluding nonrecurring activities, grew 16%, reflecting a solid operational performance. On the operational performance side, this was another strong quarter of fiber to the home expansion. Over 5,900,000 households are now covered by Nodzig a bit fixed network, with FTTH representing 86% of the households passed.

This is a significant increase of 78,000 households quarter on quarter and three thirteen year on year. But despite the challenging competitive market, nor strong offers and commercial capabilities delivered a very strong second quarter with a 2% increase to 10,700,000 RGUs. With almost 58,000 net adds, this quarter not only represented a significant improvement compared to the previous quarter, but also exceeded the results of the second quarter twenty four. On unique fixed assets, we increased almost 2% to 1,500,000. The second quarter showed some new dynamics as net adds recovered to 8.3 driven by lower levels of churn, a competitive WU offers, and naked broadband that is gaining momentum and changing the mix of new customers.

With 46 net heads in the quarter, mobile increased 3.3% year on year, reflecting a stronger performance both in postpaid and in prepaid. Postpaid had 116 net additions, posting very strong results above the previous six quarters, driven by Wu and not initiatives in app and cross sell. Prepaid net additions decreased by 70,000 in this quarter, but this only not only represents a recovery from Q1, but also exceeds the results of last year. So in summary, a solid operational performance and a strong recovery from the previous quarter. Now moving to audiovisuals and cinema business.

A later Easter holiday and three strong releases led to a 44 increase in percent increase in cinema ticket sales this second quarter. The outdoor visual segment also performed strongly, driven by Lilo and Stitch and Mission Impossible, and we had five outdoor visual films ranked in the top 10 this quarter, boosting NOSH performance. On the financial performance side, NOSH consolidated revenues increased by 3.2% year on year to EUR $458,000,000, driven by the resilient performance of the Telco segment and the robust growth of Outofisuals and Cinema divisions. Telco revenues rose by 2.3%, primarily due to the strong growth on the B2B sector, which posted a 9.6% increase supported by healthy growth in recurring services of 6%, along with a significant rise of resale. The B2C segment experienced a slight decline of 0.3%, indicating early signs of deceleration due to increased competition impacting ARPU despite stronger operational activity.

The new IT business showed a small decline of 0.8%, mainly driven by a reduction in the volatile resalind of equipment and licenses. However, this was almost fully offset by a solid 10% growth in IT services. So IT net revenues, accounted for 49,300,000.0, while the gross revenues accounted for 77.9. The Outdoor Visuals and Cinema division reported strong growth levels, increasing by 31% year on year, driven by a 44% increase in cinema tendency, supported by a strong lineup of movies. NOS operational performance and the solid results of NOS transformation program supported on Gen AI driven efficiency program continued to deliver a solid 5.9 EBIT increase, significantly above revenues with a robust contribution from telco, IT and media segments, which recorded increases of 4.2%, 18.834% respectively.

At the same time, NOSH CapEx decreased 2% to €91,700,000 driven by a 3.6% reduction in customer related investments and by a 2.3% decrease in base CapEx. Expansion CapEx, however, saw an exceptional increase this quarter, driven by a temporary peak in Nage FTTH projects. IP CapEx increased by €400,000 to 1,700,000.0 driven by customer related investments to support business growth. And Outdoor Visuals and Cinema CapEx declined 20 to EUR 4,200,000.0, reflecting a return to a more normal spending level. As a result, improved operational performance and efficient CapEx management drove a 22% increase in EBITDA minus CapEx.

Consolidated net income declined by 28% to 58,000,000, primarily due to fewer positive extraordinary effects in second quarter twenty twenty five compared to the same period last year. These effects included the tower sale to CELNATs and gains from legal procedures, which resulted in a net impact of minus EUR 30,500,000.0 this quarter. However, recurring net income increased by 16% to EUR 57,400,000.0, mainly driven by a strong EBITDA growth, lower depreciations and amortizations, and reduced financial costs. This performance was a shift despite the 15,000,000 decline in non current income, mainly driven by an interconnection favorable court decision during second quarter twenty four. Very similar reality in free cash flow that declined by 72% to EUR 38,000,000, primarily due to a minus EUR 102,000,000 in extraordinary effects related to the tower sale and gains from legal procedure, which positively impacted by almost EUR83 million in second quarter twenty twenty four.

