Explanations of items in the balance sheet

18.  Cash and cash equivalents

As of the reporting date, cash and cash equivalents amounted to € 27,689 k (prior year: € 40,523 k ). Cash and cash equivalents consist of bank balances, checks, and cash in hand. Bank balances generally bear variable interest rates for call money. In the reporting period, United Internet received a low interest on bank balances denominated in euro of approx. 1.75% (prior year: 0%) .

The development and application of cash and cash equivalents is stated in the Consolidated Cash Flow Statement.

19.  Trade accounts receivable

As of December 31, 2023 bad debt allowances for trade accounts receivable amounted to € 91,499 k (prior year: € 82,456 k ). The development of bad debt allowances can be seen below:

Additions charged to the income statement of each period under review do not comprise receivables arising during the year and eliminated before the reporting date.

As of December 31, 2023, the age profile of trade accounts receivable less the aforementioned allowances was as follows:

20.  Contract assets

The development of bad debt allowances was as follows:

21.  Inventories

As of December 31, 2023, inventories consisted of the following items:

Goods recognized as material expense from inventories in cost of sales amounted to € 897,587 k in the reporting period (prior year: € 828,053 k ). Of this total, an amount of € 2,878 k (prior year: € 2,220 k ) refers to impairment of inventories.

Allowances include € 8,618 k (prior year: € 11,507 k ) for mobile telephony/mobile internet and IP-TV, and € 2,580 k (prior year: € 2,644 k ) for domain stock.

22.  Prepaid expenses

The increase in prepaid expenses results mainly from contingent payments to pre-service providers amounting to € 276.5m.

Prepaid expenses are deferred and charged to the income statement on the basis of the underlying contractual period.

23.  Other current assets

23.1  Other current financial assets

Derivatives mainly relate to the embedded derivatives agreed as part of Warburg Pincus’ investment in the Business Applications segment, as well as other derivatives. The strong decline in derivatives results from the decrease in the valuation of the IONOS Group, which was based on its stock market price. This valuation is below the previously recognized enterprise value, which was determined on the basis of valuation reports.

For further information, please refer to Note 34 .

Payments on account mainly refer to advance payments for domains .

The increase in receivables from pre-service providers mainly relates to advertising cost subsidies.

The creditors with debit balances mainly relate to financial recovery claims from suppliers.

23.2  Other current non-financial assets

24.  Shares in associated companies

The Group holds interests in several associated companies. The main investment in 2023 are AWIN AG, Berlin, and Kublai GmbH, Frankfurt am Main, which the Group holds via its subsidiary United Internet Investments Holding AG & Co.KG, Montabaur.

AWIN AG, Berlin, is a global affiliate marketing network which offers services in the field of e-commerce and online marketing. AWIN is the world’s largest affiliate marketer, linking network advertisers and publishers around the world. As in the previous year, the Group holds 20% of shares in AWIN AG.

Kublai GmbH is the parent company of Tele Columbus AG, Berlin. Tele Columbus is an independent broadband cable and fiber-optic network operator active in the German multimedia and communication sector with most of its network infrastructures in eastern Germany (Berlin, Brandenburg, Saxony, Saxony-Anhalt, and Thuringia), as well as in North Rhine-Westphalia and Hesse. Tele Columbus offers its customers digital TV program packages, as well as internet and telephone connections. As in the previous year, the Group holds 40% of shares in Kublai GmbH. The shareholding in Kublai GmbH corresponds to the proportion of voting rights.

The shares in AWIN AG and Kublai GmbH are valued using the equity method.

The following table contains summarized financial information of the main associated companies on the basis of a 100% shareholding as of December 31, 2023:

* As the full financial information of Kublai GmbH as of December 31, 2023 was not yet available to United Internet at the time of preparing these Consolidated Financial Statements, the summarized financial information at the carrying amount disclosed in United Internet’s Consolidated Balance Sheet was calculated on the basis of the interim financial statements of Kublai GmbH as of September 30, 2023.

A reconciliation with the carrying amount in the Consolidated Financial Statements as of December 31, 2023 – with an estimation of investment results for the fourth quarter – is presented below:

* As the full financial information of Kublai GmbH as of December 31, 2023 was not yet available to United Internet at the time of preparing these Consolidated Financial Statements, the reconciliation to the carrying amount disclosed in United Internet’s Consolidated Balance Sheet was calculated on the basis of the interim financial statements of Kublai GmbH as of September 30, 2023.

In the fiscal year 2023, the shareholders of Kublai GmbH, United Internet AG and Hilbert Management GmbH, agreed to make a voluntary additional payment to the company’s equity. The funds were allocated to the company’s free capital reserves (section 272 (2) no. 4 HGB) without increasing the share capital. United Internet AG contributed a total amount of € 602 k to the equity of Kublai GmbH.

Due in part to ongoing negotiations regarding the refinancing of Tele Columbus AG and the continued significantly negative operating performance of Tele Columbus AG, the shares held in Kublai GmbH were subjected to an event-driven impairment test in the fiscal year ending December 31, 2023. United Internet assumed a planning horizon of 17 years to determine their fair value less selling costs. Assuming a discount rate of 4.9%, a growth rate in perpetuity of 1.0%, an EBITDA margin in perpetuity of 35.0% and a capex to sales ratio in perpetuity of 18.0%, there was a carrying amount surplus of € 166.8m as of December 31, 2023 and thus no impairment need was identified for the shares in Kublai GmbH.

An increase in the discount rate of one percentage point to 5.9% would result in an impairment of € 34.7m. A reduction in the EBITDA margin in perpetuity from 35.0% to 29.0% would also result in an impairment of € 10.5m.

The following table contains summarized financial information of the main associated companies on the basis of a shareholding of 100% as at December 31, 2022:

* As the full financial information of Kublai GmbH as of December 31, 2023 was not yet available to United Internet at the time of preparing these Consolidated Financial Statements, the summarized financial information on the carrying amount disclosed in United Internet’s Consolidated Balance Sheet was calculated on the basis of the interim financial statements of Kublai GmbH as of September 30, 2022.

A reconciliation with the carrying amounts in the Consolidated Financial Statements as of December 31, 2022 – with an estimation of investment results for the fourth quarter – is presented below:

* As the full financial information of Kublai GmbH as of December 31, 2023 was not yet available to United Internet at the time of preparing these Consolidated Financial Statements, the reconciliation to the carrying amount disclosed in United Internet’s Consolidated Balance Sheet was calculated on the basis of the interim financial statements of Kublai GmbH as of September 30, 2022.

As of December 31, 2023, other associated companies disclosed an aggregated carrying amount of € 34,086 k (prior year: € 35,331 k ) and an aggregated loss of € 3,352 k (prior year: € 2,009 k ). The earnings/loss contributions of other associated companies are only included in the aggregated loss on a prorated basis. Financial information is based in part on local accounting regulations as a reconciliation of this financial information with IFRS would incur disproportionately high costs.

25.  Other non-current financial assets

Other non-current financial assets as at December 31, 2023 of € 8,346 k (prior year: € 10,721 k ) mainly comprise loans to related parties of € 5,713 k (prior year: € 8,175 k ).

26.  Property, plant and equipment

Further details and an alternative presentation of the development of property, plant and equipment in the fiscal years 2023 and 2022 can be found in the exhibit to the Notes to the Consolidated Financial Statements (Development of Non-current Assets).

The carrying value of property, plant and equipment held as lessee as part of lease arrangements amounts to € 794.4 m as of December 31, 2023 (prior year: € 636.2m).

