2.2 Business development

Use and definition of relevant financial performance measures

In order to ensure the clear and transparent presentation of United Internet’s business trend, the Group’s Annual Financial Statements and Interim Financial Statements include key financial performance measures – in addition to the disclosures required by International Financial Reporting Standards (IFRS) – such as EBITDA, the EBITDA margin, EBIT, the EBIT margin, and free cash flow.

United Internet defines these measures as follows:

• EBIT: Earnings before interest and taxes represents the operating result disclosed in the statement of comprehensive income.
• EBIT margin: Presents the ratio of EBIT to sales.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization are calculated as EBIT/operating result plus the depreciation and amortization (disclosed in the Consolidated Financial Statements) of intangible assets and property, plant, and equipment, as well as assets capitalized in the course of company acquisitions.
• EBITDA margin: Presents the ratio of EBITDA to sales.
• Free cash flow: Calculated as cash flow from operating activities (disclosed in the consolidated financial statement), less capital expenditure for intangible assets and property, plant, and equipment, plus payments from the disposal of intangible assets and property, plant, and equipment.

Insofar as necessary for a clear and transparent presentation, these indicators are adjusted for special items and disclosed as “key operating figures” (e.g., operating EBITDA, operating EBIT and operating EPS). A reconciliation of EBITDA, EBIT, EBT, net income, and EPS (according to the consolidated statement of comprehensive income) with figures adjusted for special items can be found in chapter 2.3 “Position of the Group”.

Such special items usually refer solely to those effects capable of restricting the validity of the key financial performance measures with regard to the Group’s financial and earnings performance – due to their nature, frequency, and/or magnitude. All special items are presented and explained for the purpose of reconciliation from the unadjusted key financial figures to the key operating figures in the relevant section of the financial statements.

One-off amounts (such as one-offs for integration projects) or other effects (e.g., from regulation topics or growth initiatives) in the fiscal years 2021 and 2022 are not adjusted but are disclosed – if there were any – in the respective sections.

Currency-adjusted sales and earnings figures are calculated by converting sales and earnings figures with the average exchange rates of the comparative period, instead of the current period.

Actual and forecast development 2022

United Internet AG maintained its growth trajectory in the fiscal year 2022 and reached its forecast for the fiscal year 2022 of December 2021 and its updates of March 2022 and September 2022.

Forecast development

In an ad-hoc announcement on December 9, 2021, United Internet published its guidance for the fiscal year 2022 and updated it during the year as follows:

(1) This figure includes costs of approx. € 70 million for the 5G network rollout of 1&1 and an amount of approx € 30 million for additional marketing activities of IONOS

(2) This figure includes costs of approx. € 60 million for the 5G network rollout of 1&1 and an amount of approx € 30 million for additional marketing activities of IONOS and around € 20 million higher electricity costs

Actual development

In the fiscal year 2022, consolidated sales rose by 4.8%, from € 5.646 billion in the previous year to € 5.915 billion and were thus well above the original sales forecast (December 2021: approx. € 5.8 billion) and its update (March 2022: approx. € 5.85 billion).

Without consideration of a non-cash valuation effect from derivatives (€ -0.5 million) and additionally adjusted for a special item in the form of IPO costs incurred in the fiscal year 2022 for the planned IPO of Group subsidiary IONOS Group SE (€ -8.8 million), operating EBITDA for the Group in the fiscal year 2022 amounted to € 1.272 billion and was thus 0.7% above the comparable prior-year figure (€ 1.262 billion – adjusted for IONOS IPO costs). As a result, EBITDA was slightly above the original EBITDA forecast (December 2021: approx. € 1.25 billion) and exactly within the target corridor of its last update (September 2022: approx. € 1.270 billion).

In addition to the year-on-year increase in electricity costs of € -22.4 million, this at first glance only moderate growth in operating EBITDA was due to expenses for the construction of 1&1’s mobile communications network of € -51,7 million (prior year: € -37.9 million) and costs for the announced additional marketing activities of IONOS to raise brand awareness in its most important European markets of € -32.4 million.

Summary: actual and forecast development of business in 2022

(1) This figure includes costs of approx. € 70 million for the 5G network rollout of 1&1 and an amount of approx € 30 million for additional marketing activities of IONOS

(2) This figure includes costs of approx. € 60 million for the 5G network rollout of 1&1 and an amount of approx € 30 million for additional marketing activities of IONOS and around € 20 million higher electricity costs

(2) This figure includes costs of € 51.7 million for the 5G network rollout of 1&1 and an amount of € 32.4 million for additional marketing activities of IONOS and € 22.4 million higher electricity costs

Development of divisions and segments

The Group’s operating activities are divided into the two business divisions Access and Applications, which in turn are divided into the segments Consumer Access and Business Access, as well as Consumer Applications and Business Applications.

Details on the business models of the individual segments are presented in chapter 1.1 “Business model”.

Consumer Access segment

In addition to preparations for the establishment of its own mobile communications network, the Consumer Access segment once again focused on adding further valuable broadband and mobile internet contracts in the fiscal year 2022. Contract growth was significantly slowed by the effects of the amended German Telecommunications Act (“Telekommunikationsgesetz” -TKG), which came into force on December 1, 2021.

