Ziggo N.V.
Full-Year and Q4 2013 Results
24 January 2014
Disclaimer
This document does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or any
other jurisdiction. Various statements contained in this document constitute “forward-looking statements” as that term is defined by U.S. federal
securities laws. Words like “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “potential”, “predict”,
“project”, “should”, and “will” and similar words identify these forward-looking statements. By their nature, forward-looking statements are
subject to numerous assumptions, risks and uncertainties. Many of these assumptions, risks and uncertainties are beyond our control.
Accordingly, actual results may differ materially from those expressed or implied by the forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we operate.
The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated results or
events: general economic trends and trends in the information, communications and entertainment industries; the competitive environment in
which we operate; fluctuations in interest rates; consumer disposable income and spending levels, including the availability and amount of
individual consumer credit; changes in consumer television viewing, broadband internet and telephony preferences and habits; consumer
acceptance of existing service offerings, including our standard TV, digital pay TV, broadband internet and telephony services; consumer
acceptance of new technology, programming alternatives and broadband internet services that we may offer; our ability to manage rapid
technological changes; our ability to maintain or increase the number of subscriptions to our standard TV, digital pay TV, broadband internet and
telephony services and our average monthly revenue per user; our ability to handle network and IT disruptions and to handle large volumes of
customer service contacts; our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the
outcome of any pending or threatened litigation; changes in, or failure or inability to comply with, government regulations in the Netherlands and
adverse outcomes from regulatory proceedings; government intervention that opens our distribution network to competitors; uncertainties
inherent in the development and integration of new business strategies; capital spending for the acquisition and/or development of
telecommunications networks and services; the availability of attractive programming for our digital TV services at reasonable costs; the loss of
key employees and the availability of qualified personnel; and events that are outside of our control, such as terrorist attacks, natural disasters or
other events that may damage our network. We caution readers not to place undue reliance on the forward-looking statements contained herein,
which speak only as of the date of this document, and we expressly disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change
in events, conditions or circumstances on which any such statement is based.
1
Highlights Q4
• Continued RGU growth supported by broadband internet and business bundles
– RGU growth of +44k (-19k in Q4 2012) as a result of successful marketing and retention campaigns
– Ziggo Mobile on track with +33k subscriber by year-end 2013
– Decline of customer churn compared Q4 2012
• Strong growth of internet & business bundles
– Total internet subscribers up 32k in Q4 to 1.9 million, up 6.8% y-o-y
– Business bundles net adds up 7k in Q4 to 55k at year-end 2013, up 48.2% y-o-y
– Strong performance for Esprit Telecom
• Continuous increase of Wifi coverage with more than 1.1 million WifiSpots activated
• Rapid adoption of SGUI since launch in March with 310,000 users by year-end
– Covering already 40-50% of all VOD transactions
• Discussions with Liberty Global have progressed
– Therefore proposal for final dividend 2014 suspended
2
Strong increase of WifiSpots usage
• Over 1.1 million WifiSpots activated since launch
# Unique registered users
572k
• All Ziggo modems to become a WifiSpot for all other Ziggo
internet customers, providing wireless high-speed
connectivity throughout our footprint
• Integral part of Ziggo’s converged strategy and mobile
proposition
• Enhancement of total offering supports customer retention
• Exclusive access for Ziggo bundle, internet and mobile
customers
New users
Existing users
# Used MegaBytes
83 mln.
• Started a pilot with WifiSpots in street cabinets in
cooperation with a number of municipalities to enhance
outdoor WiFi coverage
Amount MB downloadtraffic
3
Ziggo Mobile on track with 33,000 subscriptions
Ziggo Mobile
Two competitive propositions
 Unlimited use of more than 1.1 million WifiSpots
Consumer
 Monthly subscription
 Sim only (approximately 30% of market)
 Exclusively for existing Ziggo customers
