Ladies and gentlemen, dear guests, welcome to the Analyst and Investor Conference of United Internet. I'm very happy to be able to welcome you personally here in Frankfurt again, and I would like to welcome the webcast participants as well. I'm happy to take you through the agenda. First, by Ralph Dommermuth, we'll hear the company development of the first half of the year, and he'll also give us an outlook. Carsten Theurer will explain us the financials in detail. After this, you will have the option of asking questions in a Q&A session. That's all I have to say, I can give the floor to Mr. Dommermuth. Give the floor.
Thank you very much, Mr. Großmann. Welcome, ladies and gentlemen. As far as we haven't seen earlier, I will give you the company development of the first half of 2026 in United Internet and give you an outlook to the second half of the year as well. Since the 1st of January, we have been distinguishing three different segments of the company in our reports. One segment is called 1&1. That's about internet access, main brand 1&1, Versatel for business-to-business, and the discount brands. We have the IONOS segments. The main brand is IONOS. The other brands are subsidiaries of IONOS from purchases that we've made in Germany and Europe.
The third segment, Mail & Media, with our brands, GMX, WEB.DE, mail.com and United Internet Media for our advertising areas. Let me start with the 1&1 segment. This is where we address consumers and small businesses, but also institutional customers and authorities.
Let me start with the consumers and small businesses. We have 12.33 million mobile contracts. We have broadband market approach. We have the fixed line business, just under 4 million broadband connections, mostly very high speed digital subscriber line and fiber to the home packages that we generate with our fiber optic network, with the last mile provided by Deutsche Telekom and regional carriers. We have the largest FTTH footprint in Germany. 77% of households are connected. We have the segment enterprises and networks within 1&1. We reach 34% of households. It was 27% at the end of last year. We have the fixed line business with more than 70,000 kilometers of fiber optic network available in over 350 cities, 30,000 directly connected sites, for instance, of major companies, institutions, and authorities. Customer contracts in this segment have decreased by 140,000.
I mentioned it earlier, 150,000 fewer contracts for mobile internet contracts and an added 10,000 broadband connections. The loss of customers is due largely to discontinuation of particularly low-cost tariffs and reducing the data allowances included in the high-performance tariffs. 10,000 new broadband customers. Revenue has increased by 1.6%. Service revenues decreased by 1.1%. That's now at EUR 1.805 billion. Other revenues have increased by 13.5%, now to EUR 464.8 million. The EBITDA has increased by 5.1% to EUR 382.7 million, 16.9% EBITDA margin. The second segment is IONOS. Just like 1&1, it is stock listed. It is Europe's leading digitalization partner for freelancers, small and medium-sized businesses, as well as a reliable cloud enabler. We're active in 14 European countries, as well as in the U.S., Canada, and Mexico.
We have a really broad product portfolio: domains, websites, e-shops, online marketing tools, office packages, business email, online storage, AI assistance, targeted to the needs for small and medium-sized companies, and a secure cloud infrastructure. IONOS created an additional 500,000 customer contracts in the first half of the year, 5.57 million abroad and 4.98 million domestic. Overall, our revenues increased to EUR 701.1 million, increasing by 6.9%. It would have been 8.2% if adjusted for foreign exchange. The EBITDA increased by 2.6% to EUR 232.6 million. Foreign exchange adjusted, it would have been 4.2%. It is significantly higher marketing expenses compared to the first half of 2025. The EBITDA margin is 33.2%, a little bit lower than last year, but we are on the right track, as IONOS has confirmed. Mail & Media. We cover data protection and everything is according to European legislation.
We have now 50,000 accounts less than last year. Overall, we have 240,000 fewer free accounts. The positive thing is 190,000 additional pay accounts. We are converting free accounts into pay accounts, which is working ever better. We now have 3.54 million pay accounts. If you look at revenue, you can see that the revenue of the pay accounts is already nearly as high as free accounts. In the past, we only had free accounts, but we are managing to shift this, and we are also improving in terms of cloud storage. For instance, if you store your photos, that is a good thing. That is an ongoing trend that we sell more and more of these pay accounts. You can see it also with revenue. We have EUR 161.4 million revenue, plus 8.4%, due to increased monetization of free accounts and strong growth in pay accounts.