As of the reporting date, there are purchase obligations for property, plant and equipment totaling € 591.4 m (prior year: € 370.8 m ).

27.  Intangible assets (without goodwill)

Further details and an alternative presentation of the development of intangible assets in the fiscal years 2023 and 2022 can be found in the exhibit to the Notes to the Consolidated Financial Statements (Development of Non-current Assets).

The carrying amount of the customer base results from the following company acquisitions:

The residual amortization period for the customer base from the acquisition of the Drillisch Group (now 1&1 AG) amounts to 2 to 10 years, depending on the customer groups, whereby 2 years applies to the major share. The residual amortization period for the customer base from the acquisition of STRATO AG amounts to 1 to 10 years, depending on the product groups, whereby 8 years applies to the major share. The residual amortization period for the customer base of the home.pl transaction amounts to 5 years and for Arsys 2 years. The residual amortization period for the customer base from the acquisition of the Versatel Group amounts to 1 to 18 years, depending on the products and services, whereby 17 years applies to the major share.

Spectrum licenses

In the fiscal year 2019, the United Internet subsidiary 1&1 Drillisch participated in the 5G spectrum auction and purchased two frequency blocks of 2 x 5 MHz in the 2 GHz band, which are limited until December 31, 2040, and five frequency blocks of 10 MHz in the 3.6 GHz band, which are limited until 2040. While the 3.6 GHz spectrum is already available, the frequency blocks in the 2 GHz band will only be available from January 1, 2026.

The intangible assets resulting from the purchase were recognized at cost.

The carrying amounts of the frequency blocks are comprised as follows:

In the fiscal year 2023, the frequency blocks in the 3.6 GHz band were amortized by € 40,819 k (prior year: € 447 k ). The acquired frequency blocks in the 2 GHz band will not be amortized until actual network operation commences and if these frequency blocks are also available at that time. These spectrum licenses are not yet usable and were therefore subjected to an impairment test in the fiscal year 2023. The impairment test was performed on the balance sheet date on the level of the cash-generating unit 5G. It did not result in any impairment in the fiscal year.

The following table provides an overview of trademarks according to the cash-generating units:

The carrying amounts of intangible assets with indefinite useful lives (trademarks) totaled € 207,682 k (prior year: € 207,711 k ).

The useful life of trademarks is determined as being indefinite, as there are no indications that the flow of benefits will end in future. Intangible assets with indefinite useful lives were subjected to an impairment test on the level of the cash-generating units as of the reporting date.

The rights similar to concessions result from a one-off payment in the fiscal year 2020 in connection with the exercise of the first prolongation option of the MBA MVNO agreement in order to secure direct access to 5G technology and as a necessary component for the establishment of the Group’s own mobile communications network.

Internally generated intangible assets relate to capitalized costs from software.

As of the balance sheet date, there were purchase commitments for intangible assets amounting to € 68.0m (prior year: € 143.9m).

The increase in payments on account mainly relates to software for operating the 1&1 mobile communications network.

28.  Goodwill

Further details, including a presentation of the development of goodwill in the fiscal years 2023 and 2022, can be found in the exhibit to the Notes to the Consolidated Financial Statements (Development of Non-current Assets).

29.  Impairment of goodwill and intangible assets with indefinite useful lives

Goodwill and intangible assets with indefinite useful lives are subjected to an impairment test at least once per year. With reference to its internal budgeting process, the Group has chosen the last quarter of the fiscal year to conduct its statutory annual impairment test.

Goodwill acquired in the course of business combinations is allocated for impairment test purposes to cash-generating units.

Impairment charges are always disclosed separately in the Income Statement and the Statement on the Development of Non-current Assets.

Goodwill as of December 31 is allocated to the cash-generating units as follows:

Goodwill after company acquisitions

The carrying amounts of goodwill according to cash-generating unit result from various transactions over the past years. The Group’s goodwill is mainly the result of the following company acquisitions:

• The goodwill of the cash-generating unit we22 results from the acquisition of we22 AG in 2021 and has been part of the cash-generating unit IONOS SE since the fiscal year 2022.
• The goodwill of the cash-generating unit World4You results from the acquisition of World4You in in 2018.
• The goodwill of the cash-generating unit 1&1 Consumer Access (formerly Drillisch) results from the acquisition of the Drillisch Group in 2017 and the merger of the cash-generating units 1&1 Telecom and Drillisch in 2018.
• The goodwill of the cash-generating unit IONOS Cloud (formerly: ProfitBricks) results from the acquisition of the ProfitBricks Group in 2017. Due to the merger in fiscal year 2019, the cash-generating unit IONOS Cloud has been incorporated into the cash-generating unit IONOS SE.
• The goodwill of the cash-generating units Versatel and 1&1 Telecom reflect goodwill from the acquisition of the Versatel Group in 2014. In the fiscal year 2018, goodwill of the cash-generating unit 1&1 Telecom was combined with the cash-generating unit 1&1 Consumer Access.
• The goodwill of the cash-generating unit STRATO results from the acquisition of the STRATO Group in 2017.
• The goodwill of the cash-generating unit home.pl results from the acquisition of home.pl S.A. in 2015.
• The goodwill of the cash-generating unit Arsys results from the acquisition of Arsys Internet S.L. in 2013.
• The goodwill of the cash-generating unit united-domains results from the acquisition of united-domains AG in 2008.
• The goodwill of the cash-generating unit Fasthosts results from the acquisition of Fasthosts Internet Ltd. in 2006 and the acquisition of Dollamore Ltd. in 2008.
• The goodwill of the cash-generating unit InterNetX results from the acquisition of InterNetX GmbH in 2005.
• The goodwill of the cash-generating unit 1&1 Mail & Media mainly comprises goodwill from the acquisition of the portal business of WEB.DE AG in 2005.

Scheduled impairment test on December 31, 2023

Measurement at fair value less disposal costs

For the Business Access, Consumer Applications, and Business Applications segments, the recoverable amounts of the cash-generating units are determined on the basis of a calculation of fair value less disposal costs using cash flow forecasts. The hierarchy of fair value less disposal costs as defined by IFRS 13 is set at Level 3 for these impairment tests.

The cash flow forecasts are based on the Company’s budgets for the fiscal year 2024. These planning calculations were extrapolated by management for a period of up to 10 years (prior year: up to 10 years) for the respective cash-generating units on the basis of external market studies and internal assumptions. Following this period, management assumes the following increase in cash flow:

The expected increase corresponds to long-term average growth of the sector in which the respective cash-generating unit operates.

The following discount rates were used for cash flow forecasts in the reporting period:

The cash flow forecasts depend heavily on the estimation of future sales revenue. The management boards of the respective cash-generating units expect a varied development of sales within the planning horizon.

Sales revenue figures in the detailed planning period are based on the following average annual sales growth rates:

Fair value less disposal costs is mainly based on the present value of the perpetual annuity, which is particularly sensitive to changes in assumptions on the long-term growth rate and the discount rate. For the calculation of fair value less disposal costs, disposal cost rates of between 0.4% and 3.0% were assumed (prior year: between 0.2% and 3.0%).

The business segments contain the following trademarks:

Measurement at value-in-use

The recoverable amount of the cash-generating unit 1&1 Consumer Access is determined on the basis of a calculation of the value-in-use with the aid of cash flow forecasts.

