NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2024

Basis of preparation and accounting policies

1. General information on the Company and accounting

United Internet AG (hereinafter referred to as the “United Internet Group” or the “Company”) is Europe’s leading internet specialist with its business divisions Access (landline and mobile internet access products) and Applications (applications for using the internet), which are each divided into Business and Consumer segments.

United Internet AG is domiciled in 56410 Montabaur, Elgendorfer Strasse 57, Germany and is registered there at the District Court under HR B 5762. The Group has numerous branches and subsidiaries in Germany and around the world.

The Consolidated Financial Statements of United Internet AG were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the relevant supplementary regulations of section 315e (1) German Commercial Code (HGB).

The reporting currency is euro (€). Amounts stated in the Notes to the Consolidated Financial Statements are in euro (€), thousand euro (€k) or million euro (€m). The Consolidated Financial Statements are always drawn up on the basis of historical costs. The exception to this rule are individual financial instruments which are stated at fair value.

The reporting date is December 31, 2024.

The Supervisory Board approved the Consolidated Financial Statements for 2023 at its meeting on March 20, 2024. The Consolidated Financial Statements were published on March 21, 2024.

The Consolidated Financial Statements for 2024 were prepared by the Company’s Management Board on March 25, 2025 and subsequently submitted to the Supervisory Board. The Consolidated Financial Statements will be presented to the Supervisory Board for approval on March 25, 2025. Theoretically, there may still be changes until the Consolidated Financial Statements are approved and released for publication by the Supervisory Board. However, the Management Board expects that the Consolidated Financial Statements will be approved in the present version. They are to be published on March 27, 2025.

2. Accounting and measurement principles

This section first presents all accounting policies which have been applied consistently in the periods presented in these Consolidated Financial Statements. Following this, those accounting standards applied for the first time in these financial statements are explained, as are those accounting standards recently published but not yet applied.

2.1 Explanation of main accounting and measurement methods

Consolidation principles

The Consolidated Financial Statements comprise the Annual Financial Statements of United Internet AG and of all domestic and foreign subsidiaries (majority shareholdings) controlled by it. Control is deemed to exist when an investor has power over the critical activities of a company, is exposed to variable returns from its involvement with the company and has the ability to use its power over the investee to affect its returns. United Internet AG currently only exercises control over its subsidiaries by holding a majority of the voting rights.

Expenses and income, receivables and liabilities, as well as profits and losses between the companies included in the Consolidated Financial Statements, are eliminated.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest, and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

Upon loss of control, a gain or loss from the disposal of the subsidiary is recognized in the Consolidated Statement of Comprehensive Income. This gain or loss is calculated as the difference between (i) the proceeds from the disposal of the subsidiary, the fair value of the remaining shares, the carrying amount of the non-controlling interests, and the cumulative amounts of other comprehensive income attributable to the subsidiary (insofar as a reclassification to the income statement is intended), and (ii) the carrying amount of the subsidiary’s net assets to be disposed of.

Non-controlling interests represent the proportion of the result and net assets which is not attributable to the Group’s shareholders. Non-controlling interests are disclosed separately in the Consolidated Balance Sheet. They are disclosed in the Consolidated Balance Sheet as part of shareholders’ equity but separate to the equity capital attributable to the shareholders of United Internet AG. For purchases of shares without a controlling influence (minority shareholding) or disposals of shares with a controlling influence but without loss of the controlling influence, the carrying amounts of shares without a controlling influence are adjusted to reflect the change in the respective shareholding. The amount by which compensation paid or received for the change in shareholding exceeds the carrying value of the respective share without a controlling influence is recognized directly in equity in capital reserves as a transaction with the shareholders.

Business combinations are accounted for using the acquisition method. This involves recognizing identifiable assets, liabilities and contingent liabilities of the acquired business at fair value as of the acquisition date. If the sum of the acquisition costs, the value of the non-controlling interests and the fair value of the equity interests possibly held before the acquisition date exceeds the fair value of the identifiable assets less liabilities and contingent liabilities, goodwill must be capitalized.

Adjustment to disclosure of other liabilities

For reasons of transparency and to ensure consistency with the disclosures on financial instruments in accordance with IFRS 7, wage- and salary-related liabilities have been reported under other non-financial liabilities since January 1, 2024, instead of under other financial liabilities as before. In this context, € 47.1m was reclassified to other current non-financial liabilities for the comparative period (December 31, 2023).

Investments in associated companies

Investments in associated companies are valued according to the equity method. An associated company is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the associated company, but not to control or jointly steer the decision-making processes.

Using the equity method, investments in associated companies are carried in the balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associated company. Goodwill connected with an associated company is included in the carrying value of the investment and not subjected to scheduled amortization. The income statement includes the Company’s portion of the success of the associated company. Changes recognized directly in the equity capital of the associated company are recognized by the Company in proportion to its shareholding and – where applicable – reported in “Changes in shareholders’ equity”. Profits and losses from transactions between the Company and the associated company are eliminated in proportion to the shareholding in the associated company.

Upon loss of significant influence, a gain or loss from the disposal of the associated company is recognized in the amount of the difference between (i) the proceeds from the disposal of the shares, the fair value of the remaining shares, and the cumulative amounts of other comprehensive income attributable to the associated company (insofar as a reclassification to profit and loss is provided for), and (ii) the carrying amount of the investment to be disposed of.

Insofar as they concern effects on the income statement, regular carrying amounts and valuations of investments in associated companies are disclosed in the result from associated companies.

Gains from the sale of such investments are always disclosed under other operating income, losses under other operating expenses. If significant influence over the company is lost without a sale taking place, and this is due to a reduction in the stake held (dilution effect), the resulting losses are recognized as impairments of the investment. These are recognized separately below the result from associated companies as “Result from the loss of significant influence”.

The annual financial statements of the associated company are generally prepared as to the same reporting date as those of the parent company. Where necessary, adjustments are made to bring the methods in line with standard group-wide accounting and measurement methods.

In the impairment test, the carrying amount of a company measured using the equity method is compared with its recoverable amount. If the carrying amount exceeds the recoverable amount, an impairment loss in the amount of the difference must be recognized. If there is objective evidence that an impairment has occurred, an impairment test is carried out in the same way as for goodwill. Objective evidence exists, for example, if an associate is experiencing significant financial difficulties, has committed breaches of contract, is highly likely to become insolvent, requires restructuring, or an active market for the net investment ceases to exist because of the financial difficulties of the associate. A significant or prolonged decline in the fair value of an associate below cost also constitutes objective evidence of impairment. A significant decline is assumed if the decrease in the fair value of an associate at the end of the reporting period is more than 25% of cost. A prolonged decline is assumed if the decrease in the fair value over a period of at least 12 months is more than 10% of the acquisition cost.

If the reasons for a previously recognized impairment no longer apply, a corresponding write-up is recognized in profit or loss.

Foreign currency translation

Functional currency and presentation currency

The Consolidated Financial Statements are prepared in euro, the functional and presentation currency of the Company. Each company within the Group defines its own functional currency. Items included in the financial statements of each company are measured using this particular functional currency.

Transactions and balances

Foreign currency transactions are initially translated into the functional currency at the spot rate applicable on the date of the transaction. Monetary assets and liabilities in a foreign currency are translated into the functional currency at each reporting date using the closing rate. All foreign exchange differences are recognized in profit or loss. They are deferred in equity if they result from net investment in a foreign operation.

