2.3 Position of the Group

There were no significant acquisition or divestment effects on consolidated and segment sales and EBITDA in the fiscal year 2024. There were also only minor positive currency effects at Group and segment level (mainly Business Applications segment) amounting to € 6.0 million for sales and € 2.7 million for EBITDA. The same applies to the Group’s asset position, for which there were no significant effects from currency fluctuations.

Group’s earnings position

In the fiscal year 2024, customer contracts, sales and earnings at Group level were unexpectedly burdened by the effects of a temporary outage of the new 1&1 mobile network in May 2024 and the associated increase in customer churn. Moreover, the planned migration of existing customers to the 1&1 mobile network was temporarily severely restricted due to the unforeseen undersizing of individual network components and could only be resumed extensively in the fourth quarter of 2024. As a result, the savings expected in fiscal year 2024 from the migration of existing customer contracts (on a wholesale basis) to the 1&1 mobile network were only partially achieved. In addition, there were temporarily higher expenses for the elimination of capacity bottlenecks identified as a result of the network outage.

In the fiscal year 2024, the total number of fee-based customer contracts in the United Internet Group was raised by 590,000 contracts to 29.02 million. At 38.93 million, ad-financed free accounts were down on December 31, 2023 (39.93 million), due mainly to higher security requirements.

Total Group sales amounted to € 6,329.2 million, compared to € 6,213.2 million in the prior-year period. Adjusted for the sales contributions from “Energy” and “De-Mail” (€ 27.3 million in the previous year and € 26.2 million in 2024), consolidated sales rose by 1.9% from € 6,185.9 million in the previous year to € 6,303.0 million in the fiscal year 2024. This merely moderate sales growth was mainly due to a year-on-year decline in low-margin hardware revenues (especially smartphones) in the Consumer Access segment (€ -92.3 million compared to 2023). Sales outside Germany amounted to € 665.0 million (prior year: € 656.9 million).

There was a disproportionately strong rise in the cost of sales, sales and marketing expenses, and administrative expenses in the fiscal year 2024. This was mainly due to increased expenditure for the 1&1 mobile network, higher depreciation and amortization due to investments in the expansion of the fiber-optic network and mobile network, as well as increased personnel expenses due to salary adjustments in 2024 in order to keep pace with price increases.

Consequently, the cost of sales increased from € 4,145.1 million in the previous year to € 4,325.7 million. This figure includes out-of-period expenses of € -14.3 million from subsequent billing for additional services during the network rollout in 2022 and 2023. There was therefore a disproportionately strong rise in the cost of sales ratio from 66.7% (of sales) in the previous year to 68.3% (of sales) in the fiscal year 2024. There was a corresponding decrease in the gross margin from 33.3% to 31.7% and gross profit fell by -3.1 % from € 2,068.1 million to € 2,003.5 million.

Sales and marketing expenses also rose faster than sales, from € 943.2 million (15.2% of sales) in the previous year to € 981.9 million (15.5% of sales), while administrative expenses increased from € 275.9 million (4.4% of sales) to € 287.8 million (4.5% of sales).

Multi-period overview: Development of key cost items

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

Other operating expenses decreased from € 33.3 million in the previous year to € 26.2 million in 2024. Other operating income increased from € 60.6 million to € 72.0 million. Due to an increase in payment defaults, impairment losses on receivables and contract assets rose from € 122.3 million in the previous year to € 140.9 million in 2024.

Key earnings figures were influenced by the following special items in the fiscal years 2024 and 2023:

• The special item “ Earnings contribution from Energy and De-Mail ” results from the decision of the Management Board and Supervisory Board to discontinue the business fields “Energy” and “De-Mail” and to adjust the key financial figures in the Management Report accordingly. The aforementioned business fields had a negative impact on EBITDA, EBIT, EBT, net income and EPS in the fiscal years 2024 and 2023.
• The special item “ Non-cash impairment loss on the investment in Kublai ” results from a non-scheduled, non-cash impairment loss on the Kublai/Tele Columbus shareholding and had a negative i mpact on EBT, net income and EPS in the fiscal year 2024.
• The special item “One-off tax effects 2024” results from a one-off writedown of deferred taxes on loss carryforwards capitalized in previous years on the level of 1&1 Versatel GmbH. There was an opposing effect from direct netting of current losses of 1&1 Versatel on the level of United Internet AG due to a profit and loss agreement concluded with 1&1 Versatel in November 2024. This special item had a negative impact on net income and EPS in the fiscal year 2024.

