Earnings call transcript: United Internet Q1 2025 sees revenue growth, stock surges

United Internet AG reported its first-quarter 2025 earnings, revealing a modest revenue increase alongside a decline in earnings per share. The company’s stock responded positively, climbing 8.84% following the announcement. Key financial metrics included a 4.2% year-over-year revenue growth to €1.63 billion and an earnings per share (EPS) of €0.31, down from €0.35 in the same period last year. According to InvestingPro data, while the company isn’t currently profitable over the last twelve months, analysts expect net income growth and a return to profitability this year, with a forecasted EPS of €2.16.

Key Takeaways

• Revenue increased by 4.2% to €1.63 billion.
• EBITDA remained stable with a slight increase of 0.1%.
• EPS fell to €0.31 from €0.35, reflecting a decline in profitability.
• The stock surged 8.84% following the earnings release.
• Continued investment in 5G and fiber optic networks.

Company Performance

United Internet’s performance in Q1 2025 was characterized by steady revenue growth but a decline in EPS. The company’s focus on expanding its network infrastructure, including 5G and fiber optics, continues to be a significant driver of its business strategy. The decline in earnings per share suggests challenges in maintaining profitability amid these investments. InvestingPro analysis shows the company maintains strong financial fundamentals with a healthy current ratio of 1.06 and has consistently paid dividends for 16 consecutive years, currently yielding 1.9%.

Financial Highlights

• Revenue: €1.63 billion, a 4.2% increase year-over-year.
• EBITDA: €342.6 million, up 0.1% from the previous year.
• EBIT: €162.9 million, a decrease of 12.9% year-over-year.
• Earnings per share: €0.31, down from €0.35.
• Net bank liabilities increased by 8.8% to €2.937 billion.

Market Reaction

United Internet’s stock price experienced a significant increase of 8.84%, closing at €21.04, following the earnings announcement. This surge places the stock closer to its 52-week high of €24.64, indicating strong investor confidence despite the mixed earnings results. InvestingPro data reveals impressive momentum with a 33% return over the past six months. The stock’s current Fair Value assessment and additional insights are available to InvestingPro subscribers, along with 8 more exclusive ProTips that could help inform investment decisions. The positive market reaction may be attributed to the company’s strategic investments and potential benefits from the German infrastructure fund.

Outlook & Guidance

For the fiscal year 2025, United Internet has set a revenue guidance of €6.45 billion and expects operating EBITDA to reach approximately €1.35 billion. The company plans to complete the migration of its mobile network by the end of the year, which is expected to enhance operational efficiency.

Executive Commentary

Carsten Toiber, CFO, emphasized the company’s strong position in hosting and cloud services, stating, "We are well positioned with IONOS and the products we provide." He also expressed confidence in the company’s leverage levels, noting, "We feel very comfortable in a leverage range till 2.5."

Risks and Challenges

• Customer churn in the Consumer Access segment could impact future revenue.
• Decreasing mobile internet and broadband connections pose a challenge.
• High network rollout expenses could strain financial resources.
• The ongoing negotiations for the sale of the energy business may introduce uncertainties.
• Macroeconomic pressures and competition in the telecommunication sector remain potential risks.

In summary, United Internet’s Q1 2025 earnings report highlights steady revenue growth and strategic investments, which have been positively received by the market despite a decline in profitability. The company’s forward-looking strategies and infrastructure expansion plans are expected to play a crucial role in its future performance. With an Altman Z-Score of 6.37 indicating strong financial health and a moderate debt-to-equity ratio of 0.81, United Internet appears well-positioned for its expansion plans. For comprehensive analysis including detailed valuation metrics and growth projections, investors can access the full Pro Research Report available on InvestingPro.

Full transcript - United Internet AG NA (UTDI) Q1 2025:

Conference Operator: and thank you for standing by. Welcome to the United Internet Quarterly Statement Q1 twenty twenty five Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, Dominik Grossmann. Please go ahead.

Dominik Grossmann, Investor Relations, United Internet: Thank you, operator. Hello, and good morning, everyone. I’d like to welcome you to our Q1 twenty twenty five Analyst and Investor Call. Thank you for joining us today. My name is Dominik Grossmann.

I’m responsible for Investor Relations at United Internet. And here with me today, I have our CFO, Carsten Toiber. Briefly about today’s program, Carsten will first take you through our presentation with the business development in Q1 and will also give an outlook for the remainder of the year. Afterwards, he will be happy to answer all your questions. So far from my side, I would now like to hand over to Carsten.

Carsten, the floor is yours. Please go ahead.