EBITDA has increased by 16.7% to EUR 62.9 million, 32.9% EBITDA margin, more than last year. That is going very well. Of course, you could always imagine things going better than that, but we cannot really complain. Business is developing quite nicely. What is the outlook? We confirm the guidance for 2026. The revenue is approximately to reach EUR 6.25 billion. The EBITDA is to reach approximately EUR 1.45 billion, and the cash CapEx is to reach EUR 600 million-EUR 650 million. We are doing fairly well. The first half of the year has panned out very positively, and we are looking ahead quite positively into the second half of the year. I would like to ask Mr. Theurer now to give you details on the financials.
Thank you very much, and welcome on my behalf as well. I would like to take you through the figures as of 30th of June compared to the first half of last year. We see what Mr. Dommermuth said. If we look at the customer contracts, we see just a million + 960,000. In the ad-funded media, we only have lost 30,000. We did not lose them, but we see a conversion rate there, that 360,000 new pay customers joined. The converting business with the pay accounts is developing very positively. Despite we were able to have the ad-funded media, mainly media responsible for this has developed very well in the first half of the year. Looking at the revenue, we are going towards a EUR 3 million, 3.3%+ compared to the year before through all segments, and that is positive as well. Each segment provides its contribution.
EBITDA on group level, we get to 5.1% EBITDA growth, which continues in the EBIT growth. We have 20% growth here. One special effect here, which is increased depreciation from the investments. In this year, by the phase out of the purchase price allocation depreciation from the Drillisch corporation, we see a drop in the depreciation, and that gives a positive development in the EBIT. In the EPS in total, we have an increase of about 60%, ending at EUR 0.775 per share in earnings. Cash flow-wise, we see a positive development as well. Before the changing of the asset, we have an increase of 3%. The net pay of the operating activities, we see an increase of 22.7%. CapEx is stable to the year before. The investment is stable.
The net payoff is a little less than the year before, but on a similar level. The net in and out pay for the funding is EUR 207 million to the level as of the year before. That means in total, bottom line free cash flow after leasing, we end up EUR 129.7 million, which is about EUR 100 million increase to the year before. I would like to illustrate this with the cash flow bridge here. We start with the EBITDA at EUR 676.77 million. We see the EBITDA, which is from AdTech, although reporting white as an IFRS 5 non-consolidated. As we've reported, the cash flow still includes it with minus EUR 6 million as a negative. CapEx net, EUR 5 million. This is the gross CapEx here with EUR 280 million. Taxes are a lot less than the year before. That is what we had announced.
The exact effect from selling 1&1 Versatel to 1&1 and the connection to the entities within 1&1 leads us to pay less taxes. We will see that in the balance sheet again in a minute. Working capital is lower than the year before. Leaving a free cash flow of EUR 230 million. The leasing expense with EUR 83.5 million, that ends us to the free cash flow after lease of EUR 129.7 million. Look at the balance sheet. We see a little increase in the total. We are a bit over EUR 12 million, EUR 93 million+ . What are the changes? Long and short-term assets, we have an increase of about EUR 100 million.
That is material assets from the investments that we have been carrying on to the optical fiber and mobile networks. In the assets, we see an increase of EUR 104 million by selling and buying hardware. We also see a tax decrease.
Why? In 2025, we had upfront payments, which after sale of 1&1 Versatel have been turned back. We asked the tax office to pay back. This is why we see the better cash flow, less payment, and of course, the profit tax, which drops. The liabilities, if we look at this, EUR 90 million increase. Liabilities of performance learned second half-year. The bank liabilities have increased by EUR 200 million to EUR 3.5 billion. With the dividend payments, shares buyback from IONOS package in 2026 as well, with EUR 84 million, and the CapEx, which we funded a net debt of EUR 3.4 billion, leverage of 2.57. These are some of the things that you see here won't appear in the second half, so that the leverage there will be expected to go down south as we have forecast the end of the year. Equity, EUR 6.3 milion+ .
Total, the ratio is slightly dropping 0.2% to a stable level of 43.4%, driven by the result on one hand, this is opposed by the dividend and the purchase of buyback of shares. This is why it doesn't change. That also already takes me to the end, and I would like to open the floor for questions.