Further details on the above mentioned special items 2024 are provided in chapter 2.2 “Business development” under “Special items in fiscal year 2024”.

• The special item “IPO costs IONOS” results from one-off costs in connection with the IPO of IONOS Group SE, as well as – with an opposing effect – the partial assumption of costs by IONOS co-owner Warburg Pincus, and had an overall negative impact on EBITDA, EBIT, EBT, net income, and EPS in the fiscal year 2023.

Reconciliation of EBITDA, EBIT, EBT, net income, and EPS with figures adjusted for special items (operating)

(1) The valuation effects from derivatives adjusted in the 2023 management report are included in the earnings contribution from Energy.

Adjusted for the above mentioned special items from the IPO of IONOS in the previous year, as well as the earnings contributions of “Energy” and “De-Mail” in the previous year and in the fiscal year 2024, the Group’s key operating performance measures developed as follows:

Consolidated operating EBITDA amounted to € 1,294.7 million in the fiscal year 2024 and was thus only slightly below the prior-year figure (€ 1,296.5 million). In addition to burdens on earnings from the temporary outage of the 1&1 mobile network, EBITDA includes higher than expected expenses for the rollout of 1&1’s mobile network. In total, these amounted to € -265.3 million (prior year: € -132.4 million). This item also includes € 14.3 million out-of-period expenses from subsequent billing for the network rollout in 2022 and 2023.

In addition to network rollout costs and out-of-period expenses, operating EBIT was additionally burdened by increased depreciation of € -541.2 million (prior year: € -424.1 million) resulting in particular from investments in the expansion of 1&1 Versatel’s fiber-optic network and 1&1’s mobile network. As a consequence, it amounted to € 639.6 million (prior year: € 758.5 million).

There was a corresponding decrease in the operating EBITDA margin from 21.0% in the previous year to 20.5% and in the operating EBIT margin from 12.3% to 10.1%.

At 10,972, the number of Group employees remained virtually unchanged (prior year: 10,962).

Key sales and earnings figures of the Group (in € million)

(1) Excluding the sales and earnings contributions from Energy and De-Mail (sales contribution: € 26.2 million; EBITDA contribution: € -0.7 million; EBIT contribution: € -0.9 million); including out-of-period expenses for network expansion from 2022 and 2023 (EBITDA and EBIT effect: € -14.3 million)

(2) Excluding the sales and earnings contributions from Energy and De-Mail (sales contribution: € 27.3 million; EBITDA contribution: € -2.7 million; EBIT contribution: € -2.8 million) and excluding IPO costs IONOS (EBITDA and EBIT effect: € -1.7 million net (IPO costs and offsetting pro rata assumption of costs by the IONOS co-shareholder))

Quarterly development ; change over prior-year quarter ⁽¹⁾

(1) Unaudited; see note “unaudited disclosures” on page 3

(2) Excluding the sales and earnings contributions from Energy and De-Mail (sales contribution: € 6.6 million, EBITDA contribution: € -1.3 million, EBIT contribution: € -1.3 million in Q1 2024; sales contribution: € 6.8 million, EBITDA contribution: € +0.6 million, EBIT contribution: € +0.6 million in Q2 2024; sales contribution: € 6.5 million, EBITDA contribution: € +0.5 million, EBIT contribution: € +0.4 million in Q3 2024; sales contribution: € 6.3 million, EBITDA contribution: € -0.5 million, EBIT contribution: € -0.6 million in Q4 2024; sales contribution: € 6.8 million, EBITDA contribution: € -0.5 million, EBIT contribution: € -0.6 million in Q4 2023) and excluding IPO costs IONOS (EBITDA and EBIT effect: € -0.1 million net in Q4 2023)