Carsten Toiber, CFO, United Internet: Thank you, Dominik, and also a warm welcome from my side to our webcast on our three month figures 2025. Let’s go into our numbers. On Slide two, we have summarized our major KPIs for you. Our contracts increased by €150,000 to €29,170,000 in the first three months of 2025. Our revenue improved by 4.2% to €1,630,000,000 EBITDA grew slightly by 0.1% to €342,600,000 However, it is important to note here that we have already more spent than €67,000,000 for the rollout of our five gs mobile one on one network in the first quarter compared to €42,000,000 during the same period last year.

Our EBIT declined by minus 12.9% to around 162,900,000 In addition to the explained negative effects on earnings, this was due to higher depreciation and amortization as a result of investments in the rollout of the fiber optic network at one on one Versatile and the rollout of the one on one mobile network. This increase in depreciation and amortization is to be offset by gradually increasing cost savings from this year onwards. EPS decreased slightly from €0.35 to 0.31 as a result of our reduced EBIT. I will continue giving an overview of the development for the first three months of the year for each of our segments, starting with the Consumer Access segment. The number of fee based contracts fell by 40,000 contracts to 60,350,000.00 in the first quarter of twenty twenty five.

Mobile Internet contracts decreased by 20,000 to 12,420,000, while broadband connections also decreased by 20,000 to 3,930,000. The development of mobile Internet contracts was burdened by increased customer churn in connection with the ongoing migration of all mobile communication customers to the one and one mobile network by the end of twenty twenty five and is therefore in line with our expectations. We continue to anticipate that the migration will be completed by end of the year. Revenue in Consumer Access segment is fairly stable and amounts to €1,018,000,000 in that case. While service revenues have remained flat year over year despite the increase in churn, the overall decline was driven by weaker hardware sales, particularly in low margin smartphones, which fell by 2.9% to 169,600,000 Hardware sales are subject to seasonal effects and also depend strongly on the appeal of new devices and the modal cycles of hardware manufacturers.

That being said, if we turn to the attention to EBITDA on the next slide. We can observe that due to the further year on year increase in expenses for the rollout of the 101 mobile network segment, EBITDA fell to €155,900,000 The net rollout costs amounted to €67,000,000 compared to €42,400,000 in the same period last year. As shown in the breakdown, next slide, the excess sub segment EBITDA remains robust at around €233,000,000 while costs for the rollout of the mobile network one on one mobile network sub segment rose by €42,600,000 year over year to €67,000,000 Moving on to the Business Access segment. We were able to increase sales by 1.6% year over year to €144,000,000 At the same time, the segment EBITDA increased by 3.4% to €36,600,000 There was corresponding improvement in the EBITDA margin from 25% in previous year to 25.4%. In the first three months of twenty twenty five, total start up costs for the new business fields, five gs and expansion of commercial areas amounted to minus €6,300,000 for EBITDA.

Let us now turn to the applications side of the business, starting with consumer applications. The number of pay accounts rose by 80,000 to 3,120,000 in the first quarter of twenty twenty five. By contrast, due to seasonal effects as well as higher security requirements, ad finance free accounts were 180,000 down on 12/01/2024. The growth of pay contracts in particular led to adjusted sales growth of 3.7% from €71,100,000 to €73,700,000 in the first three months of twenty twenty five. There was also further growth in key earnings figures such as EBITDA, with operating EBITDA increasing by 6.7% to €20,500,000 and corresponding improvement in our operating EBITDA margin by one percentage point year over year to 34.5%.

In the Business Applications segment, we increased our contract portfolio by 110,000 contracts to €9,700,000 The increase came mainly from operations abroad. Revenues in this segment subsequently increased by 19.7% to €446,300,000 The increase in revenue was driven by strong performance of the AdTech segment, the former aftermarket business, benefiting from a favorable base effect due to the segment’s weakness in Q1 twenty twenty four, good with a robust overall performance in Q1 twenty twenty five. This combination significantly contributed to the uplift in total revenues, which were well above expectations. However, it is important to note that for the AdTech segment, a phasing effect is expected going forward, driven by a new product launch and associated migration within the AdTech segment, which is anticipated to be completed by year end. EBITDA in the Business Applications segment increased by 23% compared to the previous year to 124,600,000.0 The operating EBITDA margin rose accordingly from 27.2% to 27.9%.

So much for the segments. Here, we have summarized the most important KPIs for the group once again and added a few more. We have already talked about revenues and EBITDA. Our CapEx amounted to €122,000,000 after 139,700,000.0 the previous year for the investments in our fiber optic network at one on one Versatile and the rollout of the one on one mobile network. Our free cash flow decreased to minus €165,800,000 coming from €142,900,000 year over year with more details on the next slide.

The net bank liabilities increased 8.8% to €2,937,000,000 year to date, while our equity ratio rose slightly by 0.2 percentage points to 46.7. This slide shows you the bridge of our EBITDA to free cash flow. One of the main contributors to our outflows this period is CapEx, totaling €120,100,000 as net. This reflects ongoing investments in the network rollout along with timing effects from the previous year, specifically two invoices originally due last year that were paid this year. After accounting for taxes and changes in working capital, our free cash flow before leasing stands at minus €126,100,000 Including leasing, this figure amounts to €165,800,000 Finally, a brief word on the outlook.