The cash flow forecasts are based on a Group budget for the fiscal year 2024 as well as a planning calculation for the fiscal years 2025 to 2029. These planning calculations were extrapolated by management on the basis of external market studies and internal assumptions for the cash-generating unit. As it is expected that a sustainable level of sales and earnings will not yet have been achieved by the end of the detailed planning period (2029), it has been extended to include an interim phase for the years 2029 to 2040 inclusive until a sustainable level of sales and earnings is to be achieved.

The cash flow forecasts depend heavily on the estimation of future sales revenue. Another key basic assumption for the planning of the cash-generating unit 1&1 Consumer Access is the number of subscribers, the gross profit forecast based on these subscriber numbers and on empirical values, and the discount rates applied. For future years, the number of subscribers is expected to increase and the gross profit to decrease slightly.

Value-in-use is largely determined by the present value of the perpetual annuity, which is particularly sensitive to changes in the assumptions regarding the long-term growth rate and the discount rate.

The following parameters were used for measurement:

This growth rate corresponds to the long-term average growth rate for the sector.

Basic assumptions of the impairment tests

The following table presents the basic assumptions used when checking impairment of individual cash-generating units to which goodwill has been allocated, in order to determine their fair value less disposal costs, or in the case of the cash-generating unit 1&1 Consumer Access the value-in-use:

Sensitivity of assumptions

The sensitivity of the assumptions made with respect to the impairment of goodwill or trademarks depends on the respective cash-generating units.

In the course of analyzing sensitivity for the cash-generating unit World4You, an increase in the discount rate (after taxes) of 1.3 percentage points and a decline in the EBITDA margin of 4.8 percentage points was assumed at the same time. These assumptions would result in impairment of € 2.2 m . Without an increase in the discount rate and a simultaneous decrease in the EBITDA margin, the headroom amounts to €8m. Based on current knowledge, management does not expect any significant deviations in the EBITDA margin. Assumptions on the possible development of the cost of capital rate are based on the further interest rate increases of the fiscal year 2023. Possible opportunities from the possibilities of price adjustments as a result of increased operating costs are not taken into account in the sensitivity analysis.

In the course of analyzing sensitivity for the other cash-generating units, the discount rates (after taxes) were also increased by the year-on-year change and at the same time a CGU-specific appropriate decrease in the long-term growth rate in perpetuity and alternatively a decrease in the EBITDA margin in perpetuity were assumed. These assumptions would not result in any changes to the impairment tests for these cash-generating units.

Spectrum

The 5G spectrum carried in the balance sheet results from the 5G spectrum auction in 2019. 1&1 purchased 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, which are each usable for a limited period up to December 31, 2040. The frequency blocks in the 3.6 GHz band have been available since acquisition and the frequency blocks in the 2 GHz band will be available from January 1, 2026.

The recoverable amount of the cash-generating unit 5G is determined by calculating value-in-use with the aid of cash flow forecasts.

The planning calculation on which the impairment test is based includes income statement planning and capital expenditure planning for the fiscal years 2024 to 2040. As the spectrum runs until 2040, the test was conducted for the period 2024 to 2040. Due to the innovation cycle in the telecommunications industry, no perpetuity was applied.

The cash flow forecasts depend to a large extent on the estimate of future revenue, the assumptions regarding investments in the network infrastructure, and the ongoing operating costs of network operations. The main revenue drivers for the cash-generating unit 5G are growth in the number of 1&1 network subscribers and planning for the future data consumption of customers. The planning calculations were based on subscriber growth in the cash-generating unit 1&1 Consumer Access, while assumptions regarding future customer data consumption are based on empirical values. Planning for investments in the network infrastructure are based on specific rollout plans, which are mainly based on the rollout obligations arising from the spectrum acquisition and the contractually agreed rollout costs. Planning for the ongoing costs of network operation are based on agreements already concluded and assumptions about the development of energy costs based on experience. A further key basic assumption for the planning of the cash-generating unit is the discount rates used.

The following parameters were used for measurement:

There was no impairment need in the reporting period. This also reflects the Management Board’s qualitative expectations due to the high degree of strategic importance.

Sensitivity of assumptions

The sensitivity of the assumptions made with respect to an impairment of the intangible asset not yet available for use (spectrum) depends on the basic assumptions for the cash-generating unit.

In the course of analyzing sensitivity for the cash-generating unit 1&1 mobile telecommunications network, an increase in the discount rate of 1.0 percentage point and a rise of 5 percent in operating costs for active network technology (in particular energy costs) was assumed. These assumptions would result in impairment of approx. € 261m. Based on current knowledge, management does not expect any significant deviations in the planned costs for passive infrastructure and network rollout costs due to the contractual constellations with the network rollout partners. Opportunities from the possibility of price adjustments due to increased operating costs are not taken into account in the sensitivity analysis.

30.  Trade accounts payable

Trade accounts payable amount to € 702,578 k (prior year: € 565,813 k ), of which liabilities with terms of more than one year total € 3,358 k (prior year: € 4,298 k ).

31.  Liabilities due to banks

a) Liabilities due to banks

Promissory note loans

In the fiscal year 2023, United Internet AG successfully placed a promissory note loan (“Schuldscheindarlehen”) – as in the years 2017 and 2021 – with an amount of € 300m. The proceeds from this transaction are used for general company funding. There are no covenants attached to the new promissory note loan.

Moreover, two promissory note loan tranches totaling € 238.0m were redeemed on schedule in the fiscal year 2023.

At the end of the reporting period on December 31, 2023, total liabilities from the promissory note loans 2017, 2021, and 2023 with maximum terms until May 2030 therefore amounted to € 1,162.0m (prior year: € 1,100.0m).

Syndicated loans & syndicated loan facilities

On December 21, 2018, a banking syndicate granted United Internet AG a revolving syndicated loan facility totaling € 810m 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 € 690m was agreed for this prolongation period.

As of the balance sheet date on December 31, 2023, € 150m of the revolving syndicated loan facility had been drawn (prior year: € 550m). As a result, funds of € 660m (prior year: € 260m) were still available to be drawn from the credit facility as at the balance sheet date.

In addition to the € 150m, the disclosed loan liability of € 950m also includes the loan of € 800m concluded by IONOS Group with a banking syndicate in December 2023. This loan was used fully for the partial refinancing of the existing shareholder loan with United Internet AG. The refinancing is at a fixed annual interest rate of 4.67%. The syndicated loan has a term until December 15, 2026 and is due at maturity.

Bilateral credit agreements / bilateral credit facilities

The Company also has bilateral credit agreements with several banks totaling € 50m (prior year: € 200m). The term expires at the latest on August 12, 2024. As at the end of the reporting period on December 31, 2023, these bilateral credit agreements were used in full (as in the previous year).

In addition, various bilateral credit facilities amounting to € 475m (prior year: € 400m) are available to the Company. These have been granted in part until further notice and in part have terms until March 31, 2025. Drawings of € 295m (prior year: € 300m) had been made from these credit facilities as at the end of the reporting period on December 31, 2023.

United Internet therefore had free credit lines from syndicated loan facilities and bilateral credit agreements totaling € 840m (prior year: € 360m) as at the end of the reporting period on December 31, 2023.

No collateral was provided for any of the liabilities due to banks.

With the exception of the interest-bearing tranches of the promissory note loan, the fair values of bank liabilities mainly correspond to their carrying amounts. For further information on the promissory note loan, please refer to Note 41 .

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.

b) Guaranty credit facilities

In addition to the above mentioned credit lines, the Group had guaranty credit facilities of € 105.0 m (prior year: € 105.0 m ) 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.

