Post on 28-Jul-2020
2Q20 Results Conference Call23 July 2020
#LetsStayConnected
2Q20 Earnings Presentation
#LetsStayConnected
• All main financial and operational impacts of the pandemic previously highlighted
persisted in 2Q20, to a greater extent, given they lasted almost the entire quarter;
• Resilient performance of core telecom operations, with commercial activity starting to
pick-up with the deconfinement from mid-May;
• Cinema exhibition and distribution contributed with no revenues this quarter, cinemas
reopened on 2 July; Stable performance of remaining Audiovisuals revenue lines;
• Technological investments were lower yoy, due to phasing of deployment plans which
remain on track within the context of the FttH network rollout and phasing of mobile
upgrade investment; Customer Related CAPEX was stable yoy reflecting a pickup in sales
and retention activity with gradual deconfinement from mid-May;
• Robust FCF generation of 53.5 million euros, falling less than EBITDA due to yoy savings in
CAPEX;
• Debt reduction due to postponement of dividend distribution to 3Q20, sustaining solid
capital structure with 1.8x Net Financial Debt / EBITDA AL;
Highlights 2Q20
-7.8%Telco Revenues
-12.1%Consolidated Revenues
-3.5%Telco EBITDA
-7.8%EBITDA
-4.3%Operating CF2
-12.2%Total CAPEX1
1. Excluding Leasings. 2. Including Leasings.2
32Q20 ResultsConference Call
I. Solid telco operating performance
II. COVID 19 Impact gradual deconfinement
III. Resilient financial performance
#LetsStayConnected
2Q20 Earnings Presentation
#LetsStayConnected
20
40 42
-4
23
-1
19
-5
-25 -26
21 21
47
21
48
2Q19 3Q19 4Q19 1Q20 2Q20
7
13 12
10
15
1
910
8
10
2Q19 3Q19 4Q19 1Q20 2Q20
0
14
75
43
18
9
4 4
-3 -3-1
1
0
2Q19 3Q19 4Q19 1Q20 2Q20
3023
39
6
-18
20
40
-22
-7
0
-22
-34
-1
19
52
3038
28
1621 21
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Mobile Pre-Paid Post-Paid
10
1416
14
3
7
13
24
69
-30
2
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Fixed Broadband Fixed Voice
-2
25
2
-7
0
14
3
7
11 12
23
18
-5 -5 -6
-10-8
-3 -3
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Total Pay TV Fixed Access DTH
Solid performance in Fixed Pay TV, yoy improvements in Fixed BB and Voice; Good growth in post-paid mobile subscribers
Solid telco operating performance
Fixed Access Pay TV – Net Adds [Thousands] Fixed BB and Fixed Voice – Net Adds [Thousands] Mobile – Net Adds [Thousands]
4
2Q20 Earnings Presentation
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Pay TV growth continues to be supported by network expansion and lower yoy churn
14-12
9
73 6775 76
57
33
68
40
238 15
269*
38
15
66
103
150
5543
-14-17
-60
710
1517
1410 11
1511
6 5 4 37
11
12
2 3
-3 0
-2 0
-1 0
0
1 0
2 0
3 0
-4 0
-2 0
0
2 0
4 0
6 0
8 0
1 0 0
1 20
1 4 0
1 60
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
New HH Passed Fixed Access Pay TV
Solid telco operating performance
45
76
41
27
45
3
18
9
4 4
0
5
1 0
1 5
2 0
2 5
3 0
0
1 0
2 0
3 0
4 0
5 0
6 0
7 0
8 0
9 0
2Q19 3Q19 4Q19 1Q20 2Q20
10091
8076808687
7478
73
8896
848074
7889
79 75 7376 75
1Q1
5
2Q
15
3Q
15
4Q
15
1Q1
6
2Q
16
3Q
16
4Q
16
1Q1
7
2Q
17
3Q
17
4Q
17
1Q1
8
2Q
18
3Q
18
4Q
18
1Q1
9
2Q
19
3Q
19
4Q
19
1Q2
0
2Q
20
NOS network expansion / Fixed Pay TV Net Adds [Thousands] Fixed Residential Churn [Rebased, 1Q15 = 100]
5
2Q20 Earnings Presentation
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Acceleration of Convergent + Integrated customer growth trend; ARPU under pressure mainly from premium sports revenues
Solid telco operating performance
44.9 44.6 44.7 44.242.3
2Q19 3Q19 4Q19 1Q20 2Q20
59.2% 59.1%
59.8%
60.2%
61.0%
2Q19 3Q19 4Q19 1Q20 2Q20
907.2 914.8 930.7 942.3 957.5