We specified our revenues guidance for fiscal year twenty twenty five to €6,450,000,000 from €6,400,000,000 prior year about 6,300,000,000.0 Operating EBITDA is expected to amount to approx €1,350,000,000 prior year €1,295,000,000 This includes approx €20,000,000 in costs associated with the transition from the Telefonica natural roaming agreement to the Vodafone NRA. Under the Telefonica NRA, certain network components are activated and depreciated, whereas under the Vodafone NRA, these costs are recognized directly in EBITDA. This change has no impact on EBIT. CapEx, excluding any M and A transitions, is expected to increase to €800,000,000 above the previous year’s level, in particular as a result of the network rollout and the expansion of the fiber optic network in additional expansions areas for connecting mobile antennas. So much from our side.

We are now available for any questions you may have.

Dominik Grossmann, Investor Relations, United Internet: Carsten, many thanks for your explanations. Now I would like to start with our Q and A session. The first question, please.

Conference Operator: Thank you. We will now go to our first question. And the first question comes from the line of Polo Tang from UBS. Please go ahead.

Polo Tang, Analyst, UBS: Hi. Thanks for taking the questions. I have three. The first one is just on IONOS. Do you think IONOS can be a beneficiary of the EUR 500,000,000,000 German infrastructure fund?

Second question is just about your stake in one on one. So you recently increased it from 78% to 80%. Can you talk about the rationale for that move? And would you consider buying out all of one on one? And the final question is really just about working capital.

So there was a minus €170,000,000 negative working capital swing in Q1. So could you maybe give a bit more color in terms of what’s happening here? And how should we think about working capital for the full year?

Carsten Toiber, CFO, United Internet: Thank you very much for your questions. I will start in the row. You ask the questions. First of all, Aeolus. So we hope that we can profit from the infrastructure fund.

But so far, there are no details available for the infrastructure fund, and so we have to wait and see. But for sure, in mind that the sovereign cloud is a big topic for the European Union and also for Germany, we were well positioned with the IONOS and the products we therefore provide. The second question was why UI bought the shares from the one on one. As Mr. Dormammuld said, if there is a possibility to get some shares, we will buy it because our interpretation is that the share price is still not where it should be in our opinion, and therefore, we bought or we have the opportunity to buy some shares, and we bought them.

For the working capital effect, therefore, we already mentioned that we paid two invoices in this year, which belong to the last year. That’s one of the effects. And the smaller effect is also that the stocks for hardware is slightly increasing, in line with a reduction in the hardware sales at the one on one site.

Polo Tang, Analyst, UBS: Okay. Thanks. Thank

Conference Operator: you. We will now take the next question. And your next question comes from the line of Ms. Lena Zir from Deutsche Bank. Please go ahead.

Lena Zir, Analyst, Deutsche Bank: You, Kasim. I have two questions from my end. Firstly, and it’s one that we ask every quarter, but how do you, as United Internet, view your stake in IONOS? And maybe linked to that, if you look at your leverage position as a group, are you comfortable with where the net debt is? And do you see a need to reduce it by monetizing certain parts of your holding?

So some color on maybe how you think the holding structure would be great. My second question is on the sale of the energy business. Could you give us some color on this? When is it expected to close, and how much are you expecting for it? Some details there would be great.

Thank you.

Carsten Toiber, CFO, United Internet: Thank you for the questions. How do we think about the IONOs? As I mentioned before, we think we are in a favorable situation to have such a company and to have such a big share in those company because we believe in the strong story of the Aionos, not only on the hosting side, but as I mentioned before, the cloud side, and there is always room for improvement on that side. And therefore, we are at the opinion that we stick to our stakes at the moment. And yes, maybe it’s too early to leave the party.

As also on the leverage level for the UI, we are now slightly over two a leverage factor of two. And we feel very comfortable also in a range till 2.5. And therefore, there is no reaction favorable from our side to reduce our leverage level. Concerning the Energy business, we are still in negotiations. We hope that we close the deal in a few months.

So it’s already it’s in Q3, Q2 maybe, as my colleague mentioned at the moment. And therefore, we closed the deal this year, we are sure, and make them the information.

Lena Zir, Analyst, Deutsche Bank: Great. Thank you.

Conference Operator: Thank you. There are currently no further questions. I will hand the call back to Dominic.

Dominik Grossmann, Investor Relations, United Internet: Thank you, operator, and thank you, everyone, for attending our call today. Please don’t hesitate to connect us for any follow-up questions. We wish you a nice day. Stay safe, and goodbye.

Conference Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.