However, this quarter, these effects have a negative impact on additional EUR23 million in taxes. Despite this, a strong operational performance, lower investment and the reduction in working capital contributed to a 9% year on year increase in recurring free cash flow, even after accounting for higher tax paid. Finally, this quarter, non cash debt increased to $1,145,000,000 euros primarily due to the Clarinet Portugal acquisition and the dividend payment. Despite this increase, the company maintains a conservative financial leverage ratio of 1.7, well below the reference threshold of two times. Additionally, Norge benefits from a lower average cost of debt, now below 3%, representing a decrease of 0.3 quarter on quarter and 1.1 year on year, reflecting the lower interest rates.

And as March, the company held EUR $278,000,000 in cash and liquidity. With this, we conclude our presentation, and we are now ready to answer to your questions.

Call Moderator, NOSH: Thank you. Our first question comes from the line of Molly Wittem from Goldman Sachs. Please go ahead. Your line is open.

Molly Wittem, Analyst, Goldman Sachs: Hi, thank you for taking my questions. I have a couple, please. Firstly, I was wondering if you could give us a little bit more color on the competitive environment that you’re seeing in Consumer, particularly with DG in terms of pricing and promotional incremental differences versus last quarter? And my second question is how should we think about the capacity for further OpEx efficiencies and synergies at Clarinets? Are there any one off integration costs that we should think about in the coming quarters or one off CapEx amounts that we should incorporate?

Thank you.

Miguel Almeida, Executive, NOSH: Okay. Thank you very much, Miguel. Almeida here. What concerns the competitive environment? So we have to be aware of the context.

We have, since November, a new player in the market that has entered the market with heavy discounts compared with the prices that were in place at the time. So this is the context. When we look at dynamics, taking into consideration that this is the context, are quite happy with the dynamics. You can see from the operational numbers that we are actually posting this quarter positive net adds. And I think that tells you a lot about the churn we are having in the company.

We have seen from a trend point of view, the second quarter of this year in terms of operational was actually better than the first quarter. So things are progressing in the right direction. And, overall, we are very well, given the context, I would say happy with our performance and how things are evolving. In terms of synergies or integration costs from Clarinet Portugal, we will not have any integration costs. No concerns, synergies is not our priority.

Our priority, as Manoli and just mentioned, is to grow the business. We have a significant ambition in terms of growth, and that’s where our focus will be. So I wouldn’t expect any costs and not much from synergies also.

Molly Wittem, Analyst, Goldman Sachs: Understood. Thank you very much.

Call Moderator, NOSH: Thank you. We’ll now move on to our next question. Our next question comes from the line of Ajay Soni from JPMorgan. Please go ahead. Your line is open.

Ajay Soni, Analyst, JPMorgan: Hi, guys. Thanks for taking my questions. I had a couple. The first is around your net adds, which obviously were pretty strong this quarter. I’m just wondering if you could give us a bit of color on what portion of those mobile net adds and fixed RGUs are coming from your second brand versus your first brand?

And the sec my second question is around your naked broadband. So what’s the main difference here? You mentioned it’s a bit of a growth here for you, so a bit more detail around that would be helpful. Thank you.

Miguel Almeida, Executive, NOSH: Okay. Thank you. In terms of weights, if we take gross adds as the metric, Wu is still even though it’s close, it’s still below 10% in terms of wireline RGUs. Of course, as you can imagine, if this were we were talking about net adds, this weight is obviously bigger than that. But in terms of acquisition, it has been more or less stable, around slightly less than 10% of our gross adds.

