Good day, and thank you for standing by. Welcome to the United Internet quarterly statement Q3 2026 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, one, and one on your telephone. You will then hear an automated message advising your hand is raised. If you have joined via device audio, click the raise hand button on your screen. To withdraw your question, please press star, one, and one again, or click the lower hand button. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dominic Großmann. Please go ahead.
Thank you, operator. Hello and good morning, everyone. I would like to welcome you to our Q3 2026 analyst investor call. Thank you for joining us today. My name is Dominic Großmann. I am responsible for investor relations at United Internet, and here with me today, I have our CFO, Carsten Theurer, as well as his successor, André Driesen. Briefly about today's call. Carsten will first take you through our presentation with the business development in the first nine months and will also give an outlook for the remainder of the year. Afterwards, André will shortly introduce himself before he will be happy to answer all your questions. So far to our agenda. I would like now to hand over to Carsten. Carsten, please go ahead. The floor is yours.
Thank you, Dominic, and also a warm welcome from my side. Starting with the customer figures, we are happy to show that our customer contracts increased by 770,000 to 30.49 million during the first nine months of 2026. Our revenue subsequently improved by 3.0% to around EUR 4.64 billion. What you can see here are our operative earning figures, taking into account that the reported EBITDA and EBIT are impacted by one-off expenses of EUR 61.3 million due to our ongoing transformation and restructuring programs at 1&1 Versatel and IONOS. Consequently, operative EBITDA increased by 10.0% to around EUR 1.06 billion, while operative EBIT grew strongly by 25.4%, which was mainly driven by the improvement in operative EBITDA and lower depreciation and amortization.
Despite an increase in higher depreciation and amortization of intangible assets and property plant equipment, this was overcompensated by a significant decrease in PPA amortization. As a result of the improvement, operative EBIT, and lower tax expenses, we managed to increase operative EPS to EUR 1.26 per share in the first nine months of 2026, an increase of 68% year-over-year. Over the following slides, we will do a deep dive into our segment development, starting with 1&1. Overall, the number of customer contracts decreased by 220,000 to 16.1 million during the first nine months of 2026. This was mainly driven by a decline in mobile internet contracts of around 240,000, bringing to the total of 12.24 million. This development was primarily related to our decision in April this year to withdraw from low-margin discount offers and continue our focus on our value over volume strategy.
On the broadband side, we saw a positive development and increased our broadband connections by 20,000 to 3.86 million. Here, many new partnerships with fiber providers have enabled us reversing the trend of customer losses. Today, 1&1 has the largest fiber footprint with over 25 million households in Germany. While competition in the mobile market remained intense during the first nine months of the year, we expect this challenging environment to persist through the end of the year 2026. Moving on to revenue. 1&1 generated around EUR 3.4 billion, which is an increase of 1.2% compared to the first nine months of the prior year, mainly driven by higher hardware sales as they grew over 12% to EUR 689.6 million. Service revenues have slightly decreased year-over-year to EUR 2.71 billion.
If we turn our attention to EBITDA on the next slide, we can observe that the operative segment EBITDA strongly increased by over 11% to EUR 593.3 million. This number excludes provisions for one-off expenses of EUR 60 million, which are related to our ongoing transformation and restructuring program at 1&1 Versatel. In addition to the strong increase in EBITDA, we also managed to improve our EBITDA margin to 17.4%. This reflects the ongoing transition towards a more value-oriented customer base, elimination of migration costs, and savings from increased data intake. Looking at the business development of IONOS over the next slide. We see that IONOS managed to further increase their contract portfolio by 690,000 contracts to 10.74 million in the first nine months of 2026.
This momentum is driven both by winning customers domestically as well as abroad, with our operations abroad performing even stronger and strengthening the position of IONOS as a one-stop shop for SMEs and businesses. This results in an increased revenue at 7.6% to over EUR 1.05 billion. Excluding FX effects, the revenue's growth is even higher with 8.4%. Despite higher marketing expenses compared to the previous year, the operative EBITDA increases by 5.9% to EUR 374.2 million, and the operative EBITDA margin remains strong above 35%. Turning now our attention on our last segment, Mail & Media. The number of pay accounts rose by 300,000 to 3.65 million in the first nine months of 2026. According to the ongoing conversion from free accounts to pay accounts, our ad -financed free accounts were down by 340,000 compared to the end year of 2025.