Non-monetary items measured at cost in a foreign currency are translated using the exchange rates prevailing on the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates prevailing when fair value was determined.

Group companies

Assets and liabilities of foreign operations are translated into euros at the closing rate. Income and expenses are translated at the exchange rate on the date of the transaction. For practical reasons, a weighted average annual exchange rate is used for translation if exchange rates do not fluctuate significantly. The resulting translation differences are recognized as other comprehensive income. The cumulative amount recognized in equity for a foreign operation is recognized in profit or loss when the operation is sold.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are recognized as assets and liabilities of the foreign operation and translated at the closing rate.

The exchange rates of major currencies developed as follows:

Revenue recognition

Revenue is recognized according to the degree of completion of the performance. Revenue from contracts that include several separate performance obligations is recognized pro rata when the respective performance obligation has been fulfilled.

A contract asset is recognized if the Group has recognized revenue due to the fulfillment of a contractual performance obligation before the customer has made a payment or before the conditions for invoicing and thus the recognition of a receivable are met.

A contract liability is recognized if a customer has made a payment, or a receivable from the customer falls due, before the Group has fulfilled a contractual performance obligation and thus recognized revenue.

When recognizing revenue of the United Internet Group, a distinction is made between the different business segments of the Group (see also the explanations on segment reporting in Note 5).

Consumer Access segment

The Consumer Access segment mainly comprises landline-based and mobile-based internet access products. The range comprises “Mobile Internet” and “Broadband”.

In these product lines, the Group generates revenue from the provision of the aforementioned access products, as well as from additional services such as internet and mobile telephony. The transaction price consists of fixed monthly basic fees, as well as variable additional usage fees for certain services (e.g., for foreign calls and mobile phone connections not covered by any flat-rate), and proceeds from the sale of the respective hardware.

Revenue recognition is based on a separation of the transaction price for the customer contract on the basis of the relative standalone selling prices of the individual performance obligations. The United Internet Group generally offers comparable tariffs both with and without hardware. In these cases, the standalone selling price for the service component is therefore based on the tariff conditions of a service tariff without hardware. By contrast, the standalone selling prices for hardware are determined on the basis of the adjusted market assessment approach, as only a very small amount of the relevant hardware is sold to customers without a mobile contract. In doing so, the Group primarily uses hardware prices that are regularly provided by a third-party provider and links these to the given contract conditions when the contract is concluded.

The resulting revenue share allocated to hardware is recognized on delivery to the customer (time-related revenue recognition). It usually exceeds the fee invoiced to the customer and then results in the recognition of a contract asset. This contract asset value is reduced by the customer’s payments over the contract period. The revenue share allocated to the service component is recognized over the minimum term of the customer contract (period-related revenue recognition).

If the one-off fees invoiced to the customer on conclusion of the contract, such as activation fees, do not represent a material right (e.g., favorable renewal option), these are not recognized as a separate performance obligation but are allocated to the identified performance obligations as part of the transaction price and recognized in accordance with their performance. If the customer is granted material rights in the form of options to use additional goods or services, these represent an additional performance obligation to which part of the transaction price is allocated, taking into account the expected utilization. The corresponding revenue is recognized when these future goods or services are transferred or when the option expires. If one-off fees qualify as a favorable renewal option, revenue is recognized over the expected duration of the customer contract.

The United Internet Group grants its customers time-limited promotion discounts at the time of contract conclusion. These discounts are included in the calculation of the transaction price and are allocated to the performance obligations by means of an allocation mechanism.

Within the context of the 1&1 Principle, United Internet grants its customers a voluntary 30-day right of cancellation. If customers make use of the 1&1 Principle and cancel their contracts, they have the right to be reimbursed for individual transaction components, such as one-off fees and basic fees which have been invoiced. Any usage fees are excluded from the reimbursement claim. In return, United Internet has the right to demand the return of any hardware supplied. No revenue is recognized for expected customer cancellations. The payments received from the customer and to be reimbursed are carried as reimbursement liabilities and the claims for reimbursement resulting from the 1&1 Principle for delivered hardware are disclosed as non-financial assets.

The current customer contracts do not include any significant financing components.

1&1 applies the portfolio approach as permitted by IFRS 15.4 for a part of its stock of contracts. In this case, customer contracts of the same kind are pooled and average values taken for certain valuation-relevant parameters, in particular transaction prices, standalone selling prices, and amortization periods. It can be reasonably assumed that whether a portfolio or the individual contracts or performance obligations within this portfolio are assessed, it will have no material impact on the Annual Financial Statements.

Business Access segment

The Business Access segment comprises revenue from various standardized and customized telecommunications products for business and wholesale customers. In addition to the provision of traditional landline connections, the telecommunications services also include broadband services, network solutions as telecommunications infrastructure (leased lines) or VPN, added-value services, interconnection, IP services, and cloud solutions.

In the case of products that do not meet the definition of a finance lease pursuant to IAS 16, the transaction price consists of fixed monthly basic fees and/or variable, additional per-minute usage fees for certain services (which are not covered by a flat rate) and, to an insignificant extent, revenue from the sale of related hardware. Revenue recognition is based on a separation of the transaction price for the customer contract on the basis of the relative standalone selling prices of the individual performance obligations. The transaction price for the sale of hardware is based on standard market prices. The standalone selling price for the service component is based on the tariff conditions of a comparable service tariff without hardware.

Temporary discounts or basic fee exemptions are also granted to a lesser extent at the beginning of the term. These discounts are included in the transaction price and allocated on a straight-line basis in the course of revenue recognition.

Certain products are provided on a lease basis. If all material opportunities and risks from a lease are transferred to the lessee, the present value of the minimum lease payments from this economic sale is recognized as revenue on commencement of the lease; as part of the subsequent accounting of finance lease receivables, interest income is recognized in subsequent periods. Leased assets are derecognized through cost of sales. In addition to the monthly payments, the minimum lease payments include any customer activation fees payable at the beginning of the lease term.

In the case of operating leases, where the lessor retains the material opportunities and risks, the lease payments are recognized as revenue on a straight-line basis over the lease term. Activation fees for operating leases are deferred and amortized over the lease term.

Consumer Applications segment

The Consumer Applications segment comprises the marketing of the GMX, mail.com und WEB.DE portals – whether ad-financed or via fee-based subscriptions –as well as Personal Information Management applications and sales platforms for fee-based partner products and Energy.

Besides Germany, the United Internet Group also operates in Austria and the USA in this segment.

In the field of ad-financed applications, the Group generates advertising income and e-commerce commission mainly via the WEB.DE, 1&1, and GMX portals. This business is based on the high number of hits for the portals through frequent use of applications. Advertising space is offered on the websites of the portals. Revenues are generated depending on the placing of advertising and number of screenings or according to click rates. In its e-commerce business, the Group receives commissions for the sale of products or brokerage of customers. For these products, revenue is recognized at a specific point in time.

In the field of fee-based subscriptions for the WEB.DE, 1&1, GMX, and smartshopping portals, revenue is mainly generated from fixed monthly fees for the use of extended applications, as well as for administration and storage. Revenue is recognized over the period of service provision. The payments received in advance result in contractual liabilities which are reduced accordingly over the performance period.