In your concerns, naked broadband, I’m not sure where your curiosity is. We have naked broadband offers both in both brands, so in Wu and NOSH, at significantly different prices and we believe also at significantly different customer experiences. So it’s consistent with the overall positioning of both brands. It’s it’s in both cases, it’s naked broadband, but what we are offering, customers is is, different, and what we are charging customers is also, well, significantly different. It’s almost twice as much at NOS than Wu.

Ajay Soni, Analyst, JPMorgan: Okay. Understood. Thank you.

Call Moderator, NOSH: Thank you. We’ll now move on to our next question. Our next question comes from the line of Jose Ossina from CaixaBank. Please go ahead. Your line is open.

Jose Ossina, Analyst, CaixaBank: Hi. Good morning, gentlemen. I just have a question on the transformation program. Could you detail the expected savings from this program? How much out of them have already materialized?

And if you could also explain the the amount of of provision which are linked to this to this program, How much of them have been already provisioned?

CFO, NOSH: Okay. So about the transformation program, not easy to know the the exact number that has already been achieved.

Miguel Almeida, Executive, NOSH: But

CFO, NOSH: we believe that for the year, we have done already about 50% of the transformation that we expected, But this is a long term transformation program that we expect to continue to bring the efficiencies for a long time. But about two?

Miguel Almeida, Executive, NOSH: Yes. Well, you have different very different things under this umbrella, all with the same objective of efficiency. We believe that we will keep expanding our EBITDA margin for quite some time, meaning that we are far from over in our initiatives. To give you an example, in what concerns GenAI, the benefits of implementing company wide GenAI are just coming in. So we believe that it will increase significantly over the next few quarters.

And we are talking about always recurrent costs that we are taking away from the company. So we are very optimistic in what concerns margin expansion coming from this transformation program, coming from efficiencies, which, as I mentioned, have very different shapes and forms, but are far from being exhausted.

Jose Ossina, Analyst, CaixaBank: Okay. Just for the question, could you indicate out of the improvement in EBITDA reported in this second quarter, how much out of it boosts steam from this transformation program?

Miguel Almeida, Executive, NOSH: Well, everything that doesn’t come from from top line is coming from this this transformation program because on the other side, have inflation. You have salary inflation, you have different areas of inflation. And the way to achieve this 6% growth in EBITDA this quarter is coming basically from the cost structure that is this quarter lower than it was one year ago. And most of it actually, more than 100% of it is coming from this transformation program.

Jose Ossina, Analyst, CaixaBank: Okay. Thank you very much.

Call Moderator, NOSH: Thank you. We’ll now move on to our next question. Our next question comes from the line of Antonio Saladas from AS Independent Research. Please go ahead. Your line is open.

Antonio Saladas, Analyst, AS Independent Research: Hi. Good good afternoon. I have two questions. First one is still with the price evolution. So according to your metrics, prices, blended prices are coming down by around 1% on consumers.

So this is something that we can expect for the coming quarters. You mentioned that you are happy with the results. So I guess that you were thinking about tougher pressure on prices. I don’t know if you can comment on this. And second question is related to your division IT.

I don’t know if you mentioned about growing the business. I guess that you have some you are expecting some synergies from the revenue side. I don’t know if you can share with us what kind of synergies are you expecting? Thank you very much.

Miguel Almeida, Executive, NOSH: Thank you. I’m not sure that I fully got the question on prices, we don’t expect prices to evolve in any direction, up or down, in the coming months. We don’t see space for that. Again, I stress this in either direction, up or down. When you look at our revenues, B2C revenues this quarter, I think it’s important to understand that we have three main impacts that drove the revenues on the quarter down from the same quarter last year.

And two of those impacts are one offs, so you cannot extrapolate from that. And the three impacts are basically the fact that this year, we didn’t do the price increase linked to inflation, which is a one off. And if we have done that, obviously, we would be discussing today year on year growth in terms of B2C revenues. But I stress this is a one off. It doesn’t mean anything concerning the future.

The second one off was the fact that we had new regulation concerning off bundle data, and that has, again, a one off impact. This was end of last year. It’s a one off impact. And if not for that, we would be growing revenues again. And then the third one is the one that is not one off, is the fact that given the mix of our products, we are experiencing some price erosion, which will continue to materialize in the sense that we keep having today some weight coming from our digital brand Wu, which has lower prices and as such brings ARPU down.