 Mobile business more Marketing & Sales intensive
Price
€ 25,00*
€ 40,00*
Excl. discount**
€ 15,00*
€ 30,00*
Incl. discount
1000 MB
2000 MB
300
min/SMS
600
min/SMS
Speed
WifiSpots
>1.1 million WifiSpots
Transparent
pricing
*Incl. VAT
Unlimited
Voice bundle
4
Financial Highlights Q4 and FY 2013
Q4 2013 financial highlights
• Revenue up 2.8% y-o-y to €394.0 million
– Organic revenue growth up 1.7% y-o-y (excl. Esprit and ‘other revenues’)
– B2B revenues up 47.9% (up 12.9% excl. Esprit)
• Adjusted EBITDA up 2.1% y-o-y to €222.8 million
– up 1.4% y-o-y excl. Esprit Telecom
– One-off benefit of €4.4m from adjustment in accounting of tablets
• Net profit Q4 2013 increased up 12.6% y-o-y to €79.3 million from €70.4 million in Q4 last year
FY 2013 financial highlights
• Revenue up 1.8% y-o-y to €1.56 billion
– Organic revenue growth up 1.2% y-o-y (excl. Esprit and ‘other revenues’)
– B2B revenues up 34.2% to €141.7 million (up 10.3% excl. Esprit Telecom)
• Adjusted EBITDA €886.8 million, up 0.7% compared to FY 2012
– up 0.2% excl. Esprit Telecom
– Increase in marketing & sales and customer retention
• Free cash flow €407.9 million, down 25.1% y-o-y
– Cash outflow from working capital of €46.1 million vs a cash inflow of €61.1 in 2012
– Higher capital expenditure
• Net profit up 80.2% to €347.3 million, from €192.8 million in FY 2012
• Leverage of 3.5x in line with company target (3.4x at year-end 2012)
5
Consumer
Strong growth in 2p internet subscribers
Consumer RGUs
(‘000)
All-in-1 subscribers
(‘000)
+0.4%
Telephony
Internet
Digital pay TV
Analog and digital TV
Analog TV only
6,908
6,935
1,464
1,565
1,751
1,855
917
853
2,231
2,253
1.395
1.426
1.446
1.483
1.495
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
408
545
FY 2012
+7,2%
FY2013
• Consumer RGUs 27k y-o-y (up 20k in Q4)
• Telephony RGUs up 101k or 6.9% y-o-y (up 12k in Q4)
• Internet RGUs up 104k or 6.0% y-o-y (up 25k in Q4)
• All-in-1 subs up 100k or 7.1% y-o-y (up 12k in Q4)
– All-in-1 penetration of 54.8% of consumer customer base*
Subscribers ‘000
Q4 2012
Q4 2013
– Further roll-out of popular of WifiSpots
TV only
971
747
– Focus on our dual–play bundle
2P (TV + internet)
341
349
54
59
3P (incl. non-bundle)
1,410
1,506
Total
2,776
2,661
● Digital pay TV RGUs down 64k y-o-y (up 6k in Q4)
– Decline in subscribers partly offset by increase in VOD
transactions
2P (TV + telephony)
• Standard TV down 115k or 4.1% y-o-y (down 22k in Q4)
* Excludes 35k customers serviced over cable networks owned by 3 rd parties
6
Consumer
Increase in RGUs per customer and blended ARPU
RGUs per customer
(#)
Blended and All-in-1 ARPU
(€)
~67
Telephony
usage
2.45
2.48
2.50
2.53
2.56
40.48
41.58
42.09
41.98
Digital
pay TV
42.73
All-in-1
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
• RGUs per customer1 grew to 2.56, up 4.6% y-o-y
 Excluding Digital Pay TV, 2.25 RGUs per
customer1, up 5.8% y-o-y from 2.13 per end
2012
 Growth driven by internet and all-in-1 bundle
subscribers
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
All-in-1
+ usage
Q4 132
• y-o-y increase in blended ARPU2 of 5.9%
• ARPU growth driven by:
– Growth in RGUs
– Churn among lower ARPU TV-only customers resulting in a
higher ARPU for Standard TV in total
– Price increase as per February 2013
 Decline in customer churn (22k in Q4 2013 vs
46k in Q4 2012)
1.
2.
RGUs and ARPU exclude 27k digital pay RGUs, 50k internet RGUs and 39k telephony RGUs serviced over cable networks
owned by 3rd parties
All-in-1 ARPU + digital pay TV ARPU + telephony usage ARPU
7
Revenues
Continued growth of All-in-1 Bundle and B2B
Revenue by product
(€m)
Other
B2B
Telephony
Internet
Digital pay TV
Standard TV
383
27
388
10
28
392
10
35
394
391
10
38
7
41
5
1,537
106
1,565
47
142
77
79
77
77
79
309
312
112
114
115
117
118
442
464
43
43
42
41
41
168
167
114
114
113
111
110
465
447
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
FY 2012
FY 2013
• Solid y-o-y revenue growth
32
• Revenue growth offset by
– Continued growth in RGUs for internet and telephony,
driven by a further uptake of the All-in-1 bundle
– Lower RGUs for standard TV
– A price increase for the consumer market on February 1
– Decline in other revenues related to a lower sales volume
and capitalization of STBs
– Continued strong growth in subscriptions to business
bundles and the acquisition of Esprit Telecom
– Revenue decline from subscriptions to digital pay TV
– B2B revenue contribution increased 34.2% (10.3% excl.
Esprit Telecom)
– Esprit revenue growth of 7%
8
Revenues
Revenues from subscriptions continue to grow
Revenue breakdown in subscription and usage
(€m)
Other
383
B2B
27
Consumer
usage 1
38
Consumer
subscription 2
308
394
10
41
37
312
5
1,537
106
Q4 2013
• Consumer revenues of €353.4m, down 0.7% y-o-y
1,565
47
156
1,228
142