The guaranty credit facilities are available in particular for the provision of operational bank guarantees. The guaranty credit facilities granted are mostly for unlimited periods (“until further notice”). One agreement is limited until December 30, 2024. No collateral was provided to banks.

The stated average interest rate as of the reporting date is based on utilization.

32.  Contract liabilities

Contract liabilities mainly relate to payments on account received, deferred revenue, and deferred activation fees.

33.  Other accrued liabilities

The development of accruals in fiscal year 2023 was as follows:

The accrual for termination fees refers to payments due to network operators in the case that a connection is terminated.

Litigation risks consist of various legal disputes of Group companies and potential fines imposed by the authorities.

The accruals for restoration obligations mainly refer to possible obligations to remove active telecommunication technology in leased main distribution frames (MDFs). Where applicable, the reversal was offset against non-current assets directly in equity.

Other accruals refer mainly to accruals for warranties and impending losses.

34.  Other liabilities

34.1  Other current financial liabilities

The current conditional purchase price liabilities refer to variable purchase price components from the acquisition of STRATO AG amounting to € 10,922 k (prior year: € 33,803 k ) and of ProfitBricks GmbH amounting to € 0 k (prior year: € 4,416 k ). The decrease in contingent purchase price liabilities results on the one hand from the decrease in the valuation of the IONOS Group based on its stock market price. This valuation is the basis for measuring the variable purchase price components from the acquisition of STRATO AG. On the other hand, the contingent purchase price liability from the acquisition of Profit Bricks GmbH was settled in the fiscal year.

34.2  Other current non-financial liabilities

Liabilities to the tax office mainly refer to sales tax liabilities. The year-on-year increase results from a change in sales tax grouping as a result of the transfer of the 1&1 AG Group to United Internet AG and the resulting lower advance payment. The resulting sales tax will be paid to the tax authorities after the end of the advance return period.

34.3  Other non-current financial liabilities

Please refer to Note 45 regarding liabilities from lease commitments.

Spectrum liabilities refer to the licenses acquired at auction in the fiscal year 2019. In 2019, the United Internet subsidiary 1&1 AG signed an agreement with the German Federal Ministry of Transport and Digital Infrastructure (BMVI) and the German Federal Ministry of Finance (BMF) regarding the construction of mobile communication sites in so-called “not-spots”. 1&1 AG is thus helping to close existing supply gaps and improve the provision of mobile communications in rural regions by building base stations. In return, 1&1 AG benefits from an agreement allowing it to pay for the acquired 5G spectrum in installments. As a result, the license fees which were originally to be paid to the German government 2019 and 2024 can now be spread over the period up to 2030.

35.  Maturities of liabilities

The maturities of liabilities are as follows:

The maturities of liabilities in the previous year were as follows:

In the course of determining the maturities of liabilities due to banks, management assumed that the amount drawn from the revolving syndicated loan facility as at the respective reporting date would remain constant until the end of the term (2025).

36.  Share-based payment – employee stock ownership plans

There were five different employee stock ownership plans in the reporting period 2022. One model with so-called Stock Appreciation Rights model United Internet (SAR UI) is aimed at the group of management board members, senior executives and managers and based on virtual stock options of United Internet AG. The second plan, the Long-Term Incentive Plan Hosting (LTIP Hosting) was introduced in the second half of 2017 and is aimed at the group of management board members, executives and other employees in key positions in the Business Applications segment. The third plan, the Long Term Incentive Plan Versatel (LTIP Versatel) was introduced in the first half of 2018 and is aimed at the group of managing directors, executives and employees in key positions in the Business Access segment. The fourth plan, the Stock Appreciation Rights Drillisch (SAR Drillisch) was introduced in the first half of 2020, is also aimed at the group of management board members, executives and employees in key positions in the Consumer Access segment and replaced in part the former SAR plan of Drillisch in 2020. The fifth plan, the Long-Term Incentive Plan Portal (LTIP Portal) was introduced in the first half of 2019 and is aimed at the group of management board members, executives and employees in key positions in the Consumer Applications segment. The sixth program, the Stock Appreciation Rights IONOS (SAR IONOS), was introduced in the course of the IPO of IONOS in the first quarter of 2023 and is aimed at management board members of IONOS Group SE. Moreover, the existing LTIP Hosting agreements were modified in this connection.

36.1  Stock Appreciation Rights (SAR United Internet)

United Internet AG has had a Stock Appreciation Rights plan (SAR plan) since 2009. SARs refer to the commitment of United Internet AG (or a subsidiary) to pay the beneficiary a cash amount equivalent to the difference between the share price on the date of granting the option (agreed strike price) and the share price on exercising the option. The exercise hurdle is 120% of the strike price, which is calculated as the average closing price in electronic trading (Xetra) of the Frankfurt Stock Exchange over the ten days preceding issuance of the o ption. In the case of the current tranches, the beneficiaries were in some cases awarded a maximum strike price of € 30 per SAR. Payment of value growth to the beneficiary is limited – depending on the arrangements of the different tranches – to a) 100% of the calculated share price (strike price), or b) to a fixed euro amount.

In 2023, the plan conditions were amended for one participant. In return for the amendment to the plan condition, a one-off payment was granted. The associated expense was recognized in full in 2023. A Monte Carlo simulation was carried out to determine this expense.

In connection with the appointment to the UI Management Board, the existing share-based remuneration of a beneficiary under the LTIP Portal plan was converted to an SAR United Internet commitment, whilst taking into account the beneficiary’s service period. After consideration of the assumptions made on the modification date, no additional expenses are to be recognized. The expenses from the commitment are recognized by United Internet AG from the date of the change.

An SAR corresponds to a virtual subscription right for one share of United Internet AG. However, it is not a share right and thus not a (genuine) option to acquire shares of United Internet AG. The beneficiaries are not entitled to a possible dividend payment by the Company. As a rule, settlement is in cash. Nevertheless, United Internet AG retains the right to fulfill its commitment (or the commitment of a subsidiary) to pay the SAR in cash by also transferring United Internet AG shares from its stock of treasury shares to the beneficiary, at its own discretion. The program is thus recognized as an equity-settled plan.

As a rule, up to 25% of the option right may be converted at the earliest 24 months after the date of issue of the option; up to 50% at the earliest 36 months after the date of issue of the option. A total of up to 75% may be exercised at the earliest 48 months after the date of issue of the option; the full amount may be exercised at the earliest 60 months after the date of issue of the option, provided that the beneficiary concerned has not given notice of termination at the end of each year. For one issue, however, exercise is possible after 12, 24, 36 and 48 months. The SARs have a basic term of six years, so that after this period all unexercised SARs lapse without compensation. Beyond this, no further conditions have to be met for the SARs to be successfully awarded.

The fair value of the issued options as at the grant date is determined using an option pricing model (for one beneficiary using the Black-Scholes model and for another beneficiary using the Monte Carlo simulation) in accordance with IFRS 2.

Using an option pricing model (Black-Scholes model / Monte Carlo simulation) in accordance with IFRS 2, the options issued were calculated using the following material measurement parameters:

The limited payout per SAR was reflected by deducting the value of an option valuation at twice the strike price. With regard to the exercise windows of the SARs, the Black-Scholes valuation assumed the earliest possible exercise. The Monte Carlo simulation also assumed the earliest possible exercise. Irrespective of the selected valuation method, the respective exercise hurdles were also taken into account when exercising the option.