So basically, is the dynamic, but most of the impact is coming from two one offs and cannot be extrapolated. The third one, obviously, we are expecting to be around for quite some time. Regarding

Manuel Ioannis, Executive Committee Member, NOSH: B2B, we believe that there are three sources of revenues synergies. First of all, we have a full breadth of IT services coverage to help businesses form their digital transformation. And this wider breadth put into a combined sales force will give us added revenue potential. The second is that we have a wider coverage. Clarinet did not cover the full market, not in enterprise and not in the mid market ours in telecom does.

So we believe that this added market coverage will produce better results. And the third is that we have basically doubled our scale in key practices. Scale double scale means double maturity and means more competitiveness and an aggregated value proposition. And we believe that this combination will give us some higher success rate in the businesses that we have in our deal flow. So we believe that this combination will produce a much better result.

Antonio Saladas, Analyst, AS Independent Research: Okay. Thank you very much.

Call Moderator, NOSH: Thank you. We’ll now move on to our next question. Our next question comes from the line of Mathieu Robillard from Barclays. Please go ahead. Your line is open.

Mathieu Robillard, Analyst, Barclays: Good afternoon and thank you for the presentation. I had two questions, please. First, in terms of the price increase that you did not do. I understand that one of your competitors actually did increase prices, and I was wondering if that had any impact in terms of the profitability numbers between you and that operator. Positively, I would expect.

But if you can comment on that, that would be interesting. And second, on the IT division, you flag the very strong growth potential of that division. And I was wondering if you could give a bit more color on the data center and cloud business. A number of companies in Europe have sold their data centers. I think you have kept yours.

If you can confirm that. And also if you could give a sense of who are the main players and maybe even what is your capacity when expressed in megawatt hours? That would be very interesting. Thank you.

Miguel Almeida, Executive, NOSH: Thank you. Well, you’re right. One of our competitors did increase prices beginning of this year. I’m not in a position to know what exactly happened with them. What we can see in terms of portabilities, you asked from us to them or vice versa, we didn’t see any relevant change.

So in terms of market dynamics, I cannot say that we witnessed some any kind of impact driven by that price increase.

Manuel Ioannis, Executive Committee Member, NOSH: So regarding the data center business, we believe that data center business is depending on which scale you look at it, it can be still a big opportunity. What we’re what we’re seeing is that there there is some move back to to operate a cloud and to on prem out from the cloud, given some best surprises that some the customers had on cloud costs. So now the pressure to drive IT efficiency has driven some of them back. The second is the the sovereign issue, which is mixed public customers that that still haven’t had their their problems fully solved in in the cloud environments to build or to share local environments in the cloud. So we believe that there is still room to grow in the cloud well, in the data center business.

And we also are ready for that growth in the sense that we can grow still three times our current capacity with the assets that we have and the assets that we acquired with Clarinet. So we’re confident that we’ll still able to help customers in their hybrid environments, do whatever movements they feel are more appropriate to their strategy, and we believe that we have a role to play in the service area.

Mathieu Robillard, Analyst, Barclays: And can you give any color in terms of what kind of capacity you have? Or that you’re not disclosing that?

Manuel Ioannis, Executive Committee Member, NOSH: No. I wouldn’t like But to disclose what I can tell you is that we can still grow 3x without changing our asset structure.

Mathieu Robillard, Analyst, Barclays: Thank you very much.

Antonio Saladas, Analyst, AS Independent Research: Thank you.

Call Moderator, NOSH: Thank you. There are no further questions at this time. So I’ll hand the call back to Pedro Cotadillas, Head of IR, for closing remarks.

Pedro Cotadillas, Head of IR, NOSH: Okay. Thanks. So as usual, please get in touch if you have any questions or follow ups. Thanks for tuning in, and we hope to see you after summer for the third quarter results. Goodbye.

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