Up 0.8% excl. ‘other revenue’

Discounts of approx. €1.7m as part of our promotional offers
resulted in a 0.5% lower growth of consumer revenues

Consumer revenues from subscriptions up 1.1% (taking into
account promotional discount)

Consumer revenues from usage down 1% as a result of lower
telephony usage

Other revenues (mainly STB sales) declined by 52.3% to
€4.7m
32
148
1,243

lower average sales price per STB

Less STBs recognized as sales due to capitalization

Discount from deferred tablet costs of €3.2m
• B2B revenues (excl. Esprit) grew by 12.9% y-o-y
Q4 12
Q4 13
FY 12
FY 13

Growth in business bundles

Revenue contribution from Esprit of €9.3m
FY 2013
1.
2.
Including T-VoD and telephony usage settled by calling minutes
Including flat fee fixed line telephony subscriptions
•
Consumer revenues of €1,423.1m, down 0.6% y-o-y (up 5%
excl. ‘other revenue’)
•
B2B revenues up 34.2% to €114.7m
•
B2B revenues (excl. Esprit) up 10.3% driven by growth in
business bundles
9
COGS and Gross Margin
Decline in COGS as % of the revenue
COGS1
(€m)
• In Q4 2013, COGS increased to €72.2m, up 4.6%
from Q4 2012, COGS excl. Esprit down by 3.9% due to lower
costs for STB
As a % of
revenues 18.0%
69.1
• Gross margin excl. Esprit increased to 82.8% from 82.0%
18.4%
71.3
19.4%
76.0
18.0%
18.3%
70.3
72.2
• Gross margin for Esprit Telecom is 37.2%
• Improved gross margins on internet, telephony
and B2B (excl. Esprit Telecom)
• Gross margin negatively impacted by the discount from
deferred tablet costs of €3.2m
• Negative margin contribution on STBs of ~€4.5m reduced due
to lower number recognized as sales, 50,000 set-top boxes
were capitalized, as part of our retention campaign
Q4 12
1.
Q1 13
Q2 13
Q3 13
Q4 13
ITV Recorders
ITV Receivers
CI+ module
Sub Total
Q4 2012
36,000
23,000
3,000
62,000
Q4 2013
25,000
16,000
4,000
45,000
Capitalized
ITV Recorders
ITV Receivers
Sub Total
Total
0
0
0
62,000
33,000
17,000
50,000
95,000
Cost of goods sold includes the costs for purchases of materials and services directly related to revenues and consists of author rights, signal costs and
royalties that we pay to procure our content, interconnection fees that we pay to other network operators, materials and logistics costs relating to the sale of
set-top boxes and materials used to connect customers to our network
10
OPEX
Increase in Contracted Work and Other operating expenses
Change in OPEX
(€m)
• Marketing & Sales down 12.5%
– Adjustment of €5.5m as tablets previously recognized as M&S
• Opex excl. M&S up by 6.7% y-o-y (excl. Esprit up 3.9%)
+3.2%
• Personnel excl. Esprit down 1.6% y-o-y
4.5
95.9
0.6
2.2
0.8
99.0
3.3
– Lower accrued bonuses by €3.5m
– Increase in headcount of 7.7% (mainly external) more than offset
by increase in capitalized personnel costs of €10.6m
– Headcount increase fully related to our investment program
• Contracted work excl. Esprit up 36.6% y-o-y
– Higher costs fully driven by external call centers
– Call volumes up by 24%
– Following strong RGU growth and the roll-out of Ziggo WifiSpots
• Office expenses excl. Esprit down 6.8% y-o-y
– Cost of housing and sites up 7% related to new datacenter
Q4 12
Esprit
Personnel Contr. Marketing Office
work
& Sales expense
& Other
Q4 13