Details on the TKG and its effects are provided in chapter 2 “Economic report” under “Legal conditions / significant events”.

The total number of fee-based contracts in the Consumer Access segment rose by a further 350,000 contracts (+600,000 operating growth less -250,000 contracts due to the TKG effect) to 15.78 million in 2022. Broadband connections decreased by 140,000 (-50,000 operating and -90,000 contracts due to the TKG effect) to 4.10 million, while mobile internet contracts increased by 490,000 (+650,000 operating less -160,000 contracts due to the TKG effect) to 11.68 million.

Development of Consumer Access contracts in the fiscal year 2022

Development of Consumer Access contracts in the fourth quarter of 2022

Sales of the Consumer Access segment rose by 1.5% in the fiscal year 2022, from € 3,883.0 million in the previous year to € 3,943.0 million.

This at first glance only moderate overall sales growth was due in particular to fluctuations during the year in (low-margin) hardware sales, which rose only slightly in the reporting period by 1.1%, or € 8.0 million, from € 759.6 million to € 767.6 million. Such hardware sales (especially smartphones) are subject to seasonal effects and also depend strongly on the appeal of new devices and the model cycles of hardware manufacturers. Consequently, this effect may be reversed in the coming quarters. If this is not the case, however, it would have no impact on the segment’s EBITDA trend. High-margin service revenues – which represent the core business of the segment – improved by 1.7% from € 3,123.4 million to € 3,175.4 million.

The segment’s key earnings figures in the previous year were affected by a (non-period) positive effect on earnings of € 39.4 million, which was attributable to the second half of 2020. Without consideration of this positive earnings effect in the previous year, the segment’s key earnings figures developed as follows: operating segment EBITDA improved by 3.2% in the fiscal year 2022, from € 674.6 million in the previous year to € 696.5 million. In addition to increased electricity costs (€ -0.9 million), this figure also includes expenses for the construction of 1&1’s mobile communications network (€ -51.7 million; prior year: € -37.9 million), which were mainly incurred (€ -25.6 million) in the fourth quarter. Operating segment EBIT rose by 5.3% from € 510.5 million to € 537.7 million.

The operating EBITDA margin improved from 17.4% to 17.7% and the operating EBIT margin from 13.1% to 13.6%.

The number of employees in the segment fell slightly by 0.1% to 3,163 (prior year: 3,167).

Key sales and earnings figures in the Consumer Access segment (in € million)

(1) Mainly hardware sales

(2) Excluding the non-period positive effect on earnings attributable to the second half of 2020 (EBITDA and EBIT effect: € +39.4 million)

Quarterly development ; change over prior-year quarter (unaudited; see note “unaudited disclosures” on page 3)

(1) Mainly hardware sales

Multi-period overview : Development of key sales and earnings figures

(1) Mainly hardware sales

(2) Including the non-period positive effect on earnings in 2021 attributable to the second half of 2020 (EBITDA and EBIT effect: € +39.4 million); excluding write-off of VDSL contingents that are still available (EBITDA and EBIT effect: € -129.9 million)

(3) Excluding the non-period positive effect on earnings attributable to the second half of 2020 (EBITDA and EBIT effect: € +39.4 million)

As part of the planned rollout of its powerful 5G mobile communications network – and following its successful bid for two frequency blocks of 2 x 5 MHz in the 2 GHz band and five frequency blocks of 10 MHz in the 3.6 GHz band during the 5G spectrum auction in 2019 – 1&1 concluded long-term agreements in the fiscal years 2021 and 2022 and now has all key prerequisites in place to drive forward the rollout of the 1&1 mobile network and thus extend its added value in this market – as in the landline market.

These agreements include the national roaming agreement between 1&1 and Telefónica concluded on May 21, 2021, which secures nationwide mobile coverage for 1&1 customers during the construction phase of 1&1’s own network through shared use of the Telefónica network, as well as the partnership announced on August 4, 2021 between 1&1 and Rakuten for the joint construction of Europe’s first fully virtualized mobile network based on the innovative OpenRAN technology. In addition, 1&1 signed an intercompany agreement with 1&1 Versatel on December 9, 2021, which in particular provides the access network (primarily fiber-optic cables) and data centers for operating 1&1’s mobile network on a rental basis. On the same date, an agreement was also concluded between 1&1 and Vantage Towers, one of Europe’s leading companies for radio tower infrastructure, which among other things includes the renting of Vantage’s existing antenna locations and the installation of 1&1’s high-performance antennas by Vantage.

