1&1 says H1 results lower-than expected due to network outage, lowers service revenue and EBITDA guidance for full year
Here is a summary of the preliminary results (Q2 results calculated):
- 1&1 Q2 2024 revenue rose 2% y/y to EUR 991.5 million (analysts estimate: EUR 1 billion (+3.2%)), service revenue increased 3.4% to EUR 823 million (analysts estimate: EUR 825.2 million), hardware segment revenue dropped 4.5% to EUR 168.5 million while EBITDA fell 15.1% to EUR 144.3 million (analysts estimate: EUR 175.1 million).
- In Q2 access contracts came in at 16.35 million (addition of 39k vs management guidance of 80k to 100k and analysts estimate of 40k), mobile contracts were 12.36 million (addition of 45k vs analysts estimate of 44k) while broadband contracts were 3.99 million (loss of 6k vs analysts estimate of -4k).
- 1&1 said the network outage in June and July led to contract, service revenue and EBITDA growth rate in H1 that is lower than expected and that growth in Q3 is also expected to be lower than planned.
- As a result, 1&1 lowered its guidance for 2024 service revenue to €3.33 billion (+3%) from €3.37 billion(+4%) (analysts estimate: EUR 3.35 billion), EBITDA to around €686 million from €720 million (analysts estimate: EUR 719.2 million), but raised guidance for 1&1 mobile network startup costs to around -€174 million from -€160 million (analysts estimate: EUR -163.9 million) and cash capex to around €460 million from around €380 million previously (analysts estimate: EUR 378.6 million) (due to build-up of network inventories).
Assessment
The impact of the network outages experience in late May (caused by a software update) is much worse than I had expected. 1&1 shares are down 16% on Monday open trading hours as a result. However, the increase in cash capex guidance could imply that the network buildout is progressing well.