Okay, thank you for the presentation. We will start with the question and answer session. There are the microphones in the room, and please give us your name and company. Nizla Naizer from Deutsche Bank to start.
I have a couple of questions, if I may. The first is on IONOS. Again, you still hold a 64% stake in the company. You've previously said you still see a lot of value in IONOS. Just happy to hear your thoughts on how you feel about your shareholding there. Also, IONOS has announced a lot of high ARPU AI initiatives at the moment. How do you view those initiatives and IONOS' position as a German player within Europe with data centers at their disposal? Maybe some color on the prospects there would be great. My second question is on Mail & Media. Some of the questions we're getting is: Is there an advantage for having it within the United Internet portfolio? In other words, does it help you with your other businesses to own these sort of portals?
Would you consider spinning out the business, listing it, looking at options going forward? Despite the loss of the free accounts that you described, are you still seeing good engagement on the website, or is traffic also taking a hit, which in turn affects the ad revenue on these portals? Some color there would be great. Thank you.
Thank you. Let me start with the IONOS shares. We are proud and happy investor in IONOS. The company has developed greatly and the business is going on since 1998 in our business. That's because we started with a small company in Karlsruhe, Schlund+Partner at the time, EUR 6 million turnover. That is a dimension that we do in a day today. Over the years, that has seen great development and the company has huge opportunities. You have mentioned AI as a topic. I think there is a large market for specific AI application for small and medium-sized companies. IONOS is doing initial offers with a phone assistant, which answers the phone for you, answers questions, makes appointments.
For example, a chat assistant, which is 24/7 available on your website for questions and so on, AI-supported marketing tools or a website app builder, which you can just enter your wishes by the microphone or the keyboard, and then the website, if you want to build it or if you want to build an app, it is built. These are tools that fit well into the times we're living in, and IONOS, from my point of view, has a lot of competitive advantages. One is our own data centers with our own cloud infrastructure, and also for this business, very important, the sales force. Especially addressing the small companies with German products, is not possible by Google alone. If you look at this, the demand for keywords and the request of customers is very low for these keywords.
We have to educate the customers and explain to them what AI is able to do and how simple plug-and-play it can be used. In IONOS, if you want to use a phone assistant, you just select if you want to have a male or a female voice, and you say the address of your website, the system scans the website, and that trains it, and it's done. Off it goes. Only very few small companies will know that this is actually available. I see an opportunity here for IONOS because we have millions of customers in so many countries, and we are able to drive campaigns and have the money to do the campaigns. Well, we are in the beginning. Now it's about running other products throughout the brands, adjusting it. Of course, products won't fulfill all customer demand in the first rollout.
Learn what the sales channels that work and fine-tune things. I'm very optimistic. Yesterday, we had a supervisory board meeting in IONOS, and we can simply calculate if IONOS keeps its figures today, if I had normal EBITDA, factor five by next year, the share should be at 60, not 30. What do I like? What I don't like? I like the shares. What I like is the operative business. We've seen the guidance of the revenue was increased from 7%-8%. I think more is possible. Profitability is good. There is a lot of invest in new products. I'm very happy. It is a fixed part of our group, and I wouldn't like to miss it. Lately, I had a job application interview with someone from senior management. They asked me, "Where do you see the company in five years?" The standard question.
If I start here, what do you think? Where do you want to go? Obvious. I said, "I see this company at a billion." Why shouldn't business double? If we keep the growth rates and put AI on top, we're very good in the cloud. That is no dream. Maybe it'll take a year more. Maybe it'll be a bit quicker. I think it's absolutely realistic to double the figures over the next year. The market is there. It's just up to us to do it. The market is there. The conditions are there. Great company, great future, not only for that. I can just be happy. You asked how does Mail & Media fit into the group, and how is it connected? We've just heard Mail & Media is developing very nicely as well, generating a lot of cash. We are capital light. We generate EBIT, lots of cash.