The above mentioned contract signings were complemented by further partnership agreements in 2022. These include a contract with GfTD GmbH regarding the construction of antenna locations signed on April 4, 2022. The first order is for 500 new locations. GfTD is one Germany’s leading service providers for radio tower infrastructure and will act as general contractor for the nationwide acquisition and construction of new antenna locations for 1&1’s mobile communications network. Noteworthy is also the framework contract signed on April 21, 2022 between 1&1 and ATC Germany Holdings GmbH, a German subsidiary of American Tower Corporation (ATC), for the joint use of existing antenna locations. As an independent owner of communications sites, ATC is one of the world’s leading providers of radio tower infrastructure and owns around 15,000 antenna locations in Germany alone. As part of the agreement, ATC will provide antenna masts for the installation of 1&1’s high-performance antennas. In addition, an agreement was signed with Orange on November 25, 2022 for the world-wide provision of international roaming. As part of this partnership, 1&1 customers will have access to all international roaming services based on Orange’s global roaming footprint. Last but not least, 1&1 signed an agreement with Eubanet GmbH on December 21, 2022, concerning the acquisition of up to 7,500 new 5G antenna locations.

Operations of the 1&1 mobile network were launched on December 28, 2022 with “1&1 5G at home” – a product positioned as an alternative to conventional DSL, cable internet, or fiber-optic house connections. Smartphone tariffs are set to follow in 2023, together with the scheduled provision of national roaming by Telefónica. National roaming is a standard procedure used in the rollout of new mobile networks that enables customers to surf and make calls without interruption in areas not yet covered during the construction phase of the new network. This is achieved by automatically using the roaming partner’s antennas in these areas.

Despite the current delay in the rollout of 1&1’s antenna locations (1&1 press release of September 16, 2022), the company is still pursuing its goal of covering at least 50 percent of households before 2030. To this end, additional partners have been acquired for network expansion. The company therefore expects to make up for the delays in the course of the rollout phase. In addition, 1&1 has filed a complaint with the German Federal Cartel Office regarding a competitor’s obstruction of the network rollout (1&1 press release of February 23, 2023).

Business Access segment

Despite negative regulatory effects (€ -6.1 million), sales in the Business Access segment rose by 5.5% from € 514.4 million to € 542.8 million in the fiscal year 2022.

At € 155.6 million, segment EBITDA however was 3.1% below the prior-year figure of € 160.5 million. There was a corresponding decline in the EBITDA margin from 31.2% to 28.7%. In addition to increased electricity costs (€ -2.1 million), as well as costs for the technically necessary (SDH-based advance services of Deutsche Telekom are being terminated) and also economically sensible SDH migration (€ -2.3 million), this decline was mainly due to start-up costs for the construction of 1&1’s mobile communications infrastructure (€ -8.0 million).

Under the terms of an intercompany agreement, 1&1 Versatel is responsible in particular for setting up data centers and fiber-optic connections for 1&1 and providing them on a rental basis to 1&1 for the operation of its mobile network. During the set-up period, and in order to avoid potential supply bottlenecks in the future, 1&1 Versatel had decided (as already reported on presentation of the half-year figures 2022) to perform more in advance for 1&1 than originally planned and bring forward some investments originally scheduled for the following year to the fiscal year 2022. In addition to these burdens on earnings, there were unexpected delays in the provision of antenna locations due to the delivery bottlenecks of one of 1&1’s rollout partners, which also had a negative impact on 1&1 Versatel’s earnings (since start-up costs already incurred could not yet be invoiced).

As a result of increased writedowns for network infrastructure, segment EBIT decreased from € -22.7 million in the previous year to € -39.3 million in the fiscal year 2022.

The number of employees in the segment rose by 7.9% to 1,336 in (prior year: 1,238).

Key sales and earnings figures in the Business Access segment

Quarterly development ; change over prior-year quarter (unaudited; see note “unaudited disclosures” on page 3)

Multi-period overview : Development of key sales and earnings figures

Consumer Applications segment

In the course of preparing its annual financial statements for the fiscal year 2022, United Internet decided to include app store contracts previously not included in its (fee-based) contract figures as at the end of the reporting period and to retroactively adjust its prior-year figures accordingly. The aforementioned contracts are fee-based apps for the premium mail accounts of GMX and WEB.DE that were acquired via the Apple and Google app stores (and previously disclosed in the free account figures). The reclassification resulted in an increase of 110,000 pay accounts (fee-based contracts) as of December 31, 2022. The figures as at September 30, 2022 and December 31, 2021 were retroactively adjusted by 90,000 contracts and 50,000 contracts, respectively. By contrast, the free account figures as at the aforementioned dates were reduced by the same amount. The total number of accounts remained unchanged.

Including app store contracts, the number of fee-based pay accounts (contracts) rose by 120,000 to 2.64 million in the fiscal year 2022. Ad-financed free accounts increased by 40,000 to 40.31 million. The total number of Consumer Applications accounts therefore increased by 160,000 to 42.95 million.

Development of Consumer Applications accounts in the fiscal year 2022

Development of Consumer Applications accounts in the fourth quarter of 2022

As of the beginning of the second quarter of 2022, the online advertising market was dominated in 2022 by a noticeable decline in advertising activity brought about by the war in Ukraine and very high inflation. In spite of this adverse sector environment, segment sales were increased slightly by 1.7% – compared to already good prior-year figure – from € 279.1 million to € 283.9 million.