As the SARs have no dividend entitlement, a dividend yield based on the dividend for the respective fiscal year and the share price of United Internet AG as at the reporting date was taken into account when measuring the SARs in accordance with IFRS 2.B34.

The volatility used to determine the fair value was calculated as a weighted average on the basis of the historical volatility for the last 6 (1/3 weighting) and 12 months (2/3 weighting) prior to the measurement date, respectively. The strike price is calculated on the basis of the average share price of the last 10 days prior to the issuance date.

The SAR United Internet plan has the following effects:

The changes in the virtual stock options granted and outstanding are shown in the following table:

The range of strike prices for stock options outstanding at the end of the reporting period is between € 16.91 and € 30.00 (prior year: € 31.26 and € 44.06).

36.2  Long-Term Incentive Plan Business Applications (LTIP Hosting) and Long-Term Incentive Plan WE22

Long-Term Incentive Plan Business Applications (LTIP Hosting)

An additional employee stock ownership plan (Long-Term Incentive Plan, LTIP) was introduced for the Business Applications segment (IONOS Group) in the fiscal year 2017. The LTIP is designed to align the long-term interests of management (management board members and senior executives), as well as other key employees of the IONOS Group (Business Applications segment), with the interests of the company, in order to raise the equity value of the parent company (IONOS Group SE) and other companies of the IONOS Group.

Within the LTIP plan, qualifying employees in the Hosting division are awarded so-called Management Incentive Plan (MIP) units (stock appreciation rights). Vesting is on a straight-line basis (beginning with the date of issue) and on condition that the employee concerned has not resigned before the occurrence of an event defined in the LTIP agreement (trigger event). This refers to the complete sale of all shares in IONOS Group SE held by Warburg Pincus.

The partial sale of shares by Warburg Pincus does not constitute such a trigger event – neither in 2021 nor in 2023.

In the event of a trigger event, the MIP units represent a claim equivalent to the difference between the individually determined strike price and the enterprise value of IONOS Group SE. The strike price is increased or decreased by equity contributions or repayments.

The entitlements under the LTIP plan can be settled in the form of shares or cash. In the case of settlement in the form of shares, rights may be settled by the provision of shares or options to acquire shares. As there is no current obligation for cash settlement, the plan is carried as equity-settled.

As in the previous year, there were no new MIP issues from the LTIP Hosting plan in the reporting period.

Fair value is determined on the basis of the individual strike price, the enterprise value as at the grant date and the remaining term until the trigger event, using the Black-Scholes model and taking into account the other assumptions mentioned above. As the exercise prices of the MIP units already take into account equity returns, it is not necessary to additionally consider a dividend yield when measuring the entitlements.

The volatility used to determine fair value was calculated using the weighted average price fluctuations of the Business Applications peer group over the last 180 days (1/3 weighting) and the last 360 days (2/3 weighting), respectively.

The Long Term Incentive Plan Business Applications has the following effects:

The changes in the MIP units granted and outstanding are shown in the following table:

The IPO did not involve a complete exit of WP XII Ventures Holdings S à r l, but only a partial sale. The IPO of IONOS Group SE on February 8, 2023 did not therefore constitute a triggering event as defined by the LTIP Hosting agreement. Accordingly, the IPO did not result in the claims of the individual participants becoming due. For the remaining participants in the LTIP Hosting, however, a further approx. 11% of the claims from the LTIP Hosting will be fixed at the issue price of the IPO on February 8, 2023.

Against this backdrop, all active employees of the LTIP Hosting plan were offered a so-called IPO transition agreement or rollover agreement (hereinafter referred to as the “rollover”). As part of this rollover, active employees could convert their LTIP Hosting MIP units into subscription rights for IONOS Group SE shares.

In the course of the rollover, 389,625 MIPs were converted. The remaining MIPs mainly relate to former members of the management board.

The IPO awards (virtual stock options as part of the rollover) were calculated in a two-step process based on the assumption of a complete divestment by Warburg Pincus (WP). In the first step, the increase in value per participant was derived on the basis of the LTIP (Long Term Incentive Plan) Hosting conditions. An increase in value was determined for around 25% of the shares due to a share buyback in 2021 and an enterprise value of € 4.8 billion. For the remaining approx. 75% of the MIP I units (LTIP Hosting), the increase in value at the time of the IPO was considered relevant, whereby the IPO issue price of € 18.50 was used to determine the increase in value. The total increase in value per participant was determined on the basis of these calculations.

In a second step, the increase in value achieved per participant was divided by the IPO issue price to determine the number of virtual shares in IONOS Group SE. Participants who did not achieve an increase in value by the time of the IPO did not receive any virtual shares but had the option of remaining in the LTIP Hosting. The number of calculated IPO awards was then fixed and distributed in three tranches.

The IPO awards were generally allocated in three equal tranches over a period of up to 24 months after the IPO. The number of virtual stock options could vary slightly between the tranches so that the number of options per participant and the number per tranche for each participant was a whole number. The tranches were allocated as follows:

• Tranche 1 on the IPO date (February 8, 2023),
• Tranche 2 eighteen months later (August 2024) and
• Tranche 3 twenty-four months after the IPO (February 2025).

The payment of Tranche 2 and Tranche 3 is generally linked to remaining in the company until the payment date. It can be made in cash or in equity instruments, whereby the company reserves the right to decide how this is granted. The cash payment amount depends on the performance of the IONOS share. The cash payment for the 2023 tranche is to be classified as an exception due to the lock-up period for the sale of shares in connection with the IPO, meaning that an equity-settled commitment continues to be recognized in accordance with IFRS 2.

A different arrangement was made for certain participants as their service agreements ended prematurely. A total of 2,210,243 virtual stock options were calculated as of February 8, 2023.

The changes in the outstanding virtual share options resulting from the conversion of the MIP units are shown in the following table:

In the course of fulfilling Tranche 1, a total of € 13.6m was paid out to the beneficiaries.

Long-Term Incentive Plan WE22

In the fiscal year 2021, the Business Applications segment introduced a further employee stock ownership plan (Long-Term Incentive Plan, LTIP) for selected members of the management board and the managing directors of the we22 Group (we22 AG including subsidiaries and investments). The LTIP is designed to align the long-term interests of employees of the we22 Group (Business Applications segment) with the interests of the company, in order to raise the equity value of the we22 Group and IONOS Group SE.

Within the LTIP plan, qualifying employees of the we22 Group are allocated so-called Management Incentive Plan (MIP) units , whose value is calculated by deducting a fixed strike price from the enterprise value of IONOS Group SE. Vesting is on a straight-line basis over a period of around four years (beginning with the date of issue) and on condition that the respective employee has not resigned by the end of each year or by December 31, 2024. Alternatively, in the event of a change of control at IONOS SE before the end of 2024, a portion of the beneficiaries must remain with the company until nine months after the change of control occurs in order to receive an entitlement. As such a change of control is currently not likely, this variant is not considered in the measurement of the plan. Claims are settled in cash and are therefore recognized as share-based remuneration with cash settlement.

As in the previous year, there were no new MIP issues from the LTIP WE22 plan in the reporting period.

Fair value was calculated using a Black-Scholes model. The volatility used to determine fair value was calculated using the weighted average price fluctuations of the Business Applications peer group over the last 180 days (1/3 weighting) and the last 360 days (2/3 weighting), respectively.

As the strike prices of the MIP units already take into account equity repayments, there was no additional consideration of a dividend yield when measuring the entitlements.