(3) Including out-of-period expenses for network expansion from 2022 and 2023 (EBITDA and EBIT effect: € -14.3 million)

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

(1) 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)

(2) Excluding the non-period positive effect on earnings attributable to the second half of 2020 (EBITDA and EBIT effect: € +39.4 million) and excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € +3.0 million)

(3) Excluding a non-cash valuation effect from derivatives (EBITDA and EBIT effect: € -0.5 million) and excluding IPO costs IONOS (EBITDA and EBIT effect: € -8.8 million)

(4) Excluding the sales and earnings contributions from Energy and De-Mail (sales contribution: € 27.3 million; EBITDA contribution: € -2.7 million; EBIT contribution: € -2.8 million) and excluding IPO costs IONOS (EBITDA and EBIT effect: € -1,7 million net (IPO costs and offsetting pro rata assumption of costs by the IONOS co-shareholder))

(5) Excluding the sales and earnings contributions from Energy and De-Mail (sales contribution: € 26.2 million; EBITDA contribution: € -0.7 million; EBIT contribution: € -0.9 million); including out-of-period expenses for network expansion from 2022 and 2023 (EBITDA and EBIT effect: € -14.3 million)

Additionally adjusted for the non-cash impairment loss on the investment in Kublai/Tele Columbus (disclosed in the “Result from the loss of significant influence”), operating earnings before taxes (EBT) of € 474.0 million – based on the decline in operating EBIT as explained above (€ -118.9 million) – were also down on the previous year (€ 602.1 million).

Further adjusted for the one-off tax effects 2024, the Group’s other key operating performance measures developed as follows:

Operating consolidated net income and operating consolidated net income attributable to shareholders of United Internet AG fell from € 365.9 million to € 281.4 million and from € 240.6 million to € 175.5 million, respectively.

Operating EPS declined from € 1.39 to € 1.01. This was also mainly due to the EBIT development (EPS effect: € -0.40 ).

Group’s financial position

Despite the decline in net income, cash flow before changes in balance sheet items (subtotal) rose from € 1,060.9 million in the previous year to € 1,128.9 million in the fiscal year 2024.

Cash flow from operating activities also rose from € 828.5 million to € 954.1 million.

Cash flow from investing activities in the reporting period led to a net outflow of € -765.6 million (prior year: € -798.2 million). This resulted mainly from capital expenditures of € -774.6 million (prior year: € -797.9 million).

United Internet’s free cash flow is defined as cash flow from operating activities, less capital expenditures, plus payments from disposals of intangible assets and property, plant, and equipment. In the fiscal year 2024, free cash flow improved from € 36.4 million in the previous year to € 184.5 million.

After deducting the cash flow item “Redemption of lease liabilities” – disclosed in cash flow from financing activities since the initial application of the accounting standard IFRS 16 – free cash flow (after leases) improved from € -85.0 million in the previous year to € 47.4 million.

In the fiscal year 2024, cash flow from financing activities was dominated by the assumption of loans (€ 356.7 million net; prior year: € 305.2 million), payments for interest (€ -149.5 million; prior year: € -91.0 million), the redemption of lease liabilities (€ -137.1 million; prior year: € -121.3 million), and dividend payments (€ -86.4 million; prior year: € -86.4 million). In the previous year, cash flow from financing activities also included the purchase of treasury shares (€ -291.9 million), as well as payments received from minority shareholders (€ 305.0 million) in connection with the IPO of IONOS Group SE and resulting from purchase price payments of Warburg Pincus.

Due to closing-date effects, cash and cash equivalents amounted to € 114.9 million as of December 31, 2024, compared to € 27.7 million on the same date last year.