5.0 5.1 5.1 5.0 5.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10. 0
500.0
550.0
600.0
650.0
700.0
750.0
800.0
850.0
900.0
950.0
1,000.0
2Q19 3Q19 4Q19 1Q20 2Q20
Convergent+Integrated Subscribers, RGUs per Sub [Thousands, Unit]
Convergent+Integrated Penetration of Fixed Access Subscribers [%]
Fixed Residential ARPU [Euros]
6
2Q20 Earnings Presentation
#LetsStayConnectedSolid telco operating performance
New B2C offers innovation, segmentation and reinforced equipment and additional
• : a new brand with a 100% digital and disruptive value proposition addressing an emergingsegment: Digital Champions;
• Everything is done through the app: customers can subscribe in less than 3 minutes and managetheir services exclusively through an app (no stores, call centres, etc);
• Offer centred on broadband (fixed and mobile) without TV and a new approach to managing the customerrelationship
Digital adults are an increasingly relevant segment:
• 25-44, urban, digital is their natural habitat
• Heavy users of streaming services who do notvalue traditional TV
• Preference for online shopping and financial management
Accelerating transformation and learning process
Digital Ways of working, digital customer experiencedesign, customer behaviour, formats and digital marketing strategies
7
2Q20 Earnings Presentation
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B2B: Focus on partnership and proximity, ensuring agile and resilient response
Solid telco operating performance
• Negative revenue impact from contract renegotiation due to offset by provision of
more data and IT managed services;
• Opportunity for transformation helping clients deal with the challenges of going remote and moving to digital platforms and new
sources of revenues from equipment sales;
• Launch of a digital first, agile development programme targeting the SME segments, with 9 main service offerings in the IT and security
arena;
• Strategic partnerships signed with key cloud platforms in recent months, Google, AWS and Azure, positioning NOS as a preferred,
specialist partner for hybrid cloud solutions.
8
2Q20 Earnings Presentation
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Pre-COVID19 Post-COVID19 Pre-COVID19 Post-COVID19
FttH deployment on track and best in class technological response to increased traffic volumes
Solid telco operating performance
≈ +50%
Fixed DataTraffic
≈ +25%
Mobile Data Traffic
Total Network Coverage [Millions of Homes, including brownfield] Homes Passed with FttH [K Homes, including brownfield] Traffic Evolution [%]
35%FttH
3.21 3.17 3.14 3.10 3.04
0.18 0.22 0.25 0.29 0.35
1.11 1.18 1.22 1.25 1.29
4.49 4.57 4.61 4.64 4.68
2Q19 3Q19 4Q19 1Q20 2Q20
3.4 3.4 3.36 3.34 3.32
0.05 0.12 0.15 0.18 0.220.7 0.7 0.72 0.78 0.87
4.1 4.1 4.08 4.14 4.24
3Q17 4Q17 1Q18 2Q18 3Q18
HFC only HFC and FttH FttH only
717804
926
1,1371,217
1,2881,397
1,4691,543
1,640
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1Q18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
9
2Q20 Earnings Presentation
#LetsStayConnected
NOS Towering
Competition Authority non-opposition, formalitiesof closure underway
• Competition Authority announced non-opposition to agreement to sell Towering Cellnex on 7 July;
• Final closing dependent on internal formalities
• Once completed, NOS will be able to move ahead with technological optimization initiatives and expansion of our state-of-the-art mobile network;
• 2,000 sites with agreement for additional 400 in 6 years;
• Potential value of 550 million euros, with upfront paymentof approximately 375 million euros;
• OCF impact of 22 million euros in Year 1;
• EV/OCF ~17x (2k sites) and ~25x (full perimeter).