The WE22 plan has the following effects:

The changes in the MIP units granted and outstanding are shown in the following table:

36.3  Stock Appreciation Rights (SAR IONOS)

In December 2022, a new incentive plan was also introduced for the management board members of IONOS Group SE on condition of a successful IPO. The SAR plan employs so-called Stock Appreciation Rights (SARs) and is treated as an equity-settled, shared-based payment transaction. SARs refer to the commitment of IONOS Group SE to pay the beneficiary a cash amount equivalent to the difference between the share price on the date of granting the option (agreed strike price) and the share price on exercising the option. The exercise hurdle is 110% of the strike price after three years, 115% after four years, and 120% after five years. The strike price is calculated as the average closing price in electronic trading (Xetra) of the Frankfurt Stock Exchange over the ten days preceding issuance of the o ption. Payment of value growth to the beneficiary is limited – depending on the arrangements of the different tranches – to 100% of the calculated share price (strike price), or to 150% of the calculated share price (strike price) .

An SAR corresponds to a virtual subscription right for one share of IONOS Group SE. However, it is not a share right and thus not a (genuine) option to acquire shares of IONOS Group SE. The beneficiaries are not entitled to a possible dividend payment by the Company. As a rule, settlement is in cash. Nevertheless, IONOS Group SE retains the right to fulfill its commitment to pay the SAR in cash by also transferring IONOS Group SE shares from its stock of treasury shares to the beneficiary, at its own discretion. The program is thus recognized as an equity-settled plan, as there is no present obligation to settle in cash.

Up to 33.33% of the option right may be converted at the earliest 36 months after the date of issue of the option; up to 66.66% at the earliest 48 months after the date of issue of the option; and the full amount at the earliest 60 months after the date of issue of the option, provided that the beneficiary concerned has not given notice of termination at the end of each year. Vesting is thus one-third in each of the aforementioned periods.

However, the SARs have a basic term of six years, so that after this period all unexercised SARs lapse without compensation. Moreover, additional reductions in the payout amounts are possible in connection with predefined ESG targets. At the time of preparing the Annual Financial Statements, these targets are not yet known. Within the framework of the ESG targets, the entitlements can be reduced by a maximum of 10% if targets are not met. The IPO of IONOS Group SE was on February 8, 2023, which also corresponds to the grant date.

The exercise behavior is based on the assumption that participants will exercise their SARs at the earliest possible date, similar to comparable programs within the United Internet Group. It is expected that one third of the SARs will be exercised in the first window after the third year, a further third after the fourth year and the final third after the fifth year, where possible. The exercise of SARs is limited to two 10-day windows per calendar year, starting shortly after the Annual Shareholders’ Meeting and the publication of the 9-month report.

Using an option pricing model (Monte Carlo simulation) in accordance with IFRS 2, the fair value at the grant date of the options issued was calculated as follows:

As part of the simulation, both the limit on the payout per SAR and the respective exercise hurdles per tranche were taken into account. As the SARs are not entitled to dividends, a dividend yield based on the dividend for the respective fiscal year and the share price of IONOS Group SE as at the reporting date was taken into account when measuring the SARs in accordance with IFRS 2.B34.

The volatility used to determine the fair value was calculated from the weighted average of the price fluctuations of the last 180 days (1/3 weighting) or the last 360 days (2/3 weighting) of the peer group of the Hosting segment, as the IONOS Group SE share price had been quoted for less than 360 days as at the reporting date.

The SAR IONOS plan had the following effects in the fiscal year:

The changes in the SARs granted and outstanding are shown in the following table:

36.4  Long-Term Incentive Plan Versatel (LTIP Versatel)

An additional employee stock ownership plan (Long-Term Incentive Plan, LTIP) was introduced for the Business Access segment in the fiscal year 2018. The LTIP is designed to align the long-term interests of management board members and other key employees of the 1&1 Versatel Group (Business Access segment) with the interests of the company, in order to raise the equity value of the company (1&1 Versatel GmbH) and other companies of the 1&1 Versatel Group.

The plan entitles the beneficiaries to participate in a specified share of any increase in value of the 1&1 Versatel Group. Within the LTIP plan, qualifying employees in the Business Access segment are allocated stock appreciation rights.

Vesting is on a straight-line basis over a period of six years (beginning with the date of issue), or until the occurrence of an event defined in the LTIP plan conditions (trigger event), and provided that the employee concerned has not resigned by the end of each year or by the occurrence of a trigger event. The LTIP entitlement arises as soon as the full term of the LTIP contract ends (i.e., after six years) or an event as defined by the LTIP plan conditions occurs. After six years or on occurrence of a trigger event the respective LTIP entitlement becomes due.

The LTIP entitlement is calculated as the difference between the final value and the individual starting value (in each case based on the enterprise value at the time in question), which is multiplied by the respective stock appreciation right and a dilution factor.

The recognition of expenses per participant is on a straight-line basis over the period ending with the expiry of the respective LTIP contract, provided no trigger event occurs. In the event of an (imminent) trigger event, expenses are recognized in full up to the (expected) occurrence of the trigger event. As no trigger event is currently expected, this variant is not considered in the measurement of claims. This assessment is reviewed at each reporting date. Based on the current estimates, a total period of six years is assumed in each case.

The entitlements under the LTIP plan can be settled in the form of shares or cash. In the case of settlement in the form of shares, rights may be settled by the provision of shares or options to acquire shares. As there is no current obligation for cash settlement, the plan is carried as equity-settled.

The fair value of the issued options as at the grant date is determined using an option pricing model (Black-Scholes model) in accordance with IFRS 2.

The volatility used to determine fair value was calculated using the weighted average price fluctuations of the Versatel peer group over the last 180 days (1/3 weighting) and the last 360 days (2/3 weighting), respectively.

The Long Term Incentive Plan Versatel has the following effects:

The changes in the virtual stock options granted and outstanding are shown in the following table:

36.5  Stock Appreciation Rights Drillisch (SAR 1&1)

The Stock Appreciation Rights Drillisch (SAR Drillisch) plan introduced in the first half of 2018 existed until April 17, 2020. It was aimed at management board members, executives and employees in key positions and based on virtual stock options of 1&1 AG (formerly 1&1 Drillisch AG).

An SAR Drillisch was the commitment of 1&1 AG (or one of its subsidiaries) to pay the option beneficiary a consideration whose amount depended on the share price performance and the operating result (EBIT) of 1&1 AG (consolidated). As part of the SAR plan, so-called SARs were allocated which were then granted over the vesting period. An SAR corresponded to a virtual subscription right for one share of 1&1 AG. However, it was not a share right and thus not a (genuine) option to acquire shares of 1&1 AG. The entitlement arising from an SAR depended on the development of the share price and EBIT.

The old SAR Drillisch plan was canceled during the course of fiscal year 2020. At the time of cancellation, 77,400 stock options were outstanding and replaced by new equity instruments.

A new plan was introduced on April 17, 2020. The new employee stock ownership model, the so-called Stock Appreciation Rights Drillisch (SAR Drillisch), is aimed at the group of management board members, executives and employees in key positions and based on virtual stock options of 1&1 AG. According to the current conditions, an SAR Drillisch is the commitment of 1&1 AG (or one of its subsidiaries), to pay the option beneficiary a consideration equivalent to the difference between the share price on the date of granting (strike price) and the share price on exercising the option. The exercise hurdle is 120% of the strike price. The strike price is the average closing price for the company share in electronic trading (Xetra) of the Frankfurt Stock Exchange over the ten days preceding issuance of the o ption. Payment of value growth to the entitled person is capped at 100% of the calculated share price (strike price). In 2023, an additional issue (second issue) of SARs was made for existing participants. In contrast to the previous issues, the payout amount of the first issue was offset against the second issue.