The segment’s key earnings figures were affected during the year by non-cash valuation effects from derivatives. Valuation effects developed positively in the first three quarters following quarterly remeasurement and gradually increased to € +12.2 million, but then turned negative in the fourth quarter at € -0.5 million. Adjusted for these non-cash valuation effects from derivatives of € +4.9 million in the previous year and € -0.5 million in 2022, operating segment EBITDA rose by 1.4% from € 117.6 million to € 119.3 million and operating segment EBIT by 1.1% from € 95.0 million to € 96.0 million. These earnings figures include a € 3.5 million increase in electricity costs.

The EBITDA margin fell slightly from 42.1% to 42.0% and the EBIT margin from 34.0% to 33.8%.

The number of employees in the segment increased by 3.2% in 2022 to 1,036 (prior year: 1,004).

Key sales and earnings figures in the Consumer Applications segment (in € million)

(1) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € -0.5 million)

(2) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € +4.9 million)

Quarterly development ; change over prior-year quarter (unaudited; see note “unaudited disclosures” on page 3)

(1) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € +0.8 million in Q1 2022; € +3.8 million in Q2 2022; € +7.6 million in Q3 2022; € -12.7 million in Q4 2022) and excluding IPO costs IONOS (EBITDA and EBIT effect: € -0.9 million in Q1 2022; € -1.5 million in Q2 2022; € -0.8 million in Q3 2022; € -5.6 million in Q4 2022)

Multi-period overview : Development of key sales and earnings figures

(1) Sales in 2019 after changing from gross to net presentation of third-party marketing revenues in 2020; the gross amount disclosed in 2019 is shown in brackets; 2018 reported unchanged on a gross statement

(2) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € +4.9 million)

(3) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € -0.5 million)

Business Applications segment

The number of fee-based Business Applications contracts grew by 260,000 in the fiscal year 2022. This growth resulted from 170,000 contracts in Germany and 90,000 contracts abroad. As a result, the total number of contracts rose to 9.04 million.

Development of Business Applications contracts in the fiscal year 2022

Development of Business Applications contracts in the fourth quarter of 2022

Sales of the Business Applications segment rose by 17.4% in the fiscal year 2022, from € 1,062.8 million in the previous year to € 1,248.1 million. Sedo’s after-market business (domain trading platform and domain parking) contributed 9.9 percentage points to this sales growth.

The segment’s key earnings figures in 2022 and 2021 were affected by a special item in the form of IPO costs for the planned IPO of the IONOS Group. Total IPO costs of € -8.8 million in 2022 (prior year: € -3.0 million) were primarily incurred in the fourth quarter.

Adjusted for this special item, segment EBITDA was virtually unchanged from the previous year at € 318.2 million (prior year: € 318.3 million). In addition to increased electricity costs (€ -15.9 million compared to the previous year), this figure also includes costs for the announced additional marketing activities of IONOS to raise brand awareness in its most important European markets (€ -32.4 million, of which € -19.8 million in Q4 2022).

Also burdened by these costs, segment EBIT of € 216.5 million was slightly down on the previous year by 0.3% (prior year: € 217.2 million).

Against the backdrop of strong sales growth, the EBITDA margin and EBIT margin decreased accordingly from 29.9% to 25.5% and from 20.4% to 17.3%, respectively.

The number of employees in the segment rose by 6.2% to 4,247 in 2022 (prior year: 3,998).

Key sales and earnings figures in the Business Applications segment (in € million)

(1) Excluding IPO costs (EBITDA and EBIT effect: € -8.8 million)

(2) Excluding IPO costs (EBITDA and EBIT effect: € -3.0 million)

Quarterly development ; change over prior-year quarter (unaudited; see note “unaudited disclosures” on page 3)

(1) Excluding IPO costs (EBITDA and EBIT effect: € -0.9 million in Q1 2022; € -1.5 million in Q2 2022; € -0.8 million in Q3 2022; € -5.6 million in Q4 2022; € -3.0 million in Q4 2021)

Multi-period overview : Development of key sales and earnings figures

(1) Excluding trademark writeups Strato (EBIT effect: € +19.4 million)

(2) Excluding IPO costs (EBITDA and EBIT effect: € -3.0 million)

(3) Excluding IPO costs (EBITDA and EBIT effect: € -8.8 million)

In addition to its successful operating business, the IONOS Group worked hard on preparations for a targeted IPO and made significant progress in its fiscal year 2022.

In an “Intention to Float” (ITF) document published on January 17, 2023 together with its shareholders United Internet (75.1%) and WP XII Venture Holdings II SCSp (24.9%), an affiliate of Warburg Pincus (together “Warburg Pincus”), IONOS Group SE officially announced its plans for an IPO of IONOS. Depending on the market environment, the shares were to be listed on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange in the first quarter of 2023.

In an ad-hoc announcement on January 27, 2023, United Internet and Warburg Pincus announced that they had set the framework for the planned IPO of IONOS Group SE and the admission for trading of its shares on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange. The shares of IONOS Group SE were to be offered in a price range of € 18.50 to € 22.50. United Internet and Warburg Pincus both offered 15% of their shares (i.e., a total of 21,000,000 registered shares with no par value), corresponding to 15,771,000 registered shares with no par value from the holdings of United Internet and 5,229,000 registered shares with no par value from the holdings of Warburg Pincus. Up to 3,150,000 additional registered shares with no par value from the holdings of United Internet and Warburg Pincus were available to be offered to cover potential over-allotments (greenshoe).