Revenues from partner products are recognized and measured according to the Group's intermediary function. A distinction is made as to whether the company provides the delivery or service to the customer itself (principal) or whether the company is acting solely as an agent for the supplier. The determining factor is control over the specific good or service before it is transferred to the customer. As a principal, revenues are recognized gross; as an agent, revenues are recognized net after deducting supplier costs, i.e., only the amount of the remaining margin.

Business Applications segment

In the Business Applications segment, United Internet operates in the market for webhosting and cloud applications. These mainly comprise design solutions for websites (domain registration, webhosting, website building) and services in the field of Infrastructure as a Service, Platform as a Service, and Software as a Service. The Group also offers its customers performance-based advertising and sales opportunities via Sedo.

In this segment, the United Internet Group is active in Germany, as well as – in particular – France, the UK, Spain, Austria, Switzerland, Poland, Italy, Canada, Mexico, and the USA. It is one of the leading companies in all the countries mentioned. The services are rendered by various subsidiaries of the United Internet Group in Germany and abroad.

Customers generally pay in advance for a contractually fixed time period for the services to be provided by the Company. The main service in the product group Domains consists of domain registration for the end customer with the respective registry. With regard to the timing of revenue recognition from domain registration, the special rules regarding licenses are applied. As in the case of a domain, a right of use is granted for (static) intellectual property that exists at the time the license is granted, revenue is generally recognized at a point in time.

Product groups that include domains as part of multiple-component transactions primarily relate to web hosting products. The web hosting packages offered usually combine domain registrations with further services, such as storage capacity (web space) and software as a service (SaaS). The value proposition web space refers to the provision of storage space on servers in data centers of the United Internet Group. SaaS refers to the use of application software by the customer (such as for the creation of websites), which is hosted on the servers of the United Internet Group. The value propositions of web space and SaaS are both time-related performance obligations, as the customer benefits continuously from the corresponding benefit flow.

Customer contracts in the web hosting product category generally comprise domain registrations and other services provided over time, such as storage capacity (Webspace) and software as a service (SaaS). The total fee for the customer contract is allocated to the different performance obligations. In the absence of separate standalone selling prices for Webspace and SaaS, and a high variability of prices, the residual method is used to allocate the total fee.

Customers are granted temporary monetary discounts on the basic fee for the hosting service and/or on domains. These discounts are recognized over the term of the customer contracts in line with the associated performance obligations. In the case of domains, discounts immediately reduce revenue as they are recognized at a specific point in time.

One-time fees invoiced to customers on conclusion of a contract, such as activation and setup fees, are allocated to the identified performance obligations and recognized on a straight-line basis in line with the performance of those obligations. Setup fees for domains are recognized immediately at a specific point in time.

A further revenue group is revenue from the performance-based advertising form of domain marketing. In Domain Marketing, United Internet operates (via Sedo GmbH) a trading platform for the secondary domain market (domain trading). At the same time, the domain owners are offered the possibility to market unused domains to advertisers (domain parking). In addition to these customer domains, the Group also holds its own portfolio of marketable and salable domains. In domain trading, the Group receives sales commission from the successful sale of domains via the platform and also generates revenue from services relating to domain value assessments and transfers. The sales commissions and services are generally based on a percentage of the sales price achieved, whereas fixed prices are generally charged for the other services. In domain parking, domains are mainly marketed using text links, i.e., links on the parked domains to offers of the advertisers (primarily via cooperation agreements with search engines). The Company receives performance-based payment on a monthly basis from the cooperation partner on a pay-per-click basis, according to the number of clicks registered by the cooperation partner.

Sales commissions are recognized as revenue when the service is rendered. Revenue is thus recognized on completion of the transaction or provision of the service. In the case of domain parking, the monthly payments credited by cooperation partners are recognized as revenue.

Revenues from partner products (affiliates) are recognized and measured according to the Group’s intermediary function. As a rule, the Group acts as the principal for partner products and recognizes the revenues gross. However, revenues are recognized net (after deducting supplier costs, i.e. only in the amount of the remaining margin) if the Group acts purely as an agent, in particular when providing software licenses to the customer, and does not provide any significant integration services and the Group has no right to set the respective price.

Government grants

Government grants are recognized where there is reasonable certainty that the grant will be received and the Company will satisfy all attaching conditions. Where the grants relate to an expense item, they are recognized as income in scheduled amounts over the period necessary to match the grants to the costs they are intended to compensate. Grants relating to an asset item reduce the carrying value of that item.

Financial income

Interest income is recognized as interest accrues. It is measured using the effective interest rate, i.e., the rate which discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset. Dividend income is recognized with the inception of the legal right to payment.

Income taxes

The tax expense for a period comprises current taxes and deferred taxes. Taxes are recognized in the income statement, unless they relate to transactions that are recognized in other comprehensive income or directly in equity. In these cases, taxes are recognized accordingly in other comprehensive income or directly in equity.

Current taxes are valued at the amount at which a refund from the tax authorities or a payment to the tax authorities is expected. The amount is calculated on the basis of the tax rates and tax laws applicable on the reporting date in those countries in which the Group operates and generates taxable income, or which will soon apply.

Deferred taxes are recognized for future effects arising from temporary differences between the values of assets and liabilities in the Consolidated Financial Statements and the values reported for tax purposes. As an exception to this principle, no deferred taxes are recognized from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the profit according to IFRS nor taxable profit or loss and does not lead to deductible and taxable temporary differences of the same amount. Furthermore, no deferred taxes are recognized in respect of investments in subsidiaries, associated companies, and interests in joint ventures where the timing of the reversal of the temporary differences can be controlled, it is probable that the temporary differences will not reverse in the foreseeable future and, in the case of deferred tax assets, where no sufficient taxable income will be available against which the temporary differences can be utilized. Similarly, no deferred tax liabilities are recognized from the initial recognition of goodwill.

Moreover, deferred tax assets are recognized for expected tax benefits from the future use of tax loss and interest carryforwards. The measurement is based on the tax rates applicable on the reporting date unless a change in the tax rate has already been decided upon for the period of the expected reversal of the temporary differences or the expected use of loss carryforwards and tax credits. Deferred tax assets are only recognized if it appears overwhelmingly likely that the tax benefits will be realized within the planning horizon.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted as of the reporting date.

The carrying value of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are netted per company or tax group, insofar as they relate to income taxes due to the same taxation authority and the Group has a legally enforceable right to set off current tax assets against current tax liabilities.

Intangible assets

The Group has control over an asset if it is able to obtain the future economic benefits flowing from the underlying resource and can restrict the access of third parties to these benefits.

Software/licenses, spectrum licenses, rights similar to concessions

These intangible assets are primarily acquired individually and initially measured at cost. They are amortized on a straight-line basis over their useful life. Amortization of the 5G frequencies in the 3.6 GHz spectrum began on December 28, 2022, when the network was ready for operation. The 5G frequencies in the 2 GHz spectrum are not yet operational intangible assets, and amortization will not begin until the term of the allocated frequencies begins in 2026. Indications of impairment are identified as they arise and, if any exist, an impairment test is conducted.

Customer base

In the case of business combinations, the customer base is initially recognized at fair value and has a finite useful life. It is amortized on a straight-line basis over its useful life.