An SAR corresponds to a virtual subscription right for one share of 1&1 AG. However, it is not a share right and thus not a (genuine) option to acquire shares of 1&1 AG. The beneficiaries are not entitled to a possible dividend payment by the company. As a rule, settlement is in cash. Nevertheless, 1&1 AG retains the right to fulfill its commitment (or the commitment of a subsidiary) to pay the SAR in cash by also transferring 1&1 AG shares from its stock of treasury shares to the beneficiary, at its own discretion. As there is currently no obligation to settle in cash from the Group’s perspective, these obligations are recognized as equity-settled transactions.

Those entitled to exercise options have an exercise window of 10 days. This begins on the 3rd day after the annual shareholders' meeting or after publication of the 9-month report. Up to 25% of the option right may be converted at the earliest 24 months after the date of issue of the option; up to 50% at the earliest 36 months after the date of issue of the option. A total of up to 75% may be exercised at the earliest 48 months after the date of issue of the option; the full amount may be exercised at the earliest 60 months after the date of issue of the option, provided that the beneficiary concerned has not given notice of termination at the end of each year. The SARs have a basic term of six years, so that after this period all unexercised SARs lapse without compensation. Tranches that are not exercised during the available exercise window can be exercised during the next regular exercise window for the tranche. Beyond this, no further conditions have to be met for the SARs to be successfully awarded.

Using an option pricing model (Black-Scholes model / Monte Carlo simulation) in accordance with IFRS 2, the fair value as at the grant date of the options issued was calculated as follows:

The volatility used to determine the fair value was calculated as a weighted average on the basis of the historical volatility for the last 6 (1/3 weighting) and 12 months (2/3 weighting) prior to the measurement date, respectively. The strike price is calculated on the basis of the average share price of the last 10 days prior to the issuance date.

The capped payout per SAR was reflected by deducting the value of an option valuation at twice the strike price. With regard to the exercise windows of the SARs, the option valuation assumed the earliest possible exercise. As the SARs have no dividend entitlement, a dividend yield based on the dividend for the respective fiscal year and the share price of 1&1 AG as at the reporting date was taken into account when measuring the SARs in accordance with IFRS 2.B34.

A Monte Carlo simulation was used to calculate the fair value of the secondary issues in order to illustrate the offsetting of the payout amount between the old tranche and the second tranche for selected participants. With regard to the exercise windows, the earliest possible exercise was assumed for the simulation. Moreover, both the capped payout per SAR and the respective exercise hurdles per tranche were taken into account. In accordance with IFRS 2.B34, a dividend yield based on the dividend for the respective fiscal year and the 1&1 AG share price as at the reporting date was taken into account when measuring the SARs.

The SAR Drillisch plan has the following effects:

The changes in the virtual stock options granted and outstanding are shown in the following table:

36.6  Long-Term Incentive Plan Portal (LTIP Consumer Application)

An additional employee stock ownership plan (LTIP Portal) was introduced by 1&1 Mail & Media Applications SE in the fiscal year 2019. The LTIP is designed to attract and retain skilled employees as well as to align the long-term interests of management board members, executives, and other key employees of the group with the interests of the company, in order to raise the equity value of the company (1&1 Mail & Media Applications SE) and other companies of the group.

The plan entitles the beneficiaries to participate in a certain proportion of the increase in value of the 1&1 Mail & Media Group. Within the LTIP plan, qualifying employees are allocated stock appreciation rights.

Vesting is on a straight-line basis over an individually defined period (four to six years, beginning with the date of issue), or until the occurrence of a special event defined in the LTIP plan conditions (trigger event), and provided that the employee concerned has not resigned by the end of each year or by the occurrence of a trigger event. The LTIP entitlement arises as soon as the full term of the LTIP contract or a trigger event occurs.

The recognition of expenses per participant is on a straight-line basis over the period ending with the expiry of the respective LTIP contract, provided no trigger event occurs. In the event of an (imminent) trigger event, expenses are recognized in full up to the (expected) occurrence of the trigger event. As no trigger event is currently expected, this variant is not considered in the measurement of claims. This assessment is reviewed at each reporting date. Based on the current estimates, a total period of four to six years is assumed (depending on the individual agreement).

The entitlements under the LTIP plan can be settled in the form of shares or cash. In the case of settlement in the form of shares, rights may be settled by the provision of shares in the company, provided they are traded on a stock exchange in the meantime, or shares in another company listed on a stock exchange, or the corresponding options to acquire shares. As there is no current obligation for cash settlement, the plan is carried as equity-settled.

The fair value of the issued options as at the grant date is determined using an option pricing model (Black-Scholes model) in accordance with IFRS 2.

The volatility used to determine fair value was calculated using the weighted average price fluctuations of the Portal peer group over the last 180 days (1/3 weighting) and the last 360 days (2/3 weighting), respectively.

The LTIP Consumer Application has the following effects:

The changes in the virtual stock options granted and outstanding are shown in the following table:

37.  Capital stock

Following the capital reduction through cancellation of 2 million treasury shares, as resolved by the Management Board with the approval of the Supervisory Board on February 14, 2023, the fully paid-in capital stock as of December 31, 2023 amounted to €192,000,000 (prior year: € 194,000,000) divided into 192,000,000 registered no-par shares with a theoretical share in the capital stock of € 1.00 each.

Authorized Capital

Authorized Capital 2020, which authorized the Management Board to increase the capital stock by a maximum of € 77,500,000.00 by issuing on one or more occasions new no-par shares for cash and/or non-cash contributions), expired on August 31, 2023. On May 17, 2023, the Annual Shareholders' Meeting adopted a resolution to create a new Authorized Capital 2023 with effect from September 1, 2023 with the possibility to exclude subscription rights and a corresponding amendment to the Articles of Association.

The Management Board is authorized, subject to the approval of the Supervisory Board, to increase the capital stock in the period ending August 31, 2026, by a maximum of € 75,000,000.00 by issuing on one or more occasions new no-par shares for cash and/or non-cash contributions (Authorized Capital 2023). In the case of cash contributions, the new shares may – at the option of the Management Board – also be underwritten, subject to the approval of the Supervisory Board, by one or several credit institutions and/or any other company fulfilling the requirements of section 186 (5) sentence 1 AktG subject to the obligation to offer the shares only to the shareholders for subscription (indirect subscription rights).

Shareholders are to be granted subscription rights with the following restrictions. The Management Board is authorized, subject to the approval of the Supervisory Board, to exclude the right to subscribe in the case of fractional amounts and also to exclude subscription rights to the extent that this should be necessary in order to grant subscription rights for new shares to bearers of warrants and convertible bonds issued by the Company or its subsidiaries in the amount to which they would be entitled on exercise of their warrant or conversion rights or fulfillment of their conversion obligation.

Furthermore, in the event of a capital increase in return for cash contributions, the Management Board is authorized to exclude, subject to the approval of the Supervisory Board, shareholders’ subscription rights for an amount of up to 10% of the capital stock existing at the time Authorized Capital 2023 becomes effective or – if this amount is lower – at the time the resolution to use Authorized Capital 2023 is adopted if the new shares are issued at an issuance price which is not substantially below the market price of those Company shares already listed at the time of the final determination of the issuance price, which is to be as near in time as possible to the share issue date. This maximum amount includes any shares that are issued or to be issued under bonds with warrants or convertible bonds provided that the bonds are issued during the term of this authorization in analogous application of section 186 (3) sentence 4 AktG with subscription rights excluded; also, the amount must take into account any shares that are issued or sold during the term of this authorization pursuant to or in analogous application of section 186 (3) sentence 4 AktG.