In an ad-hoc announcement on February 7, 2023, United Internet and Warburg Pincus announced that they had set the final offer price for the shares of IONOS Group SE at € 18.50 per share.

The shares of IONOS Group SE have been listed on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange under the ISIN: DE000A3E00M1, WKN: A3E00M, ticker symbol: IOS since February 8, 2023. Following the IPO of IONOS Group SE, United Internet holds 63.8% and Warburg Pincus 21.2% of shares. A further 15.0% are in free float.

Further details on the IONOS IPO are provided in chapter 3 “Subsequent events”.

Group investments

Significant changes in investments

Investment via Kublai in capital increase of Tele Columbus

As the former anchor investor in Tele Columbus AG, United Internet AG announced on December 21, 2020 that, together with Morgan Stanley Infrastructure Partners, it would provide sustained support for the implementation of Tele Columbus’s Fiber Champion strategy.

In a first step, Kublai GmbH (a bidding company backed by Morgan Stanley) submitted a voluntary public takeover offer for Tele Columbus shares. After the successful completion of the takeover bid, United Internet contributed its Tele Columbus shares to Kublai in April 2021 and raised its stake in Kublai to 40%. The remaining 60% of shares in Kublai are held by Morgan Stanley Infrastructure Partners.

In late 2022, Kublai participated in the capital increase by way of a rights offering of Tele Columbus and acquired 22,940,652 new shares for direct subscription at a price of € 3.25 per share. In accordance with the shareholdings in Kublai, around € 30 million of the total purchase price of around € 75 million was attributable to United Internet AG. The additional funds will be used to implement the Fiber Champion strategy and to strengthen the equity footing of Tele Columbus AG.

Following the capital increase, Kublai currently holds 95.39% of Tele Columbus shares.

In addition to Kublai GmbH and its other (fully consolidated) core operating companies, United Internet held the following other minority shareholdings as of December 31, 2022, which are included in its result from associated companies.

Minority holdings in partner companies

In July 2013, United Internet acquired a stake in Open-Xchange AG (main activity: e-mail and collaboration solutions). United Internet has already been working successfully with the company for many years in its Applications business. As of December 31, 2022, United Internet’s share of voting rights amounted to 25.39%. United Internet expects Open-Xchange to post increased revenues and a positive EBITDA for the fiscal year 2022.

In April 2014, United Internet acquired a stake in uberall GmbH (main activity: online listings). In addition, uberall and IONOS agreed a long-term cooperation contract for the use of uberall solutions. As of December 31, 2022, the share of voting rights held by United Internet amounted to 25.10%. For 2022, United Internet anticipates increased sales of uberall. Due to the expansion of business in the USA, the company’s EBITDA is likely to remain negative.

In April 2017, United Internet acquired a stake in rankingCoach International GmbH (main activity: online marketing solutions). In addition to the equity stake, rankingCoach and IONOS signed a long-term cooperation agreement for IONOS SE to use the online marketing solutions of rankingCoach as part of its hosting and cloud products marketed in Europe and North America. As of December 31, 2022, the share of voting rights amounted to 31.52%. United Internet expects rankingCoach to achieve significant sales growth in 2022 with slightly positive EBITDA.

Following the contribution of affilinet GmbH to AWIN in October 2017, United Internet also holds a stake in AWIN AG (main activity: affiliate marketing). Several United Internet subsidiaries are currently working together with AWIN and using the company’s affiliate network as part of their marketing mix. As of December 31, 2022, United Internet’s share of voting rights amounted to 20.00%. United Internet expects further strong sales growth for AWIN in its fiscal year 2022 and a strongly positive EBITDA result.

Share and dividend

Share

In the fiscal year 2022, the United Internet share price fell strongly by 45.9% to € 18.89 as of December 31, 2022 (December 31, 2021: € 34.94). The share thus performed worse than its comparative indices, which also fell year on year (DAX -12.3%; MDAX -28.5%).

Share performance 2022, indexed

There was a corresponding decline in the market capitalization of United Internet AG from around € 6.78 billion in the previous year to around € 3.66 billion as of December 31, 2022.

In the fiscal year 2022, average daily trading via the XETRA electronic computer trading system amounted to around 220,000 shares (prior year: around 230,000) with an average value of € 5.8 million (prior year: € 8.1 million).

Multi-period overview: share performance (as of: December 31, 2022; in €; all stock exchange figures based on Xetra trading)

(1) EPS from continued operations

(2) EPS from continued operations and without special items

Share data

Shareholder structure (as of: March 16, 2023, after capital reduction and share buyback)

Presentation of the total positons shown above based on the most recent notification of voting rights in accordance with sections 33 ff. of the German Securities Trading Act. Accordingly, only voting rights notifications that have reached at least the first notification threshold of 3% are taken into account. In addition, any directors' dealings announcements available to the Company have been taken into account accordingly.