Trademarks

In the case of business combinations, trademarks are initially recognized at fair value and have an indefinite useful life. They are not amortized. The determination of possible impairment is described in the “Impairment” section below. An annual review is conducted to determine whether or not their useful lives are still indefinite. If this is not the case, a prospective change is made from indefinite useful life to limited useful life.

Goodwill

In the case of business combinations, goodwill arises when the total acquisition costs, the value of the non-controlling interests, and the equity interests already held before the acquisition date exceed the fair value of the identifiable assets less liabilities and contingent liabilities. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. The determination of possible impairment is described in the “Impairment” section below.

Internally generated intangible assets

In the case of internally generated intangible assets, expenses for the development phase are capitalized if clear expense allocation is possible and both the technical feasibility and the marketing or, in the case of future internal use, the benefit of the newly developed products can be ensured. Moreover, it must be sufficiently likely that the development activity will lead to future benefits. Capitalized development costs include all direct costs and overheads that can be attributed directly to the development project. For the United Internet Group, these are mainly technological product developments of the Consumer Applications segment and an invoicing system of the Business Applications segment. All capitalized development costs have a limited useful life. Capitalized development costs are amortized from the point in time when the asset can be used in the manner intended by management.

The useful life periods can be found in the following summary:

Amortization is recognized in the expense category that corresponds to the function of the intangible asset in the company.

Property, plant and equipment

Property, plant and equipment is stated at cost less cumulative scheduled depreciation and any impairment losses.

Items of property, plant and equipment are depreciated on a straight-line basis over their useful lives and the expenses are allocated according to their function in the company.

Scheduled depreciation of property, plant and equipment is based on the following useful life periods:

Leasehold improvements and buildings are included in the item “Land and buildings” in the Development of Fixed Assets, while vehicles, other operational and office equipment, office furniture and fixtures, and servers are included in the item “Operating and office equipment” and telecommunication equipment and distribution grids in the item “Network infrastructure”.

The residual values, useful lives and depreciation methods are reviewed at the end of each fiscal year and adjusted where necessary. If there are indications of impairment, an impairment test is conducted as described in the “Impairment” section below.

Items of property, plant and equipment are eliminated either on their disposal or when no further economic use is expected from the continued use or sale of the asset. Gains and losses from the disposal of an asset are recognized in the statement of comprehensive income.

Borrowing costs

Borrowing costs are recognized as an expense in the period in which they are incurred, unless they are incurred in connection with the production or acquisition of a qualifying asset. United Internet defines “qualifying assets” as those assets that necessarily require at least twelve months to prepare for their intended use or sale. No borrowing costs were capitalized in the reporting period nor in the previous year.

Impairment

On each balance sheet date, the carrying amounts of property, plant and equipment, intangible assets and right-of-use assets with limited useful lives are reviewed for any indications of impairment. If such indications exist, an impairment test is conducted. In addition, intangible assets with indefinite useful lives (goodwill, trademarks) and capitalized development costs are regularly tested for impairment as of the balance sheet date. This involves comparing the recoverable amount of the asset concerned with its corresponding carrying amount. The recoverable amount is the higher of fair value less cost of sell and value-in-use. In order to determine the value-in-use, the expected future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the interest effect and the specific risks of the asset. An appropriate valuation model is used to determine fair value less cost of sell. This is based on DCF models, valuation multiples, stock market prices of listed subsidiaries or other available indicators of fair value. If no recoverable amount can be determined for an individual asset, the recoverable amount for the cash-generating unit to which the respective asset can be allocated and which independently generates cash flows is determined. This regularly applies to the goodwill allocated to the respective cash-generating units that are expected to benefit from synergies arising from the business combination from which the goodwill arose. If the carrying amount of an asset or cash-generating unit exceeds its recoverable value, the asset or cash-generating unit is considered to be impaired and is written down to its recoverable amount. An impairment loss recognized for goodwill may not be reversed in subsequent reporting periods. For all other assets, if the reasons for an impairment loss no longer exist, the reversal of the impairment loss is limited to the amortized carrying amount that would have resulted if there had been no impairment in the past. If an impairment loss is necessary, it is recognized in the functional areas to which the respective fixed asset is assigned.

Inventories

Inventories are valued at the lower of cost and net realizable value. Net realizable value comprises the estimated sales proceeds, realizable in the ordinary course of business, less estimated necessary selling costs. Adequate allowances for excess inventories are made to provide for inventory risks.

Measurement is also based in part on time-related writedowns for inventories. Both the size and distribution over time of such writedowns represents a best-possible estimation of net realizable value and are thus subject to uncertainties. On indication of decreased net realizable value, inventories are corrected by recognizing suitable impairment charges.

Contract initiation and contract fulfillment costs

Additional costs incurred in initiating a contract with a customer (e.g., sales commissions), as well as contract fulfillment costs, are capitalized if the Group expects to recover these costs.

Contract fulfillment costs (e.g., customer activation fees and expected termination fees) are costs related to an existing or expected contract, not within the scope of a standard other than IFRS 15, for the creation of resources or the improvement of resources of the Company that will be used in the future for the fulfillment of performance obligations.

Capitalized contract initiation and fulfillment costs are expensed on a straight-line basis over the term of the contract, whereby contract initiation costs are disclosed in selling expenses and contract fulfillment costs in cost of sales. They are recognized in the balance sheet within deferred expenses.

The amortization periods for contract initiation costs are 1 to 5 years and for contract fulfillment costs 2 to 4 years.

An impairment loss is recognized if the carrying amount of the capitalized costs exceeds the remaining amount of the customer’s expected consideration for the delivery of goods or the rendering of services less the costs still to be incurred.

Non-current assets held for sale

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.

Assets and liabilities classified as held for sale are presented separately as current items in the balance sheet.

Leases

A lease exists when the lessor transfers to the lessee the right to use a clearly specified asset for a period of time in exchange for a fee, thereby giving the lessee control over the right of use. This includes the right to derive substantially all economic benefits from the use of the identified asset and the sole right to decide on its use.

United Internet acts as both lessee and lessor.

The majority of the Group’s lessee contracts relate to the renting of network infrastructure, buildings, technical equipment and vehicles. The rented network infrastructure mainly comprises unlit fiber-optic cable (dark fiber), empty conduit systems, copper twin wires, leases of subscriber lines (local loops), and antenna locations.

United Internet as lessee

Lease liabilities

The present value of the future lease payments is recognized as a lease liability and disclosed under other financial liabilities. The lease payments include fixed payments (including de facto fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

The lease payments are divided into repayment and interest portions using the effective interest method. To determine the present value, the lease payments are discounted at an incremental borrowing rate of interest equivalent to the risk and maturity. The incremental borrowing rate is determined on the basis of reference interest rates for a period of up to 25 years from risk-free interest rates with appropriate maturities, increased by credit risk premiums and adjusted for a liquidity and country risk premium.

Right-of-use assets

As with lease liabilities, the right to use the leased asset is capitalized at the commencement date of the lease. Right-of-use assets resulting from leases are disclosed under property, plant and equipment and intangible assets. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

In the case of low-value leases (e.g., PCs), the practical expedient allowed under IFRS 16.5 is applied on a case-by-case basis, and for leases with a term of less than twelve months it is applied in full. The Group only has a small number of such leases.

There is an option to form a portfolio of contracts with the same or similar characteristics. This option has been used for the asset classes subscriber lines (local loop) and main distribution frame locations (MDFs).