Development of key cash flow figures

(1) Free cash flow is defined as cash flow from operating activities, less capital expenditures, plus payments from disposals of intangible assets and property, plant and equipment

(2) 2024 including the repayment portion of lease liabilities (€ -137.1 million), which have been reported under cash flow from financing activities since the fiscal year 2019 (IFRS 16)

(3) 2023 including the repayment portion of lease liabilities (€ -121.3 million), which have been reported under cash flow from financing activities since the fiscal year 2019 (IFRS 16)

For further details on guarantees, leases, and other financial obligations, please refer to chapter 2.2 “Business development”, “Liquidity and finance”, as well as note 45 of the Notes to the Consolidated Financial Statements.

Group’s asset position

The balance sheet total increased from € 11.246 billion as of December 31, 2023 to € 11.936 billion on December 31, 2024.

Development of current assets

Current assets rose from € 1,840.1 million on December 31, 2023 to € 1,989.3 million as of December 31, 2024. Cash and cash equivalents disclosed under current assets increased from € 27.7 million to € 114.9 million due to closing-date effects. The decrease in current contract assets from € 676.1 million to € 630.3 million was attributable to the current slower customer growth (compared to previous periods), as well as lower hardware sales, and includes current claims against customers due to accelerated revenue recognition from the application of IFRS 15. After raising inventories to avoid supply bottlenecks in late 2023, this item declined from € 178.1 million to € 119.7 million. As a result of prepayments made to advance service providers and closing-date effects, current prepaid expenses increased from € 303.8 million to € 394.2 million and mainly comprise the short-term portion of expenses relating to contract acquisition and contract fulfillment according to IFRS 15. Income tax claims rose from € 34.8 million to € 93.1 million. The items current trade accounts receivable, other financial assets, and other non-financial assets were all largely unchanged.

Development of non-current assets

Non-current assets rose from € 9,405.6 million as of December 31, 2023 to € 9,946.4 million on December 31, 2024. Due in particular to the non-cash writedown of the investment in Kublai and the reclassification/rededication of the Kublai investment (resulting from the loss of significant influence) to non-current other financial assets, shares in associated companies fell from € 373.2 million to € 124.9 million. There was a corresponding rise in non-current other financial assets from € 8.3 million to € 85.9 million. C apital expenditures in the reporting period (especially for the 5G network rollout as well as the expansion of the fiber-optic network in the Consumer Access and Business Access segments) led to a strong increase in property, plant and equipment from € 2,405.3 million to € 3,145.0 million, while intangible assets declined from € 2,001.6 million to € 1,879.8 million, mainly as a result of increased amortization. Due to prepayments made to advance service providers and closing-date effects, there was a significant increase in non-current prepaid expenses from € 679.8 million to € 801.2 million. The items goodwill, non-current trade accounts receivable, contract assets, and deferred tax assets were all largely unchanged.

Development of current liabilities

(1) Vorjahr angepasst; die Verbindlichkeiten aus Gehalt wurden aufgrund ihres inhaltlichen Charakters von den finanziellen in die nicht-finanziellen Verbindlichkeiten umgegliedert.

Current liabilities decreased from € 2,022.7 million as of December 31, 2023 to € 1,881.6 million on December 31, 2024. Due to closing-date effects, current trade accounts payable increased from € 699.2 million to € 798.1 million. There was a decrease in current liabilities due to banks from € 582.4 million to € 356.5 million as a result of their reduction or long-term refinancing. Income tax liabilities declined from € 88.0 million to € 48.0 million due to closing-date effects. The items current contract liabilities, which mainly include payments received from customer contracts for which the performance has not yet been completely rendered, as well as current other accrued liabilities, current other financial liabilities, and current other non-financial liabilities were largely unchanged.

Development of non-current liabilities

Non-current liabilities rose from € 3,667.9 million as of December 31, 2023 to € 4,509.4 million on December 31, 2024. This was mainly due to non-current liabilities due to banks, which increased from € 1,881.9 million to € 2,457.2 million as a result of the use of existing and new long-term credit facilities and the assumption of a new promissory note loan. Deferred tax liabilities rose from € 293.0 million to € 350.7 million. Other financial liabilities increased from € 1,388.3 million to € 1,597.6 million, mainly due to higher leasing additions (IFRS 16). The items non-current trade accounts payable, non-current contract liabilities (which mainly include payments received from customer contracts for which the performance has not yet been completely rendered), and non-current other accrued liabilities were all largely unchanged.