– Offset by a refund of energy tax for prior years and the coverage for
office expenses related to the increase in hours capitalized
• Other expenses excl. Esprit up 20.0% y-o-y
– Includes a gain of €6.9m from the sale of our transmission towers
– Offset by an impairment of €6.5m related to the development
of a new Video platform
– Release in provision for bad debt of €0.7m in Q4 2012
11
Adjusted EBITDA
EBITDA up due to higher spend on Contracted Work
Adjusted EBITDA1
(€m)
As a % of
revenues
56.9
218.2
57.4
222.6
56.4
56.4
221.0
220.4
56.5
222.8
Q4 2013
• Adjusted EBITDA of €222.8 million, up 2.1% compared
to Q4 2012
• Excl. Esprit Telecom, EBITDA up 1.4% as a result of
– An adjustment of €4.4m as a result of the deferred
costs for tablets for the first 9 months
– Offset by an increase of 36.6% in Contracted Work,
driven by higher costs for external call centers
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
• EBITDA margin is 56.5%
–
1.
Excl. Exprit, EBITDA margin is 57.6% vs 57.3% in
Q4 2012
Adjusted EBITDA does not include IPO related expenses
12
Net Financial Expense
Decrease in financing costs due to volatility in other income
Net financial expense
(€m)
53
4
0
49
0
2
4Q 2013
• Interest expense down €1.2m or 2.4% to €50.2m
– Lower average debt of €28m compared to Q4 2012
– Blended interest rate 6.8%, similar to Q4 2012
51
50
• Amortization of funding costs down €2.5m y-o-y
to €1.6m following the refinancing of the €1.1bn
senior credit facility in March 2013
• €3.1m gain in other income
– Fair value gain on IRS of €4.4m
– Periodic amortization of negative hedge reserve of €1.2m
-3
Q4 12
-3
Q4 13
– Forex gain on USD denominated purchases of €0.1m
• Banking and financing fees up €0.1m to €0.3m
Fair value results on
derivative financial instruments
Amortization funding costs
Bank & financing fees
Interest on bank debt and notes
13
CAPEX
Increased investments in all Capex segments
Capex1
(€m)
Capex mix, Q4 2013
(%)
-1.2%
97.4
15.1
100% = €96.2m
96.2
22.5
Customer
installations
53.2
40.7
Network
growth
29.1
33.0
Maintenance
& other
Q4 12
Q4 13
23%
Customer
installations
Maintenance
& other
34%
42%
Network
growth
4Q 2013
• Capital expenditure of €96.2m, down 1.2% y-o-y (up 22.5% for FY 2013)
• Increase of €7.4m y-o-y in Capex for customer equipment, due to capitalization of STB’s (€6.1m)
• Decrease of €12.5m y-o-y in Capex for network growth
– A peak in capacity investments in Q4 last year
• Maintenance and ‘Other Capex’ increased to €33.0m vs. €29.1m in Q4 2012
– Impairment of €6.5m recognized as impairment of a project to build a new video platform
– Excluding the impairment, Other Capex increased by €10.4m, mainly related to hours capitalized by over €9m.
1.
Our capital expenditure and investments relate primarily to extending, upgrading and maintaining our network, installation of new customers and the cost of
cable modems. Capital expenditure also includes increases in intangible assets, primarily expenditures on software, which we capitalize. Set-top boxes are
sold to customers and therefore recognized as cost of goods sold and not capitalized
14
Free Cash Flow
Lower FCF due to an increase in net working capital
Free Cash Flow
(€m)
Q4 2012
Q4 2013
% change