The option to recognize each lease component of a contract and all related non-lease components as a single lease component is applied for the asset classes underlying fiber-optic, MDFs, and cars, but not to lease arrangements for buildings. IFRS 16 is not applied to rights held by a lessee under license agreements within the scope of IAS 38.

The Group determines the lease term as the non-cancelable basic term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised. Consideration is given to all relevant facts and circumstances that provide an economic incentive to exercise existing options.

United Internet as lessor

In those cases where Group companies agree finance leases as the lessor, a receivable is recognized at an amount equal to the net investment in the lease. The lease payments are apportioned between repayment of principal and finance income.

If the Group bears all substantial risks and rewards (operating lease), the leased asset is recognized in the balance sheet by the lessor. Measurement of the leased asset is then based on the accounting policies applicable to that asset. The lease payments are recognized in revenue by the lessor.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Items are recognized and measured in accordance with the provisions of IFRS 9. They are recognized on the day on which the Group becomes a party to the contract. For standard market purchases, items are recognized on the trading day.

Financial assets – initial recognition and measurement

With the exception of trade accounts receivable that do not contain a significant financing component or have a maturity of less than one year, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not subsequently measured at fair value through profit or loss, directly attributable transaction costs. Trade accounts receivable that do not contain a significant financing component or have a maturity of less than one year are measured at the transaction price. In this context, reference is made to the accounting policies in the section Revenue Recognition – Revenue from Contracts with Customers.

Financial assets – subsequent measurement

The classification of financial assets for subsequent measurement at amortized cost (ac), at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVTPL) is based on the business model and the characteristics of the cash flows.

Financial assets at amortized cost (ac)

If a financial asset is held to maturity with the aim of collecting contractual cash flows and the cash flows of the financial asset are solely payments of principal and interest on the principal amount outstanding on specified dates, it is measured at amortized cost (ac).

Financial assets at amortized cost include cash and cash equivalents, trade accounts receivable, loans granted, and other financial assets.

Cash and cash equivalents consist of bank balances, other deposits, checks and cash in hand, all of which have a high degree of liquidity and a remaining term of less than three months from the date of acquisition.

Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

Financial assets at fair value

The Group recognizes equity instruments and derivative financial assets as financial assets at fair value through profit or loss. Equity instruments in the United Internet Group comprise equity investments. For equity instruments not held for trading purposes, there is a one-time option for irrevocable recognition of fair value changes in equity. The option to recognize changes in fair value in equity without subsequent reclassification to the income statement was exercised for the investment in Kublai GmbH in particular. Dividends are recognized as other income in the income statement if there is a legal entitlement to payment. Equity instruments measured at fair value through other comprehensive income are not tested for impairment.

Financial assets are derecognized when their contractual cash flows have expired and all material risks and rewards have passed to the buyer.

Impairment of financial assets

For trade accounts receivable, contract assets, and lease receivables the Group applies a simplified (one-step) method for calculating expected credit losses, whereby a loss allowance based on expected credit losses over the remaining term is recognized at each reporting date.

Expectations of future credit losses are formed on the basis of regular reviews and measurements as part of credit monitoring. Historical data is regularly used to derive relationships between credit losses and various factors (e.g., payment agreement, overdue period, dunning level etc.). On the basis of these relationships, supplemented by current observations and forward-looking assumptions regarding the portfolio of receivables and contract assets held as of the reporting date, an estimate of future credit losses is made.

The Group’s operating business is mainly in the mass customer business. Default risks are thus taken into account by means of individual value adjustments and lump-sum individual value adjustments. The specific bad debt allowances for overdue receivables are mainly based on the age structure of the receivables with different valuation discounts, which are mainly derived from the success rates of those collection agencies commissioned to collect overdue receivables. All receivables that are more than 365 days overdue are written down individually by 100%, unless there is objective evidence of successful recovery. Fully impaired trade accounts receivable are derecognized 180 days after collection has been handed over to the collection agency, unless the agency has given positive feedback or payment for an impaired receivable is unexpectedly received, or if the customer’s inability to pay is known before or after transfer to the collection agencies.

The Group also recognizes an allowance for expected credit losses for all debt instruments which are not held at fair value through profit or loss and are not trade accounts receivable, contract assets or lease receivables. For financial instruments for which there has not been a significant increase in credit risk since initial recognition, a loss allowance is recognized in the amount of the expected credit losses based on a default event within the next twelve months. For those financial instruments for which there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized in the amount of the credit losses expected over the remaining life of the exposure, irrespective of the timing of the default.

Impairment charges in connection with non-current loans to affiliates are recognized in the financial result.

Further details on the impairment of trade accounts receivable and contract assets are provided in the following Notes:

• Significant accounting judgments, estimates, and assumptions (Note 3)
• Trade accounts receivable (Note 19)
• Contract assets (Note 20)
• Objectives and methods of financial risk management (Note 43)

Financial liabilities

Financial liabilities mainly comprise trade accounts payable, lease liabilities and liabilities due to banks. With the exception of lease liabilities, financial liabilities are either classified as financial liabilities measured at fair value through profit or loss, or as financial liabilities measured at amortized cost.

Derivatives and conditional purchase price liabilities from the acquisition of a subsidiary are recognized at fair value through profit or loss. All other financial liabilities are classified as financial liabilities measured at amortized cost. These are recognized initially at fair value, net of directly attributable transaction costs. In subsequent periods, these financial liabilities are recognized at amortized cost using the effective interest method. Amortization using the effective interest method is included as part of finance costs in the income statement.

A financial liability is derecognized when the obligation under the liability is discharged, canceled or expires.

Measuring the fair value of financial instruments

Financial assets and liabilities at fair value through profit or loss, or whose fair value is disclosed in the financial statements, are categorized within the fair value hierarchy described below based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 – Quoted (unadjusted) prices in active markets for identical assets or liabilities. Insofar as financial instruments are recognized in the balance sheet at their fair value, derivatives in the Group are assigned to this level.
• Level 2 – Measurement techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable in the market. Insofar as financial instruments are measured at fair value in the balance sheet, no financial instruments are currently assigned to this level.
• Level 3 – Measurement techniques for which the lowest level input that is significant to the fair value measurement is unobservable. Insofar as financial instruments are measured at fair value in the balance sheet, derivatives and conditional purchase price liabilities in the Group are assigned to this level.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated Balance Sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

Accruals

Accruals are formed if the Group has a present (legal or actual) obligation resulting from a past event, the outflow of resources with economic benefit to fulfill the obligation is probable, and a reliable estimate of the amount of the obligation is possible. If the Group expects at least partial compensation for a recognized accrual (e.g., in the case of an insurance policy), this compensation is only recognized as a separate asset if the reimbursement is virtually certain. The expense from forming the accrual is recognized in the income statement after deducting the reimbursement.

Accruals are measured at present value based on management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

Accruals have been formed in particular for severance pay, litigation risks and restoration obligations.

Treasury shares

Treasury shares are deducted from shareholders’ equity. The purchase, sale, issue or retirement of treasury shares is not recognized in the income statement.