Tower Sale and Mobile Network Sharing
Solid telco operating performance
Mobile Network Sharing
10
Ongoing exclusive negotiations with Vodafone
• For a mobile network sharing agreement;
• To enhance investment efficiency;
• To achieve larger and faster coverage of the national territory;
• Deliver a reinforced service with more benefits for customers;
• Significant contribution to the economic and digital development of the country;
• Each operator will maintain exclusive strategic control of their networks and independence in the definition and provision of customer service.
2Q20 Earnings Presentation
#LetsStayConnected
Cinemas closed throughout 2Q20, opening on 2 July. Good performance in non-Cinema Distribution Audiovisuals revenues
Solid telco operating performance
16.718.2
16.6
12.2
8.9
2Q19 3Q19 4Q19 1Q20 2Q20
NOS Audiovisuals Revenues [Millions of Euros]
• Reinforced health and safety and social distancing measures implemented inpreparation for 2 July reopening;
• Online ticket and bar sales encouraged through the NOS Cinemas App;
• Implementation of cost cutting measures rental reduction and decrease oftemporary headcount;
• Sales set for slow recovery given social distancing restrictions and continueddelays in high box-office sales premieres such as Top Gun, Minions, Soul,Wonderwoman and Bodyguard, originally set for 3Q20;
11
12
I. Solid telco operating performance
II. COVID 19 Impact gradual deconfinement
III. Resilient telco financial performance
2Q20 ResultsConference Call
#LetsStayConnected
2Q20 Earnings Presentation
#LetsStayConnectedCOVID 19 Impact gradual deconfinement
Strong growth in the adoption of digital platforms, leveraging on transformation programmedevelopments
NOS App WTF App
+52%Total Users
Post-COVID vs Pre-COVID
+31%Total Users
Post-COVID vs Pre-COVID
Website
+19%Daily Sessions
Post-COVID vs Pre-COVID
Web self care
+19%Daily Sessions
Post-COVID vs Pre-COVID
13
2Q20 Earnings Presentation
#LetsStayConnectedCOVID 19 Impact gradual deconfinement
Store reopening almost complete and traffic recovering gradually
Stores Open [Before Lockdown, Base 100] Store Traffic [Before Lockdown, Base 100]
100
70
96
Before
Lockdown
During
Lockdown
Now
100
29
91
Before
Lockdown
During
Lockdown
Now
14
15
I. Solid telco operating performance
II. COVID 19 Impact gradual deconfinement
III.Resilient telco financial performance
2Q20 ResultsConference Call
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2Q20 Earnings Presentation
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Revenue decline in Telco driven by premium sports channels, roaming and lower DTH subscribers yoy; Cinemas were closed for the entire quarter in 2Q20.
Resilient financial performance
* Revenues adjusted for the regulatory imposition of international call caps within Europe.
365.6 370.5 366.4
345.4
321.3 321.7
3.0%1.0% 0.5%
-3.0%
-12.1% -12.1%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10. 0%
15. 0%
20. 0%
200.0
220.0
240.0
260.0
280.0
300.0
320.0
340.0
360.0
380.0
2Q19 3Q19 4Q19 1Q20 2Q20 2Q20*
347.0 347.4 346.6332.9
319.9 320.3
2.1%-0.1% 0.3%
-2.2%
-7.8% -7.7%
-10.0%
-5.0%
0.0%
5.0%
10. 0%
15. 0%
20. 0%
200.0
250.0
300.0
350.0
400.0
2Q19 3Q19 4Q19 1Q20 2Q20 2Q20*
29.1
33.630.3
21.8
8.9
14.0% 15.6%
1.8%
-15.5%
-69.2%
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20. 0%
40. 0%
60. 0%
80. 0%
0.0
5.0
10. 0
15. 0
20. 0
25. 0
30. 0
35. 0
40. 0
2Q19 3Q19 4Q19 1Q20 2Q20
Consolidated Revenues and YoY Change [Millions of Euros, %] Telco Revenues and YoY Change [Millions of Euros, %] AV & Cinema Revenues and YoY Change [Millions of Euros, %]
16
2Q20 Earnings Presentation
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2.9%
0.9%
1.8% 0.9%
2.3%
3.5%
0.9%
1.7%
1.5%
2.5%
4Q17 1Q18 2Q18 3Q18 4Q18
Not Adjusted Adjusted*
Relative resilience in Consumer and B2B, while Wholesale & Others were impacted by roaming and mass calling services decline in the context of the COVID-19 pandemic
1.0%
1.4%
0.3%
2.0%-0.2%1.3%
-1.1%
1.2%
1.1% -0.8%-0.7%
16.8%
-7.3%
-20.1%
-26.6%1Q19 2Q19 3Q19 4Q19 1Q20
Consumer Business Wholesale & Others
* Revenues adjusted for the regulatory imposition of international call caps within Europe.