The treasury shares held by United Internet do not carry voting or dividend rights. Due to the non-voting nature of treasury shares, the proportion of shares with voting rights held by companies controlled by Mr. Dommermuth in relation to the total number of voting rights of United Internet AG amounts to 54.37%, the proportion of shares with voting rights held by Blackrock to 3.82%, the proportion of shares with voting rights held by Wellington to 3.34%, and the proportion of shares with voting rights in free float to 38.47%.

Dividend

United Internet’s dividend policy aims to pay a dividend to shareholders of approx. 20-40% of adjusted consolidated net income after minority interests (adjusted consolidated net income attributable to the “shareholders of United Internet AG” – according to the consolidated statement of comprehensive income), provided that funds are not needed for further Company development.

At the (virtual) Annual Shareholders' Meeting of United Internet AG held on May 19, 2022, the proposal of the Management Board and Supervisory Board to pay a dividend of € 0.50 per share (prior year: € 0.50) for the fiscal year 2021, was approved with a majority of 99.97% of votes cast. As a consequence, a total of € 93.4 million (prior year: € 93.6 million) was distributed on May 24, 2022. The payout ratio was thus 23.7% of the adjusted consolidated net income after minority interests for 2021 (€ 394.5 million adjusted for IONOS IPO costs) and – in view of the investments due to be made in the Company’s own mobile communications network – therefore still within the range targeted by the dividend policy.

For the fiscal year 2022, the Management Board of United Internet AG will propose to the Supervisory Board a dividend of € 0.50 per share (prior year: € 0.50). The Management Board and Supervisory Board will discuss this dividend proposal at the Supervisory Board meeting on March 29, 2023 (and thus after the preparation deadline for this Management Report). The Annual Shareholders' Meeting of United Internet AG on May 17, 2023 will then vote on whether to adopt the joint proposal of the Management Board and Supervisory Board.

On the basis of around 172.8 million shares with dividend entitlement (as of March 2023 following the cancellation of 2 million treasury shares and the purchase of around 13.9 million shares in a public share buyback offer ), the total dividend payment for fiscal year 2022 would amount to € 86.4 million. The dividend payout ratio would therefore be 23.1% of adjusted consolidated net income after minority interests for 2022 (€ 374.1 million) and thus lie – in view of the investments due to be made in the Company’s own mobile communications network – within the range of the dividend policy. Based on the closing price of the United Internet share on December 31, 2022, the dividend yield would be 2.6%.

Multi-period overview: dividend development

(1) Subject to approval of Supervisory Board and Annual Shareholders' Meeting 2023

(2) Without special items

(3) As of: December 31

Annual Shareholders' Meeting 2022

The (virtual) Annual Shareholders' Meeting of United Internet AG was held in Frankfurt am Main on May 19, 2022. A total of 80.24% of capital stock (or 83.37% of capital stock less treasury shares) was represented. The shareholders adopted all resolutions on the agenda requiring voting with large majorities.

Capital stock and treasury shares

As at the balance sheet date of December 31, 2022, United Internet AG continued to hold 7,284,109 treasury shares. This corresponds to approx. 3.75% of the capital stock of 194,000,000 shares.

On February 14, 2023, the Management Board of United Internet AG decided, with the approval of the Supervisory Board and on the basis of the authorization granted by the Annual Shareholders' Meeting of May 20, 2020 regarding the acquisition and use of treasury shares, to initially cancel 2,000,000 treasury shares and to reduce the capital stock of United Internet AG by € 2,000,000 from € 194,000,000 to € 192,000,000. The number of shares issued decreased accordingly by 2,000,000 shares, from 194,000,000 shares to 192,000,000 shares. The pro-rata amount of the capital stock that the issued shares represent remains unchanged at € 1 per share. The cancellation of the treasury shares serves to increase the proportionate participation of United Internet shareholders. Following the cancellation of the aforementioned two million shares, United Internet AG initially held 5,284,109 treasury shares. This corresponded to approx. 2.75% of the Company’s capital stock.

Furthermore, the Management Board of United Internet AG also decided on February 14, 2023, with the approval of the Supervisory Board, to make a public share buyback offer to the shareholders of United Internet AG for a total of up to 13,900,000 shares at a price of € 21.00 per share. The total volume of the share buyback offer therefore amounted to up to € 291.9 million. With the public share buyback offer, United Internet AG made use of the authorization granted by the Annual Shareholders' Meeting of the Company on May 20, 2020, under which up to 10% of the Company’s capital stock could be bought back by August 31, 2023. The shares bought back may be used for all of the purposes permitted under the authorization granted by the Annual Shareholders' Meeting of May 20, 2020. The shares may also be canceled.

In the course of the public share buyback offer, a total of 27,553,147 shares were tendered to the Company by the end of the offer period. The offer was based on the buyback of up to 13.9 million shares in total. As the total number of shares for which the offer was accepted exceeded this maximum amount, the declarations of acceptance were considered on a pro rata basis, i.e., corresponding to the ratio of the maximum number of United Internet shares to be purchased pursuant to this offer, i.e., 13.9 million United Internet shares, to the aggregate number of United Internet shares tendered by United Internet shareholders for buyback.