The cancellation of treasury shares results in the pro rata reversal of the item “Treasury shares” disclosed in shareholders’ equity at the expense of the remaining shareholders’ equity. The Group uses the following application sequence:

• The cancellation of treasury shares is always deducted from share capital in the amount of the par value.
• The amount exceeding par value is first derecognized in the amount of the value contribution from employee stock ownership plans (SARs and convertible bonds) against capital reserves.
• Any amount exceeding the value contribution from employee stock ownership plans is derecognized against accumulated profit.

Share-based payment

Group employees and Management Board members receive share-based payments as remuneration for their work in the form of equity instruments and the granting of stock appreciation rights, which for the majority of plans may be settled in cash or via equity instruments at the Company’s discretion. As the United Internet Group has no current obligation to settle in cash for any agreement with such an option, all share-based payment transactions are carried in the balance sheet as equity-settled transactions.

The cost of such equity-settled agreements is measured using the fair value of such equity instruments on the date of granting. Fair value is measured using a suitable option price model; the Black-Scholes model and Monte Carlo simulation are employed for this purpose. At each balance sheet date, the expected exercise volume is reassessed with a corresponding adjustment of the additional amount. Any necessary adjustment bookings are to be made in the period in which new information about the exercise volume becomes available. Expenses from the granting of equity-settled agreements are recognized over the period in which the related service is rendered (the so-called vesting period). This period ends on the date on which all vesting conditions (service and performance conditions) are fulfilled, i.e., the date on which the employee concerned has gained irrevocable entitlement. The cumulative expenses recognized on each reporting date until the vesting date reflect the extent to which the vesting period has expired and the Group’s best-possible estimate of the number of awards that will ultimately vest. A fluctuation probability of 0% is applied in each case. The income or expense recognized in personnel expenses for the period represents the development of cumulative expenses recognized at the beginning and end of the reporting period.

When new equity instruments are granted as a result of the cancellation of previously granted equity instruments, IFRS 2.28(c) requires an entity to assess whether the newly granted equity instruments are a replacement for the previously granted or canceled instruments. For canceled equity instruments, the full outstanding expense is recognized immediately at the time of cancellation.

New equity instruments that are not granted as a replacement for canceled equity instruments are accounted for as newly granted equity instruments. If they are classified as a replacement, the new equity instruments are accounted for in the same way as an amendment to the original instruments granted. The benefits received are recognized at least at the fair value determined on the grant date (of the original instruments). If the amendments are beneficial to the employee, the additional fair value of the new equity instruments is measured and allocated over the vesting period as an additional expense. The additional fair value is measured as the difference between the fair value of the equity instruments identified as a replacement and the net fair value of the canceled equity instruments on the date on which the replacement instruments are granted.

Earnings per share

Undiluted or basic earnings per share are calculated by dividing the result attributable to the holders of registered shares by the weighted average number of shares outstanding during the period.

Diluted earnings per share are calculated similarly to basic earnings per share with the adjustment that the average number of shares outstanding is increased by the number that would arise if the exercisable subscription rights resulting from the existing employee stock participation plans had been exercised.

2.2 Summary of measurement principles

The Group’s measurement principles can be summarized and simplified as follows – providing there is no impairment:

2.3 Effects of new or amended IFRS standards

For the fiscal year starting January 1, 2024, the following standards were applied for the first time:

These amendments had no significant impact on the Consolidated Financial Statements and are not expected to have a material impact on the Group in the future.

2.4 Accounting standards already published but not yet mandatory

Apart from the IFRSs mentioned above whose application is mandatory, the IASB has also published further IFRSs and IFRICs which have already partly received EU endorsement, but which will not become mandatory until a later date. United Internet AG will probably only implement these standards when their adoption in the Consolidated Financial Statements becomes mandatory.

The new accounting standard IFRS 18 replaces the previous IAS 1 – Presentation of Financial Statements. The aim is to improve the structure and comparability of financial reporting.

The main changes introduced by IFRS 18 include:

• Introduction of mandatory subtotals in the income statement, such as “operating profit before financing and taxes”, and a breakdown into clearly defined categories (operating, investing, financing).
• Enhanced disclosures on company-specific performance measures (“management performance measures”) used in public communication in order to present management's financial perspective.
• New principles for aggregating and disaggregating financial items to provide more detailed and consistent reporting.
• Adjustments to the cash flow statement, in particular to standardize the presentation, for example by eliminating certain disclosure options.

It is expected that the application of IFRS 18 will have a significant impact on the Consolidated Financial Statements – particularly on the presentation of the Consolidated Income Statement. The specific effects are currently being analyzed as part of a Group-wide implementation project.

No significant impact for the Group is expected from other IFRS amendments already published but not yet mandatory.

3. Significant accounting judgments, estimates, and assumptions

The application of accounting and measurement methods in preparing the Consolidated Financial Statements requires management to make certain accounting judgments, estimates, and assumptions. These have an effect on the disclosed amounts of earnings, expenditure, assets and liabilities, as well as contingent liabilities, as of the reporting date. Actual amounts may differ from these estimates and assumptions, which may lead in future to significant adjustments to the carrying amounts of the assets and liabilities concerned.

Judgments, estimates, and assumptions

In the application of accounting and measurement methods, management made the following accounting judgments which significantly affect amounts in the Consolidated Financial Statements.

The most important forward-looking assumptions and other major sources of uncertainty as of the reporting date, which involve the risk of significant adjustments to the carrying amounts of assets and liabilities in the coming fiscal year, are explained below.

Impact of geopolitical conflicts

Society, politics and the economy are currently facing complex macroeconomic challenges resulting from a combination of a higher level of interest rates, subdued growth expectations, a tense financing framework, falling trade growth and declining confidence among companies and consumers. In addition to the destabilizing effects of the conflicts in Ukraine and the Middle East, the current course of the US government is also contributing to greater uncertainty about the political and economic future. The United Internet Group is responding to this by actively accepting the current challenges and integrating them into its business decisions, in particular by developing strategies to minimize risk, such as reducing the proportion of variable-interest debt or through diversified procurement strategies to ensure a secure and fair energy supply.

Although the United Internet Group has no business activities in the countries involved in the conflicts, it is still confronted with the indirect effects. In view of the uncertain security situation caused by the conflict in the Middle East and the war in Ukraine, especially surrounding the entrance and passage of the Suez Canal, and the potential indirect effects on global business activities, United Internet has developed proactive risk management and mitigation strategies:

• Cybersecurity risks: due to the increased cybersecurity threats associated with the conflicts in the Middle East and Ukraine, the Company is stepping up its investment in cybersecurity measures. These include the use of advanced monitoring technologies, conducting regular security audits and training employees to improve their resistance to cyberattacks.

The Management Board and the operational managers will closely monitor further developments and initiate any appropriate countermeasures (if possible).

United Internet also takes account of developments in the economic environment in its accounting and reporting in the Consolidated Financial Statements, e.g., when determining the recoverability of goodwill or the measurement of assets and liabilities.

These developments are not expected to have any significant direct impact on United Internet.

Impact of environmental and social concerns

Environmental and social concerns can impact the recoverability of Group assets in various ways. For example, risks to recoverability may arise from rising energy prices for renewable energies to operate our 5G mobile network. The recoverability of the 5G spectrum was reviewed as part of the impairment test (Note 29).

The Company currently assumes that any impact caused by environmental and social issues will not have a material effect on the Consolidated Financial Statements.