The Mail & Media segment achieved a revenue growth of 6.8% to EUR 245.4 million, driven primarily by growth in pay contracts as well as a stable development on the advertising side of the business. There was also further growth in EBITDA, with an increase of 20.5% to EUR 99.9 million, and the corresponding improvement in our EBITDA margin to almost 41%, which corresponds to a more than 4% points increase year over year. Besides the underlying business performance contribution to the growth in EBITDA, the increase also results from the acquisition of the server infrastructure used in IONOS Group's data centers, which was previously leased from IONOS. Following the acquisition effective January 1st, 2026, the prior incurred lease costs fully expensed through EBITDA as OpEx have been shifted. The acquired infrastructure is now recognized as capital expenditure on the balance sheet and depreciated on a scheduled basis.
Much for the segments. Here we have summarized additional KPIs for the group. At around EUR 453.8 million, our CapEx was down 7% year -over -year. This confirms that we are on track to finish the year below the elevated levels on the past two years. Our free cash flow improved significantly by over 78% year over year to EUR 313.5 million, which I will go into more detail on the next slide. The net bank liabilities increased by 3.1% to around EUR 3.3 billion, as our net bank liabilities reached their peak ahead of planned repayment, while our equity ratio remained stable at almost 44% year over year. Continuing with the free cash flow bridge, we adjusted the operative EBITDA for Sedo, which is carried in accordance with IFRS 5 as discontinued operations as of last year, as well as for EUR 61.3 million in restructuring costs.
One of the main contributors to our outflows this period is again CapEx, totaling EUR 451.8 million, and this reflects ongoing investments in our infrastructure across fiber optics, mobile networks, and data centers, which highly contributes to the digital sovereignty of Germany and Europe. After accounting for lower tax payments and changes in working capital, our free cash flow before leasing stands at EUR 427.6 million, a significant improvement year over year, while our free cash flow after leasing amounts to EUR 313.5 million. Finally, a brief word on the outlook.
We confirm our guidance for the 2026 fiscal year, with revenues expected to reach approximately EUR 6.25 billion. Operating EBITDA, excluding one-off expenses of approximately EUR 95 million related to our ongoing restructuring processes, is expected to amount to around EUR 1.45 billion. Cash CapEx is expected to reach approximately EUR 600 million-EUR 650 million by the end of the year. I will now hand over to André to short introduce himself. André, please go ahead. Floor is—
Thank you, Carsten, and good morning everyone from my side as well. Before we move into the Q&A, let me briefly introduce myself. Some of you may know me from my time as CFO of Drillisch and later 1&1 Drillisch. During that period, I represented the company for almost seven years on the capital market and was closely involved in some of the group's major strategic developments, including the negotiation and execution of the MBA MVNO contract with Telefónica and the merger of Drillisch and 1&1. Since November, I've joined the management board of United Internet, and currently, I'm taking over responsibility for all finance functions from my predecessor, Carsten. I'm very much looking forward to continuing the work with the team and, of course, to engaging with all of you in the discussions ahead. I hand back over to Carsten.
Thank you, André.
Yeah.
All the very best for your new role. I wish you a great start, and I'm doing my best to make it as easy as possible for you. Before we move on to the Q&A session, I would also like to take this opportunity to address all of you, our stakeholders, investors, and analysts. As you may know, this will be my last webcast, as I will be leaving the company at the end of the year. It has been a real pleasure engaging with you over the years, and I have always greatly appreciated our constructive, sometimes challenging dialogues, whether in person, on the road, or over the phone. I'm confident that André will build on this strong foundation.
For that, I wish André and the entire team every success. Thank you once again for the great exchanges over the years. Now, let's move on to the Q&A session. We are happy to take your questions.
Thank you. To ask a question, you will need to press star, one, and one on your telephone, or if you have joined via device audio, click the raise hand button on your screen and wait for your name to be announced. To withdraw your question, please press star, one, and one again, or click the lower hand button. Thank you. We will now go to our first question. The first question today comes from the line of Polo Tang from UBS. Please go ahead.
Yeah. Hi. Morning. Thanks for taking the questions. I have three. First two are for Carsten, and the last one is for André. My first question is on Mail & Media. How is it going with the cross-selling of mobile and other products to the Mail & Media base? Second question is just in terms of IONOS. You previously looked at spinning out IONOS and distributing shares to United Internet shareholders. However, there were tax issues associated with this.
What is your latest thinking about a spin-off and potential tax implications, and does the spin-off of Siemens Healthineers in the news today change your thinking on what you may or may not do with IONOS? The last question is for André. What are your main priorities as CFO, and what surprised you negatively or positively since starting the role? Given your background at 1&1 Drillisch, does your appointment signal a greater focus on the 1&1 unit for United Internet? Thanks.