Development of equity

Consolidated equity capital fell from € 5,555.1 million as of December 31, 2023 to € 5,544.7 million on December 31, 2024. The Group’s accumulated profit – comprising the past profits of the consolidated companies, insofar as they were not distributed – decreased from € 2,980.5 million to € 2,851.5 million in the fiscal year 2024. There was a corresponding fall in the consolidated equity ratio from 49.4% to 46.5%. This decline was mainly due to the non-cash writedown of the Kublai investment and the effects of the temporary outage of the 1&1 mobile network in May 2024.

Net bank liabilities (i.e., the balance of bank liabilities and cash and cash equivalents) increased by € 262.2 million, from € 2,436.6 million as of December 31, 2023 to € 2,698.8 million on December 31, 2024.

Multi-period overview: development of relative indebtedness

(1) Net bank liabilities = balance of bank liabilities and cash and cash equivalents

Further details on the objectives and methods of the Group’s financial risk management are provided under note 43 of the Notes to the Consolidated Financial Statements.

Multi-period overview: development of key balance sheet items

(1) Increase due to stake in Kublai (2021)

(2) Decrease due to withdrawal of treasury shares (2023)

Management Board’s overall assessment of the Group’s business situation

In its latest economic outlook, the International Monetary Fund (IMF) reported growth of 3.2% for the global economy in 2024, based on preliminary calculations. For Germany – United Internet’s most important market by far with a sales share of around 90% – the IMF’s calculations are in line with the preliminary figures of the country’s Federal Statistical Office, which reported a decline in (price-adjusted) gross domestic product (GDP) of -0.2% for 2024 (prior year: -0.3%).

Despite the adverse macroeconomic conditions, customer contract figures and sales of United Internet continued to make good progress in the fiscal year 2024 – thanks to its stable and largely non-cyclical business model. The Company was able to increase contracts by 590,000 in total to 29.02 million and raise sales by 1.9%, or € 117.1 million, to € 6.303 billion (without “Energy” and “De-Mail”). This at first glance only moderate sales growth was due in particular to a year-on-year decrease in low-margin hardware revenues (especially smartphones) in the Consumer Access segment (€ -92.3 million compared to 2023).

In the fiscal year 2024, customer contracts, sales and earnings were unexpectedly burdened by the effects of a temporary outage of the new 1&1 mobile network in May 2024 and the associated increase in customer churn. Moreover, the planned migration of existing customers to the 1&1 mobile network was temporarily severely restricted due to the unforeseen undersizing of individual network components and could only be resumed extensively in the fourth quarter of 2024. As a result, the savings expected in fiscal year 2024 from the migration of existing customer contracts (on a wholesale basis) to the 1&1 mobile network were only partially achieved. In addition, there were temporarily higher expenses for the elimination of capacity bottlenecks identified as a result of the network outage.

Despite the above mentioned burdens on earnings, operating EBITDA for the Group of € 1,294.7 million was only slightly below the prior-year figure (€ 1,296.5 million). In addition to burdens from the temporary outage of the 1&1 mobile network, EBITDA includes higher than expected expenses for the rollout of 1&1’s mobile network. In total, these amounted to € -265.3 million (prior year: € -132.4 million). This item also includes around € 14 million out-of-period expenses from subsequent billing for the network rollout in 2022 and 2023.

The performance once again highlights the benefits of United Internet’s business model based predominantly on electronic subscriptions with fixed monthly payments. This ensures stable and predictable revenues and cash flows, offers protection against cyclical influences and provides the financial scope to win new customers, expand existing customer relationships, and grasp opportunities in new business fields and new markets – organically or via investments and acquisitions.

As of the reporting date for the Annual Financial Statements 2024, and at the time of preparing this Management Report, the Management Board believes that the United Internet Group as a whole is well placed for its further development. It regards the financial position and performance – subject to possible special items – as positive and is optimistic about the Group’s future prospects.