Upon completion of the capital reduction resolved by the Management Board on February 14, 2023, with the approval of the Supervisory Board, by means of canceling 2,000,000 treasury shares and the buyback of 13,899,596 shares (without fractional amounts) as part of the public share buyback offer to the shareholders of United Internet AG, United Internet now holds 19,183,705 treasury shares, corresponding to 9.99% of the current capital stock of 192 million shares. In view of the offer price of € 21.00 per United Internet share, the purchase price for the buyback of 13,899,596 shares in total amounted to € 291.9 million.

Investor Relations

Continuous and transparent corporate communication with all capital market participants is important for United Internet. The Company aims to provide all target groups with timely information without discrimination. To this end, the Management Board and the Investor Relations department continued their regular discussions with institutional and private investors in the fiscal year 2022.

The capital market was informed via the quarterly statements, half-year financial report and annual report, press and analyst conferences, as well as via various webcasts. Due to pandemic-related restrictions still in place in the early part of 2022, some events were held virtually (including the Annual Shareholders' Meeting), whereas later in the year the focus returned to face-to-face meetings. The Company’s management and Investor Relations department explained the Company’s strategy and financial results in numerous one-on-one discussions at the Company’s offices in Montabaur, as well as at roadshows with mainly European and North American investors.

Apart from one-on-one meetings, shareholders and potential future investors can also receive the latest news around the clock via the Company’s extensive and bilingual website (www.united-internet.de). In addition to the publication dates of financial reports, the dates and venues of investor conferences and roadshows are made publicly available at https://www.united-internet.de/investor-relations/finanzkalender.html. Online versions of the Annual Report and Sustainability Report are also provided on the corporate website.

Personnel report

As a telecommunications and internet company, United Internet is subject to the defining characteristics of the industry: rapid change, short innovation cycles, and fierce competition. United Internet AG has risen to these challenges with great success over many years now. One of the key factors for the success and growth of the United Internet Group are its dedicated and highly competent employees and executives with their entrepreneurial and autonomous approach to work. The Company therefore attaches great importance to a sustainable and balanced strategy across all aspects of its HR activities: from employee recruitment, to targeted entry-level and vocational training formats, tailored skills training programs, support with individual career paths, through to sustainable management development programs, and the long-term retention of executives, high potentials and top performers.

United Internet AG was once again recognized as a top employer in 2022. Based on an independent study of the “Top Employers Institute”, United Internet received the “TOP Employers Germany” award – as in the preceding years. Certification is only awarded to organizations which offer staff attractive working conditions. Assessment is based on career opportunities, employer benefits, and working conditions, as well as training and development opportunities.

Headcount and personnel expenses

In the highly competitive market for skilled workers in the ICT sector, United Internet once again succeeded in recruiting top staff for its key positions and thus meeting the needs of its growing business. In addition to targeted employer branding, partnerships with education and training providers, and the positive impact of the Company’s product brands, our successful recruitment efforts center around a candidate-friendly, highly competitive acquisition and selection process.

In the fiscal year 2022, the number of employees increased year on year by 5.0%, or 499 employees, to 10,474 (prior year: 9,975). This increase was mainly due to the Business Applications segment as a result of the strong increase in headcount for the segment’s international business.

Headcount in Germany rose by 4.3%, or 351 employees, to 8,550 as of December 31, 2022 (prior year: 8,199). The number of employees at the Group’s non-German subsidiaries grew by 8.3%, or 148 employees, to 1,924 (prior year: 1,776).

Multi-period overview: headcount development by location ⁽¹⁾ ; year-on-year change

(1) Active employees as December 31 of the respective fiscal year

From the segment perspective, there were 3,163 employees in the Consumer Access segment (prior year: 3,167), 1,336 in the Business Access segment (prior year: 1,238), 1,036 in the Consumer Applications segment (prior year: 1,004), and 4,247 in the Business Applications segment (prior year: 3,998). A further 692 people were employed at the Group’s headquarters (Corporate/HQ) (prior year: 568).

Multi-period overview: headcount development by segment ⁽¹⁾ ; year-on-year change

(1) Active employees as December 31 of the respective fiscal year

Personnel expenses rose by 4.7% to € 675.5 million in the fiscal year 2022 (prior year: € 645.4 million). The personnel expense ratio was thus unchanged at 11.4%.

Multi-period overview: development of personnel expenses ; year-on-year change

Sales per employee, based on annual average headcount, amounted to approx. € 579k in fiscal year 2022 (prior year: approx. € 576k).

Diversity

Respect for diversity is a core aspect of United Internet’s corporate culture. The reason for this is simple: only a workforce that mirrors the many different facets of society offers the best possible conditions for creativity and productivity, and makes employees – and the organization itself – unique. This unique diversity creates an incomparable wealth of potential ideas and innovations, increasing the Company’s competitiveness and providing opportunities for all.