The Management Board is further authorized, subject to the approval of the Supervisory Board, to exclude shareholders’ subscription rights in the case of capital increases in return for non-cash contribution in order to grant shares for the purpose of acquiring companies, parts of companies, interests in companies or other assets, including rights and receivables, or as part of business combinations.

The above mentioned authorizations to exclude subscription rights are limited in total to an amount of up to 20% of the capital stock existing at the time Authorized Capital 2023 becomes effective or – if this amount is lower – at the time the resolution to use Authorized Capital 2023 is adopted. This maximum amount of 20% of the capital stock includes the proportionate share of capital stock attributable to shares that are subject to conversion and/or warrant rights or conversion obligations under bonds that are issued with warrant and/or conversion rights or conversion obligations during the term of this authorization with subscription rights excluded, as well as the proportionate share of capital stock attributable to treasury shares sold or used during the term of this authorization in a manner other than via the stock exchange or by means of an offer to all shareholders.

The Management Board is further authorized, subject to the approval of the Supervisory Board, to determine the further details of the capital increase and its execution.

Conditional Capital

The Annual Shareholders' Meeting of May 17, 2023 also adopted a resolution to cancel the existing authorization to issue warrants and/or convertible bonds and the associated Conditional Capital 2020 and to issue a new authorization to issue warrants and/or convertible bonds, with the exclusion of subscription rights to these warrants and/or convertible bonds, and at the same time to create conditional capital (Conditional Capital 2023) with a corresponding amendment to the Articles of Association.

The capital stock is conditionally increased by up to € 18,500,000.00, divided into up to 18,500,000 new no-par value registered shares (Conditional Capital 2023). The conditional capital increase will only be implemented to the extent that the bearers or holders of warrant rights or conversion rights or obligations under bonds with warrants or convertible bonds that have been issued or guaranteed by the Company or any of the Company’s subordinated Group companies in the period ending August 31, 2026, on the basis of the Management Board’s authorization resolved by the Annual Shareholders’ Meeting of May 17, 2023, exercise their warrant or conversion rights or, to the extent that they are obligated to convert their bonds, fulfill their obligation, or to the extent that the Company exercises a right to grant shares in the Company, instead of paying the cash amount due (or parts thereof), and to the extent that cash compensation is not granted or treasury shares or shares in another listed company are not used to service bonds. The new shares will be issued at the warrant or conversion price to be determined in accordance with the above authorizing resolution. The new shares will participate in profits from the beginning of the fiscal year in which they are created; to the extent that it is legally permissible, the Management Board may determine, subject to the approval of the Supervisory Board, the profit participation of new shares and, notwithstanding section 60 (2) AktG, also for a fiscal year already expired.

The Management Board is authorized, subject to the approval of the Supervisory Board, to determine the further details concerning the execution of the conditional capital increase.

Interim dividend

38.  Reserves

As of December 31, 2023, capital reserves amounted to € 2,197 m (prior year: € 1,966 m ). The increase is mainly due to the sale of shares in IONOS Group SE in the course of the IPO.

United Internet received gross proceeds of around € 292m from the sale of shares. The corresponding share of equity in IONOS Group SE amounted to € -16.4m, while the disposal costs recognized in equity amounted to € 3.1m. Taking into account the prorated earnings of around € 1.6m, the total effect of the IPO on reserves amounted to € 303.7m. For further information, please refer to Notes 4 and 46.

Moreover, the reversal of deferred tax assets on employee stock ownership plans and payments in connection with employee stock ownership plans reduced reserves by a total of € 10.6m.

Reserves were also reduced by the cancellation of treasury shares amounting to € 61.5m. For further information, please refer to Note 39.

The accumulated result includes the past results of consolidated companies, less amounts for dividends payouts.

At the end of the reporting period, the revaluation reserve attributable to shareholders of United Internet AG consisted of the following items:

Translation differences from the annual financial statements of foreign subsidiaries without an effect on profit or loss are recognized in the currency translation adjustment.

An overview of the composition and changes in the reserves described above for the fiscal years 2023 and 2022 is provided in the Statement of Changes in Shareholders’ Equity.

39.  Treasury shares

The authorization to acquire and use treasury shares that was granted by the Annual Shareholders’ Meeting on May 20, 2020, under agenda item 15 in accordance with section 71 (1) no. 8 AktG expired on August 31, 2023. Against this background, the Annual Shareholders' Meeting of May 17, 2023 authorized the Management Board pursuant to section 71 (1) number 8 AktG and subject to the approval of the Supervisory Board, to acquire treasury shares for every permissible purpose, within the scope of legal restrictions and subject to the provisions set out under agenda item 11, during the period September 1, 2023 to August 31, 2026. The authorization is limited to a total share of 10% of the capital stock existing at the time the Annual Shareholders’ Meeting adopted the resolution or – if this amount is lower – at the time the authorization is exercised. As of the balance sheet date, a total of 19,183,705 treasury shares were held.

Treasury shares may be acquired via the stock exchange or by means of a public purchase offer made to all shareholders or through a public request made to all shareholders to submit sales offers or by granting tender rights to the shareholders.

The Management Board is also authorized, in addition to a sale via the stock exchange or a use in another manner that complies with the principle of equal treatment of all shareholders, to use treasury shares for the following purposes:

• as (partial) consideration in connection with the acquisition of companies or interests in companies or parts of companies or in connection with business combinations;
• to float shares of the Company on foreign stock exchanges on which they were previously not admitted to trading;
• to grant shares of the Company to current and former members of the Management Board and employees of the Company as well as to current and former members of the management boards or, as the case may be, boards of directors and employees of affiliates of the Company within the meaning of sections 15 et seqq. AktG in fulfillment of claims under virtual share participation programs. To the extent members of the Company’s Management Board are to be granted shares, the Company’s Supervisory Board decides thereon.

Shareholders’ statutory subscription rights with regard to these treasury shares are excluded in accordance with sections 71 (1) no. 8 and 186 (3) and (4) AktG to the extent that these shares are used pursuant to the above authorizations. Furthermore, the Managing Board is authorized to exclude shareholders’ subscription rights for fractional shares if treasury shares are sold by means of an offer to all shareholders.

The authorization may not be used for the purpose of trading with treasury shares.

Furthermore, the Management Board of United Internet AG 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 13.9m shares at a price of € 21.00 per share. The total volume of the share buyback offer therefore amounted to up to € 291.9m. 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. As the total number of shares for which the offer was accepted exceeded the maximum amount of 13.9 million shares in total, 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. In the course of the share buyback program, the Company acquired 13,899,596 shares (without fractional amounts).

The Group did not purchase any treasury shares in the previous year.

As of the balance sheet date, a total of 19,183,705 treasury shares were held (prior year: 7,284,109).

Treasury shares reduce equity and have no dividend entitlement.

40.  Non-controlling interests

Non-controlling interests developed as follows:

Pro-rated changes in the reporting period relate to the sale of shares in IONOS Group SE, due to the IPO of IONOS Group SE. Please refer to Note 4.

The following financial information comprises summarized details on the assets, liabilities, profits or losses, and cash flows of subgroups with material non-controlling interests.