Revenue recognition

The standalone selling prices for hardware are determined on the basis of the adjusted market assessment approach, which requires an estimate of the relevant market prices for the respective hardware. Changes in these estimates may affect the allocation of the transaction price to the individual performance obligations and thus also affect the amount and timing of revenue recognition.

In addition, various other assumptions and estimates are made during application of the portfolio approach, which are based on past experience and available knowledge at the end of the reporting period. Changes in these assumptions and estimates in their entirety can also have a material effect on the amount and timing of revenue recognition.

The guiding principle for considering whether an entity is acting as a principal or as an agent is whether it has control over the specified good or service before transferring it to the customer. When examining the question of control, significant discretionary decisions often have to be made. This relates in particular to services in connection with the marketing of websites and the sale of third-party products and services by the Group. When a third party is involved in the performance process, the entity must determine whether the nature of its promise is a performance obligation to provide the specific good/service itself (i.e., the entity is a principal) or whether the performance obligation is to arrange for the provision of those goods/services by the third party (i.e., the entity is an agent). An entity determines for each specific good/service whether it acts as principal or agent. If the Group acts as an agent, sales are recognized on a net basis. If we act as principal, sales are reported gross.

In the Business Applications segment, new partners or third-party services newly integrated into the product portfolio, such as third-party licenses (e.g., Microsoft Office licenses), are examined to determine the extent to which licenses or services are already available to the Group prior to the conclusion of a contract with a customer, in other words, whether the licenses can be used by the Group itself without further approval. Moreover, a check is made to see whether the license or service contract with the customer must first be confirmed or released by the actual licensor. If both of these conditions are met, then an agent position is assumed. From the Group’s perspective, complete flexibility with regard to tariff and pricing does not change the previously made assessment.

Also in the Business Applications segment, the role of principal is assumed in the field of domain parking, as this is not a pure brokerage business. The Group provides a platform on which it places advertising on parked domains, with the domain owner receiving a share of the revenue generated. As the Group maintains the platform and has the right to select advertising partners and set prices, it is assumed that it has control over its domain parking business. Although the Group also provides the platform for its domain trading business, however, pricing and the conclusion of contracts generally take place between buyers and sellers of domains, without the Group having the right to intervene. The Group therefore acts as an agent in this business.

In the Consumer Applications segment, the Group must decide for each contract with an agency whether it is acting as principal or as agent, in particular with regard to the marketing of online advertising space. If the Group bears the primary responsibility for contract fulfillment, as it has control over the advertising inventory, and is allowed to set a certain minimum price and reject certain advertising content, the Group acts as principal. This is predominantly the case for the Group's marketing of online advertising space.

Costs of contract fulfillment and contract initiation

The calculation of the estimated amortization periods for contract costs is based on past experience and subject to significant uncertainties, in particular with regard to unforeseen customer or technology developments. A change in the estimated amortization period affects the timing of the recognition. The carrying amount of capitalized contract initiation and contract fulfillment costs as of December 31, 2024 amounted to € 344,738k (prior year: € 303,145k).

Impairment of non-financial assets

Goodwill and other intangible assets with indefinite useful lives, as well as not yet usable assets with finite useful lives, are assessed at least once a year or on indication of impairment. Other non-financial assets are tested for impairment if there is any indication that the carrying value exceeds the recoverable amount. The recoverable value of the respective cash-generating unit to which the goodwill or intangible assets have been allocated is calculated either as “value-in-use” or fair value less cost of sell. As of December 31, 2024, the carrying amount of goodwill was € 3,632,744k (prior year: € 3,628,849k).

In order to estimate value-in-use or fair value less cost of sell, management must estimate expected future cash flows of the asset or cash-generating unit and select a suitable discount rate to assess the present value of these cash flows.

Further details, including a sensitivity analysis of significant assumptions, are presented in the Note “Impairment of goodwill and intangible assets with indefinite useful lives”.

The most important management assumptions for the measurement of the recoverable value of cash-generating units include assumptions regarding the development of sales, margins, and the discount rate.

Carrying amounts and impairment test for investments in associated companies

As of the reporting date, the United Internet Group holds investments in various associated companies. If the consideration for the acquisition of the shares is made by contributing a subsidiary or other investment, the acquisition costs of the associated company are to be determined by means of a company valuation. This valuation is closely related to the assumptions and estimates made by management with respect to the future development of the respective company and the applicable discount rate.

In accordance with IAS 28.40, the Group examines on the reporting date whether the net investment of the United Internet Group in the respective associated company requires an additional impairment charge.

The carrying amount for shares in associated companies is measured on the basis of their prorated annual results. If the annual results for the fiscal year are not known, an estimate is made on the basis of the latest publicly available financial information of the respective associated company.

The recoverable amounts of non-listed companies consider both the available past experience for the respective company and expectations of its future development. As these expectations are based on numerous assumptions, the calculation of recoverable amounts depends on discretionary factors. The carrying value of investments in non-listed associated companies as of December 31, 2024 amounted to € 124,943k (prior year: € 373,205k).

Share-based payment

For share-based payment arrangements, the cost of equity-settled arrangements is measured at the fair value of such equity instruments on the date of granting. A suitable measurement model must be used to estimate fair value when granting equity instruments; this depends on the contractual terms. Suitable data must also be chosen for the valuation process, including the expected option term, volatility, exercise behavior, and dividend yield, as well as the corresponding assumptions.

In the reporting period, expenses for share-based remuneration amounted to € 10,617k (prior year: € 8,176k).

Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.

The Group forms liabilities, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of these liabilities is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile. The carrying value of income tax liabilities as of December 31, 2024 amounted to € 48,004k (prior year: € 87,996k) and mainly related to current taxes of the fiscal year.

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

Trade accounts receivable and contract assets

Trade accounts receivable and contract assets are carried in the balance sheet less impairment charges made. Allowances for doubtful claims are made on the basis of expected credit losses by means of regular reviews as well as valuations conducted as part of credit monitoring. Assumptions concerning the payment behavior and creditworthiness of customers are subject to significant uncertainties. The carrying value of trade accounts receivable as of December 31, 2024 amounted to € 545,713k (prior year: €545,935k). The carrying value of contract assets as of December 31, 2024 amounted to € 818,250k (prior year: €882,733k).

Inventories

Inventories are valued at the lower of cost and net realizable value. Net realizable value comprises the estimated sales proceeds less the necessary expected costs up to the time of sale. Measurement is also based in part on writedowns for inventories. The size of such writedowns represents a best-possible estimation of net realizable value and is thus subject to uncertainties. The carrying amounts of inventories as of the reporting date amounted to € 119,667k (prior year: € 178,083k). Please refer to Note 21 for further details.

Property, plant and equipment, and intangible assets

Property, plant and equipment, and intangible assets are valued at cost on initial recognition. After initial recognition, property, plant and equipment, and intangible assets with limited useful lives are depreciated over their expected economic useful lives using the straight-line method. Expected useful lives are based on historical experience and thus subject to significant uncertainties, especially with regard to unforeseen technological developments. When determining the timing of capitalization and the start of amortization for the 5G spectrum, discretionary decisions were made.

The carrying value of property, plant and equipment, and intangible assets with limited useful lives amounted to € 4,365,860k as of December 31, 2024 (prior year: € 3,491,424k). This amount includes spectrum licenses of € 988,102k (prior year: € 1,028,921k).