1.4%0.3%
2.0%
-0.1% -3.0%
-1.1%1.2%
1.1%
0.0%-5.0%
16.8%
-7.3%
-20.3%
-30.4%
-50.1%
2Q19 3Q19 4Q19 1Q20 2Q20
2.1%
-0.1% 0.3%
-2.2%
-7.8%
3.1%
0.2% 0.5%
-2.0%
-7.7%
2Q19 3Q19 4Q19 1Q20 2Q20
Telco Revenue Growth [%] Consumer, Business, Wholesale & Others YoY Change [%]
Resilient financial performance
17
2Q20 Earnings Presentation
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13.0
15.7
14.0
10.9
5.3
44.8% 46.7% 46.3%50.1%
58.8%
40. 0%
60. 0%
80. 0%
100.0%
120.0%
140.0%
0.0
2.0
4.0
6.0
8.0
10. 0
12. 0
14. 0
16. 0
18. 0
2Q19 3Q19 4Q19 1Q20 2Q20
158.2 157.0
121.9
141.8
152.6
45.6% 45.2%
35.2%
42.6%
47.7%
20. 0%
25. 0%
30. 0%
35. 0%
40. 0%
45. 0%
50. 0%
55. 0%
60. 0%
65. 0%
70. 0%
80. 0
90. 0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
2Q19 3Q19 4Q19 1Q20 2Q20
171.2 172.7
135.9
152.7157.9
46.8% 46.6%37.1%
44.2%49.1%
0.0%
10. 0%
20. 0%
30. 0%
40. 0%
50. 0%
60. 0%
70. 0%
80. 0%
90. 0%
100.0%
50. 0
70. 0
90. 0
110.0
130.0
150.0
170.0
190.0
2Q19 3Q19 4Q19 1Q20 2Q20
COVID-19 impact felt at the EBITDA level, despite declining less than Revenues in both Telco and Cinema & Audiovisuals
-7.8%yoy
-3.5%yoy
-59.6%yoy
Consolidated EBITDA, EBITDA Margin [Millions of Euros, %] Telco EBITDA, EBITDA Margin [Millions of Euros, %] AV & Cinema EBITDA, EBITDA Margin [Millions of Euros, %]
Resilient financial performance
18
2Q20 Earnings Presentation
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Net Income decline due to COVID-19 impact at the EBITDA level
1.1
(103.1)
(3.8) (5.9) (11.9)(0.0)(0.9)
(101.2)
(3.8) (5.6) (7.5)
6.3
Share of JV
results
D&A Other
expenses
Net Fin.
Expenses
Income Taxes Discontinued
Op.
47.7 47.9
5.4
-10.4
45.3
2Q19 3Q19 4Q19 1Q20 2Q20
1
(103)
(4) (6) (12)
0 0 0 0 0
(120.0)
(100.0)
(80.0)
(60.0)
(40.0)
(20.0)
0.0
20.0
Share of JV
results
D&A Other
expenses
Net Fin.