All United Internet employees are to be treated with respect and should receive the same opportunities, regardless of their nationality, ethnic origin, religion, ideological beliefs, gender and gender identity, age, disability, or sexual orientation and identity. Each employee should be able to find the area of activity and function in which they can make the most of their individual potential and talents.

Multi-period overview: employees by gender ⁽¹⁾

(1) Active employees as December 31 of the respective fiscal year

The average age of the United Internet Group’s employees at the end of fiscal year 2022 was around 39 (prior year: 40).

Multi-period overview: employee age profile ⁽¹⁾

(1) Active employees as December 31 of the respective fiscal year

Employees of United Internet AG work in an international environment at around 40 sites around the world.

Multi-period overview: employees by country ⁽¹⁾

(1) Active employees as December 31 of the respective fiscal year

For further information on topics such as “HR Strategy and HR Organization”, “Training and Education”, “Diversity and Equal Opportunities”, and “Occupational Health and Safety”, please refer to the chapter “United Internet as an Employer” in the Sustainability Report 2022 of United Internet AG, which will be published in late March 2023 (at https://www.united-internet.de/en/investor-relations/publications/reports.html).

Liquidity and finance

The Group’s financial strategy is primarily geared to the strategic business plans of its operating business units. In order to provide sufficient flexibility for further growth, United Internet therefore constantly monitors trends in funding opportunities arising on the financial markets. Various options for funding and potential for optimizing existing financial instruments are regularly reviewed. The main focus is on ensuring sufficient liquidity and the financial independence of the Group at all times. In addition to its own financial strength, the Group maintains sufficient liquidity reserves with core banks. The flexible use of these liquidity reserves enables efficient management of Group liquidity, optimal debt management to reduce interest costs, and the avoidance of negative interest on deposits.

A euro cash pooling agreement (zero balancing) has been in place between United Internet AG and certain subsidiaries since July 2012. Under the agreement, credit and debit balances of the participating Group subsidiaries are pooled and netted via several cascades in a central bank account of United Internet AG and available each banking day.

At the end of the reporting period on December 31, 2022, the Group’s bank liabilities amounted to € 2,155.5 million (prior year: € 1,822.7 million) and mainly comprise promissory note loans, syndicated loans, and bilateral credit agreements / credit facilities.

Promissory note loans

United Internet AG successfully placed three promissory note loans (“Schuldscheindarlehen”) in its fiscal years 2014, 2017, and 2021. At the end of the reporting period on December 31, 2021, total liabilities from the above promissory note loans amounted to € 1,297.5 million.

In the fiscal year 2022, one tranche of the promissory note loan 2017 amounting to € 100.0 million and the last remaining tranche of the promissory note loan 2014 amounting to € 97.5 million were redeemed on schedule.

At the end of the reporting period on December 31, 2022, total liabilities from the promissory note loans 2017 and 2021 with maximum terms until July 2027 therefore amounted to € 1,100.0 million.

Syndicated loan facilities & syndicated loans

On December 21, 2018, a banking syndicate granted United Internet AG a revolving syndicated loan facility totaling € 810 million until January 2025. In the fiscal year 2020, the Company made use of a contractually agreed prolongation option and extended the term of the revolving syndicated loan facility for the period from January 2025 to January 2026. A credit facility of € 690 million was agreed for this prolongation period.

As of the balance sheet date on December 31, 2022, € 550 million of the revolving syndicated loan facility had been drawn (prior year: € 250 million). As a result, funds of € 260 million (prior year: € 560 million) were still available to be drawn from the credit facility as at the balance sheet date.

Bilateral credit agreements / bilateral credit facilities

The Company also has bilateral credit agreements with several banks totaling € 200 million (prior year: € 170 million). The terms expire at the latest on August 11, 2023. As of the balance sheet date on December 31, 2022, these bilateral credit agreements were used in full (as in the previous year).

In addition, various bilateral credit facilities amounting to € 400 million (prior year: € 375 million) are available to the Company. These have been granted in part until further notice and in part have terms until July 2, 2024. Drawings of € 300 million (prior year: € 100 million) had been made from these credit facilities as at the end of the reporting period on December 31, 2022.

United Internet therefore had free credit lines from syndicated loan facilities and bilateral credit agreements totaling € 360 million (prior year: € 835 million) as at the end of the reporting period on December 31, 2022.

In addition to the above mentioned credit lines, the Group has guaranty credit facilities of € 105.0 million (prior year: € 105.0 million) as at the end of the reporting period, which in some cases can also be used by other Group companies. The guaranty credit facilities are available in particular for the provision of operational bank guarantees.

Further disclosures on the various financial instruments, drawings, interest rates, and maturities are provided under note 31 of the Notes to the Consolidated Financial Statements.

As of the reporting date, there are purchase obligations for property, plant and equipment (especially for network infrastructure) totaling € 370.8 million (prior year: € 150.8 million). In addition, there are purchase commitments for intangible assets (especially software) totaling € 143.9 million (prior year: € 1.2 million).

For further details on significant investment obligations, please refer to notes 26 and 27 of the Notes to the Consolidated Financial Statements.