We help 1&1 in the mobile customers, by GMX, WEB.DE. We sell mobile contracts. This is a topic we're looking into in more detail if we could do more, especially with respect to eSIM. Today, 1&1 is mainly for contracts with cell phones, bundled. If you look at the campaigns, it's always cell phones, hardware with additional things like a watch or some kind of bundle. It's always hardware. 85% of the contracts in 1&1 is on hardware. We have very few SIM-only. Our discount brands nearly always only sell SIM-only. Discount brands are in a segment, as we've seen today, which is discount. We are considering whether we could do more with the portals. The portals should have more range. As they have so many apps, is it 25 million, 28 million? I don't know. Does anybody know the figure?
25 million active apps. We can do an eSIM within three minutes. 25 million people, if you want, pressing a button, giving them a new SIM card without having to send it by mail or anything. This is where I see great opportunity over the next years. eSIM is getting more and more. People are learning it. We can do this out of the app, producing, and commissioning the eSIM. That is something we want to drive down into. It is an additional reason why the portals, beside their independence, their profitability they have already Could grow in importance as an additional and even more important channel. They are already a channel, but more important in the mobile business because we have this benefit of these millions of installed apps. From there, I think, yes, there is a pivot.
Yes, we do have business. That business could grow. Definitely. On the other side, we're looking at combining apps of the portals with mobile phones. You get cloud storage. I think young people have 25 GB free, 100 GB, 200 GB, terabyte. We have synchronization in the background, as you know, from your iPhone and your phone. We have that up and running. We are moving in that. If you look at our pay accounts, lots of pay accounts are not mail traffic, but cloud induced. Because people have to pay. Apple or Google's 15 GB are free. Then they have to pay. Now I see a big issue for the portals in the next years, and also for the bundles with 1&1 products, because in the group, we have this function.
We are now coming up with an even better function to manage, to administer pictures with the best moments and so on, AI induced. That is a topic that is coming up. On one side, we can sell more mobile phones. We can combine it with the development of the portals as well. This is why I'm rather in getting this geared up more rather than separating it. If I got your last question right, it's about the engagement on the website, the traffic on our website. That is still growing. We have a good situation. Over the past years, we had the mobile traffic increasing a lot, smartphone-induced traffic. The big screen traffic dropped. Now we do see that the drop in big screen is flattening out. Big screen is well monitorizable for us.
Small screen as well, by the growth ads in the inbox. We have leveled the drop in big screen by the growth in small screen. If this decline levels off now, we are going to see better view. We are not dependent on Google, like many other websites are, which have Google traffic on them. Now Google answers more and more with AI. They are not linking to the websites. We do not have this problem. We generate our own traffic. We have login traffic. This is why our traffic is still growing. I do not see any reason why this should change. In total, I am very happy with that area of the business. It squares in nicely. Of course, there is lots of things that it could do better, as in any business. AI is something that we integrate more and more.
We are going to start with an independent AI assistant for our customers. We have lots of AI functions in the mail system, translation function, auto-completion. I see opportunities there as well. I think it is a good match in the group and it is developing nicely.
Another question. By Ulrich Rathe .
I have two questions, please. Firstly, just to follow up on that GMX eSIM opportunity. That feels like it could be a big opportunity. What would the timeline be for implementing that, and why has it not been done already? Second question, just on the EBITDA phasing. Based on the guidance that EBITDA is going to be very H2 weighted. That is partly implied by the guidance that IONOS from 1&1. It would be great if you could just talk through the steps of what is driving that step up in EBITDA in H2. That would be really helpful. Thank you.
Yeah, I'll begin with the.
Well, I'll start with the eSIM topic. We'll start in quarter four, i.e. the next quarter with this. Why didn't we do it earlier? Well, we now have an increasing number of eSIM-enabled devices. It is something. Well, the legacy devices weren't able to support this. That way we couldn't do it in the past. Now we're at the point where we can actually do this within three minutes, including identification procedure with the customer, et cetera. This can be done within three minutes, and we weren't able to do that in the past at this speed, and we wanted to get to this point before we actually communicate those and spend money on it.
We combine this eSIM then with cloud storage to create an overall package. The target group are younger people, because at the 1&1 brand, we are mostly in a middle-aged or older target group with hardware. Here we try to build a business without hardware, target group, younger companies. That's the basic idea, and we'd like to try it out in the fourth quarter. Concerning the second question, monetization for the first and second half of the year, we've seen a large customer growth with IONOS, where we have some offerings that will monetize in the second half. That's why the EBITDA growth will accelerate in the second half of the year. Also with additional customers.