Expenses
Income
Taxes
2Q19 2Q20
-5.0%yoy
Consolidated Net Income [Millions of Euros] Cost breakdown below EBITDA [Millions of Euros]
Resilient financial performance
19
2Q20 Earnings Presentation
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Customer CAPEX stable yoy with pick-up in commercial activity as from mid-May; Decline in Technical CAPEX due to completion of Single RAN upgrade and pending 5G visibility
80.8 85.4 92.5 87.0 81.7
6.8 6.37.7
7.35.5
87.6 91.7100.2
94.387.3
1Q18 2Q18 3Q18 4Q18 1Q19
Telco AV & Cinema
27.8 31.6 30.4 35.626.6
19.4
36.1
18.216.0
23.9
47.1
67.7
48.6 51.7 50.6
3Q17 4Q17 1Q18 2Q18 3Q18
Baseline NW Exp, Subst, Integration & Others
89.5 83.6 89.7 81.8 79.4
5.68.7
10.06.4 4.1
95.2 92.299.7
88.283.5
2Q19 3Q19 4Q19 1Q20 2Q20
38.530.6 34.2 29.8
39.8
19.6
16.918.4
18.78.2
58.1
47.552.6
48.5 48.0
2Q19 3Q19 4Q19 1Q20 2Q20
31.4
36.1
37.0
33.4
31.4
9.1% 10.4% 10.7% 10.0% 9.8%
0.0%
5.0%
10. 0%
15. 0%
20. 0%
25. 0%
30. 0%
35. 0%
40. 0%
45. 0%
50. 0%
28. 0
29. 0
30. 0
31. 0
32. 0
33. 0
34. 0
35. 0
36. 0
37. 0
38. 0
2Q19 3Q19 4Q19 1Q20 2Q20
Total, Telco and AV & Cinema CAPEX Excl. Leasing Contracts[Millions of Euros] Technical CAPEX [Millions of Euros] Customer CAPEX, % of Telco Revenues [Millions of Euros, %]
Resilient financial performance
20
2Q20 Earnings Presentation
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FCF declining less than EBITDA due to lower CAPEX yoy
-4.3%yoy
-2.3%yoy
* After lease payments.
-6.4%yoy
57.1
44.4
2.4
34.6
53.5
0.0
10. 0
20. 0
30. 0
40. 0
50. 0
60. 0
2Q19 3Q19 4Q19 1Q20 2Q20
65.2
57.9
20.4
44.4
62.4
0.0
10. 0
20. 0
30. 0
40. 0
50. 0
60. 0
70. 0
2Q19 3Q19 4Q19 1Q20 2Q20
76.180.4
36.2
64.5
74.3
0.0
10. 0
20. 0
30. 0
40. 0
50. 0
60. 0
70. 0
80. 0
90. 0
2Q19 3Q19 4Q19 1Q20 2Q20
EBITDA Total CAPEX Excl. Leasings [Millions of Euros] Operating Cash Flow* [Millions of Euros] Free Cash Flow [Millions of Euros]
Resilient financial performance
21
2Q20 Earnings Presentation
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1,220.2 million EurosNet Debt Including Leases
2.7 yearsTotal Average Maturity
1.3%
1.8xNet Financial Debt / EBITDA After Leases
488.1 million EurosCash and Liquidity Position*
Solid capital structure with leverage ratio now at 1.8x, average cost of debt remains low. BS to strengthen further with cash-in from Tower sale.
* Includes non-issued financing lines.
1,009.4 million EurosNet Financial Debt
1,130.3 1,089.3 1,093.6 1,062.11,009.4
2.0x 1.9x 1.9x 1.9x 1.8x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
175.0
375.0
575.0
775.0
975.0
1,175.0
1,375.0
2Q19 3Q19 4Q19 1Q20 2Q20
1.5%1.4%
1.3%1.1%
1.3%
2Q19 3Q19 4Q19 1Q20 2Q20
Net Financial Debt, Net Financial Debt/EBITDA After Leases[Millions of Euros, X] Average Cost of Debt [%]
Resilient financial performance
22
Q&A
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2Q20 Results Conference Call23 July 2020