Right-of-use assets and lease liabilities

For the duration of the lease, a right-of-use asset in the amount of the present value of the future lease payments plus initial direct costs, advance payments, and restoration costs, and less incentive payments received is capitalized and amortized over the term of the lease. At the same time, a lease liability is recognized in the amount of the future lease payments less the interest portion.

The leases for the business premises in Montabaur and Karlsruhe contain extension options. For the terms of these leases, a period until 2033 was assumed due to their strategic importance for the Group – with the exception of two leases for buildings in Karlsruhe that were newly occupied in 2020 and have assumed terms until 2035. For leases of office buildings at the other locations, extension options are predominantly not included in the determination of the terms, as these assets could be replaced by the Group without significant cost.

The leases for antenna locations in connection with the 1&1 mobile communications network usually have a non-cancelable basic lease term of twenty years. Extension options are not included in the term, as it cannot be assumed with sufficient certainty that the extension options will be exercised at the time the lease is concluded.

The incremental borrowing rate is used to measure right-of-use assets and lease liabilities. The incremental borrowing rate is determined on the basis of reference interest rates for a period of up to 25 years from risk-free interest rates with appropriate maturities, plus credit risk premiums.

Accounting for business combinations

Business combinations are accounted for using the purchase method. The initial recognition of goodwill results from the excess of the acquisition cost of the entity over the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Costs accrued in the course of the business combination are recognized under other operating expense.

However, assumptions made to determine the respective fair value of the acquired assets and liabilities as of the date of acquisition are subject to significant uncertainties. For the identification of intangible assets, depending on the type of intangible asset and complexity of determining its fair value, the Company either uses independent appraisals of external assessors or fair value is determined internally using a suitable assessment technique for the respective intangible asset, generally based on a forecast of total expected future cash flow generation. These valuations are closely related to assumptions and estimates which management has made about the future development of the respective assets and the applicable discounted interest rate.

Accruals

Accruals are formed if the Group has a legal or actual obligation resulting from a past event which will probably give rise to the outflow of resources with an economic benefit to fulfill the obligation, provided that the level of the obligation can be reliably estimated. Such estimates are subject to significant uncertainties. The carrying value of accruals as of December 31, 2024 amounted to € 93,752k (prior year: € 95,099k).

4. Business combinations and investments

4.1 Business combinations in the fiscal year

As in the previous year, there were no business combinations in the fiscal year 2024.

4.2 Investments in the fiscal year

Dilution and loss of significant influence over the stake in Kublai-Tele Columbus

As of December 31, 2023, United Internet held a 40% stake in Kublai GmbH, which holds 95.39% of Tele Columbus AG. At the end of 2023, co-shareholder Hilbert Management GmbH, an indirect subsidiary of Morgan Stanley Infrastructure Inc. (“MSI”), requested a conditional capital increase, which United Internet was obliged to approve due to the existing provisions of the shareholders' agreement.

Due to a difference of opinion between the co-shareholders MSI and United Internet regarding the future financing of Kublai GmbH, United Internet did not participate in the capital increase. Furthermore, United Internet considered the valuation on which the capital increase was based to be inappropriately low and the resulting dilution to be too extensive. United Internet therefore initiated the contractually stipulated dilution protection proceedings as early as the end of 2023 and reserved the right to assert the contractually stipulated catch-up rights at a later date and to increase its stake again.

The capital increase was completed at the end of the first quarter of 2024 and resulted in a dilution of United Internet's stake in Kublai to 4.71%. As the catch-up rights were initially recognized as potential voting rights, the dilution did not immediately result in a loss of significant influence.

On June 14, 2024, United Internet AG announced that it would make no further investments in Kublai GmbH. In making this decision, United Internet waived its catch-up right to increase the 4.71% stake in Kublai to 40% again following the dilution effect of the capital increase. The underlying valuation of the capital increase of Kublai GmbH completed by MSI is still considered to be inappropriately low.

It was only with this decision and its announcement on June 14, 2024 that United Internet ultimately lost significant influence over Kublai.

Up to the date of loss of significant influence, an equity result based on the respective pro-rata stake of € -32.3m was recognized.

From the date of loss of significant influence, the investment represented a financial asset in accordance with IFRS 9. As a result, the investment was reclassified from “investments in associates” to “other non-current financial assets” (see also Notes 24 and 25).

The remaining stake was to be recognized at fair value from that point on, and any difference between

(a) the fair value of the remaining stake and

(b) the carrying amount of the investment when the equity method was no longer applied

was to be recognized in profit or loss.

For the fiscal year 2024, the dilution loss and loss of significant influence resulted in a non-cash impairment of the investment in Kublai GmbH of € 170,533k in total.

Following reclassification, the shares are recognized at fair value in accordance with IFRS 9, whereby changes in value are recognized in other comprehensive income (fair value through other comprehensive income – FVOCI). The option to recognize change in value in OCI was chosen as the corresponding measurement effects are not part of the operating results of the UI Group.

As at the date of loss of significant influence, the remaining 4.71% stake was recognized at a fair value of € 52.5m. An amount of € 19.3m was recognized in other comprehensive income (OCI) for the change in the value of the shares to € 71.8m as at the reporting date.

United Internet has already indirectly initiated the contractually agreed anti-dilution proceedings and submitted the valuation performed by MSI to a court of arbitration for review. If the court agrees with United Internet's assessment and confirms the valuation conducted prior to the capital increase, United Internet may be awarded compensation of approximately € 300m. If the court reaches a different conclusion, the awarded claim or compensation amount could be correspondingly lower. The accounting requirements for recognizing a possible compensation amount in profit or loss have not yet been met (contingent receivable).

Planned discontinuation of the “Energy” and “De-Mail” business fields

In March 2024, the Management Board and Supervisory Board decided to discontinue the “Energy” and “De-Mail” business fields in the Consumer Applications segment. The balance of assets and liabilities resulting from the adjustment is not material.

Sale of IONOS shares by Warburg Pincus

Following the sale of IONOS shares by Warburg Pincus in the fiscal year 2024, the latter’s shareholding fell from 21.2% to 16.2%. 19.7% of shares are in free float. United Internet’s stake in IONOS is unchanged at 63.8%. Moreover, the IONOS Group holds 0.3% in treasury shares.

4.3 Business combinations in the previous year

IPO of IONOS

The IPO of IONOS was completed on February 8, 2023. The shares of IONOS Group SE have since been listed on the regulated market of the Frankfurt Stock Exchange (Prime Standard) under ISIN: DE000A3E00M1, WKN: A3E00M, ticker symbol: IOS.

United Internet received gross proceeds of around € 292m from the sale of shares, while the entire placement volume amounted to around € 389m.

Following the IPO of IONOS Group SE, United Internet held 63.8% and Warburg Pincus 21.2% of IONOS shares. 15.0% of shares were in free float.

Acquisition of shares in Street Media GmbH

On September 5, 2023, the Group acquired 28.7% of shares in Street Media GmbH, based in Berlin, which has since been included in the Consolidated Financial Statements as an associated company using the equity method.

An additional contribution of € 1,490k was made to the equity of Street Media GmbH on October 2, 2023, whereby the shareholding ratio did not change as a result of this transaction. The total acquisition costs for the share purchase amounted to € 1,567k. Street Media GmbH specializes in the development and management of digital media projects.