With 1&1, we have the monetization of the network, which is being expanded, that will give us some tailwinds with the increase of EBITDA in the second half of the year as well.
Are there any other questions? On the left-hand side, Karsten Oblinger of DZ Bank, first row.
Well, yes, Karsten Oblinger, DZ Bank. I have two questions. First, cost reduction potential due to AI. What can I see there for the group as a whole? Are there any work groups in the three segments? Is there a central control of this? Maybe you can give me some indication. I have a question, Mr. Theurer. You mentioned IFRS 5, which is a IONOS issue, of course, but it affects the group as a whole. My understanding was that if you hadn't sold it within a year, you'd have to put it back on your balance sheet. Can you comment on that?
Will I start with that? Yes, that's true. It's a 12-month period, that is what our colleagues have said, that over the next few months, we will have clarity concerning AdTech, though, how things will continue there. AI cost reduction potentials, you're right, they're huge for us, for the group, from development to marketing to the call centers, written processing of customer requests, customer inquiries. We do a lot in this context already, we can see overall that we have fewer staff members today than we had a couple of years ago. I think we had 11,000 staff members. Now we have 10,400. If you ask me how many people will we have when we reconvene a year from now, we will probably have fewer than 10,400 because we have incredible efficiency improvements.
This will pan out over several years to roll out all of that. There are areas where we've made huge progress. Other areas, we're still experimenting. Let me give you an example. What we can do pretty well already is written communication with customers. That's going very well. With oral communication, we can handle simple topics. For instance, we have a concierge function. If somebody calls us, we can recognize the customer through the phone number that's calling us, we can see what phase they're in. Are they waiting for a digital subscriber line connection? Did they just receive an invoice? Are they in an area that just suffered a technical fault? We can already assume what's coming down the line. With many, we can't anticipate that's where we have the concierge function, where customers tell us what it's all about. That's done entirely by AI with us.
In the past, we used to have staff there. Once we go into the actual topic, we can't rely fully on the AI to answer all complex cases. The quality isn't where we'd like to be, over time, this will change. What we're doing, the AI monitors the phone call and suggests solutions to the agent in real time, so that if the agent doesn't know the answer, the solution immediately doesn't have to look into a knowledge database. The AI suggests a solution. Of course, every phone call has to be logged so that if the customer calls again, they usually wind up with a different agent. That agent needs to know what it's all about, the AI can process this, that also reduces the period that we spend with every single phone call.
We're making good progress in this spoken communication. Written communication, we can show context-sensitive solutions, suggest them, log the call, use the concierge function for a number of different issues. We're not at the point where all the support can be handled by the AI without any staff. They're not there yet, this will develop over the years, this is mirrored in other areas. In marketing, for instance, if we have a support video or presenter, then it can be AI-generated, or if it's about adjusting images to certain channels, to different formats, small screen, big screen, or for social media. In the past, if we had copy, somebody had to write copy. In the past, that was done by a copy editor.
Nowadays, this is generated by the AI and then monitored or proofread by a copy editor so they can handle five or six texts a day rather than one like in the past. This means that we can save costs here. Of course, it doesn't necessarily mean we can handle more calls. We don't want to have more calls. We want to reduce the time that we spend on the calls, and this is also something can happen with all the other companies as well. That's a core competence, and this has to be handled by the subsidiaries. Network control for mobile phone system AI, well, I can't say yay or nay because I'm not sure. We're working on it, but I'm not sure how far we've progressed. You can always read the press statements by Telekom, et cetera. "Oh, it's so great.
It does everything itself." We can see with predictive maintenance whether something is going to break. The technology partner is Mavenir, and they provide a core software. Whether we use all the tools that are being offered, whether we've rolled them all out or whether we only do it in parts, I can't tell you. We have it in some areas, but I can't tell you that the entire network control is handled by AI.
Are there any other further questions? I can't see anyone indicating right now. I would like to thank you for your participation and your questions. I conclude this conference. I would like to invite you to a coffee in the foyer. Safe home. See you next time. Thank you very much.