• Free Cash Flow down 42.7% y-o-y to €79.4m
mainly due to an increase in net working capital
as a result of
Adjusted EBITDA
218.8
222.8
2.1%
EBITDA
218.8
222.8
2.1%
0.0
0.2
-923.0%
– An increase in trade accounts receivables by €10.7m
vs a decrease of €14m last year
20.8
-47.4
-327.9%
– Accounts payable and other current liabilities
decreased by €12m vs an increase of €38m last year
-97.4
-96.2
-1.2%
Funding Joint Ventures
-2.8
0.0
-100.0%
Other cash used in investing
activities
-0.4
-0.4
19.1%
138.7
79.4
-42.7%
Free Cash Flow as a % of revenues
36.2%
20.2%
Capex as a % of revenues
25.4%
24.4%
48.9
-3.0
Movement in provisions
Change in net working capital
Capex
Free Cash Flow
Free Cash Flow to Equity
• FCF margin down to 20.2% of revenues vs.
36.2% in Q4 2012; (FY2013: 30.1% of
revenues vs. 40.9% in 2012)
• FCF to Equity (FCFE) down to -€3.0m from
€48.9m in Q4 2012; (FY 2013 €264.8m down
by 35.4% vs. 2012)
-100,7%
15
Net Debt
Significant headroom
Total Net Debt / EBITDA1
4.50
3.87
3.42
EBITDA / Interest
3.50
4.04
2.76
10
11
12
13
10
3.0
2.42
10
11
2.05
12
11
12
3.0
Covenant2
13
(EBITDA – Capex) / Interest3
Net Senior Secured Debt / EBITDA1
2.95
3.14
4.56
Covenant2
2.14
13
2.14
2.20
10
11
2.76
2.80
12
13
1. As of 2012, the MtM value of the derivatives and the accrued interest are included in the debt
2. For New Senior Credit Facility – based on slightly different calculation
3. Capex excludes Capex related to the integration of Ziggo’s predecessors
16
Net Debt and refinancing options
Room for further optimization
31-Dec-13
x LTM EBITDA
Margin/Coupon
Maturity
Senior Credit Facility
405.0
0.46
E + 1.750%
Mar 2018
6.125% Senior Secured Notes
750.0
0.85
6.125%
Nov 2017
3.625% Senior Secured Notes
750.0
0.85
3.625%
Mar 2020
1,905.0
2.15
1,208.9
1.36
8.000%
May 2018
3,113.9
3.51
Accrued interest
38.8
0.04
MtM interest rate swaps
29.5
0.03
(77.4)
(0.09)
3,104.8
3.50
€ million
Total Senior Secured Debt
8.000% Senior Unsecured Notes
Total Debt
Cash and cash equivalents
Total Net Debt
• As per end of Q4 2013, the average maturity is approx. 4.7 years1
• 6.125% SSN callable as per 15th of November 2013 at 3.0625% call premium
• 8.0% SUN callable as per 15th of May 2014 at 4.0% call premium
• At todays interest rates, Ziggo could potentially realize a 200bps lower coupon upon refinancing of
these two Notes
1. Average maturity of outstanding notes and Term Loan A
17
Management Agenda & Outlook 2014
Management Agenda
Outlook 2014
• Discussions with Liberty Global regarding a potential
acquisition of Ziggo have progressed
• Continued focus on the top-line
• Further investments in marketing, retention
campaigns and Ziggo Mobile
• EBITDA: Flat compared to FY 2013
• Capex: around €370 million
• Further build-out of “Ziggo WifiSpots”
– Capitalization of set-top boxes following for 12/24
months contract
• Extend and build upon of mobile offering
– Investment Program for the development of new
products and systems
• Execution of development roadmap
• Cost control & discipline
• Optimization of capital structure
– Increase in network capacity (mainly additional
network segmentation), to accommodate increased
internet video traffic
• Dividend proposal suspended in view of
discussions with Liberty Global
18