Thank you, Polo, for your questions. Starting with Mail & Media and the cross-selling question, maybe it is too early to talk about the success story or not success story of the offers due to the fact that they are out for, I guess now, three weeks, something like that. For those who did not know the offer, we enriched our mobile tariffs with cloud storage. That was the idea. We will see how it will go, and we will keep you informed if this is a success or not.
Coming to your IONOS question of spinning off the shares, yes, we are watching the process at the Siemens concern. But for us, even if we have a solution, if we can save or avoid the tax issues, it is not a topic for us in the next years. We have no plans for spinning off the shares. I hand over to André.
Yeah. My first priority is to go on with the work as seamless as possible and continue the, I would say, good and successful work of Carsten. And yeah, I think we share the same ideas and have the same approach. Yeah, my business will be the holding functions in United Internet, and yeah, all what you know from the ideas or the plans will be the same for me in the new role.
Is there anything—
Hope that answers your question. Sorry, we didn't get it.
—So, just in terms of André, is there anything that surprised you in terms of your return back to the group?
No. Although there were a lot of years between my last days here for the 1&1 Drillisch, a lot of things are the same people, some people are the same. I think it's, the business goes on. The figures changed. The group grew over the time, but I followed the United Internet and also the 1&1 equity story over the years, and so I was not always totally out of the business.
Thanks.
Thank you. As a reminder, if you wish to ask a question, please press star, one, and one on your telephone. Or if you have joined via device audio, click the raise hand button on your screen. Thank you. We will now go to the next question. The next question today comes from the line of Nizla Naizer from Deutsche Bank. Please go ahead.
Thanks. Just wanted to say all the best to you, Carsten, in your next ventures, and welcome back, I guess, André, and looking forward to working with you as well. I have a couple of questions. The first is on United Internet recently increased their stake in 1&1, and now you own 89% of the company from what I understand. How are you seeing, I guess, the rest of the minority position in 1&1, and would you want to keep increasing your stake if the opportunity arises? If you could give us some color, that would be great. My second question is on the Mail & Media business. So growth is quite encouraging, and you did mention that a lot of it is from increasing your paying subscriber base.
Do you see the scope to keep increasing your penetration of paying subscribers, and what are you really offering that's making it appealing, and what is the average subscription that a subscriber would pay for Mail & Media? If you can maybe also give us some color as to what the margins would have been if the leasing costs had stayed on as OpEx, just to understand what the organic margin expansion would have looked like, given how strong the reported margin expansion is. Thank you.
Okay. First of all, let's start with our shares on 1&1. As always mentioned, we are still willing to buy shares from investors which don't believe in the story because we are strongly believing in it. Just to add, always at reasonable prices. Also, the barrier of 90%, as we also mentioned before, is not a barrier which we don't want to pass. Just to mention here, there are no delisting or squeeze-out plans which are in place. That is on the one hand. For Mail & Media, what is driving the conversion? It's mainly the topic of data storage, which is strongly driving the conversion from ad-financed to paid accounts.
What we also are working on is the AI features, which are much more sophisticated in the paid accounts than in the free accounts. That are the two drivers for further conversion of the Mail & Media from free to paid accounts. The effect for the DC carve-out is about roughly EUR 6 million, something like that, what the effect is, the change from OpEx to amortization. You can calculate it by yourself what the margin in the like-for-like situation is.
Yeah. Thank you very much.
I hope this answered your questions.
Yeah. Thank you very much.
Thank you. Your next question today comes from the line of Mollie Witcombe from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question. I just have one, please. Maybe just to come a little bit back to what Polo was talking about, the offerings between Mail & Media and 1&1. Is this a sign that you are looking to more closely integrate the two businesses, and would you consider restructuring the business similarly to how you did with Versatel so that Mail & Media sat under 1&1? Maybe a little bit of color on how you are thinking about business structure in terms of that would be really helpful. Thank you very much. And thanks also to Carsten. Looking forward to working with you, André.
Thank you, Mollie, for your question. Just a short answer. We are still open, as we discussed in the past. First of all, we are happy to have those business of the Mail & Media due to the fact that it is a very strong contribution to our cash flow, and our conversion from ad-financed to paid accounts is still a success story. So that is the first point. We are not finally have a clear solution what we will do with Mail & Media. What we now try is to getting the companies closer together to use our distribution power on the side of Mail & Media for the 1&1, as we did in the past also.
But this new offer with additional storage is offer which we can only provide in that way, and this is unique due to the fact that we have the possibility on the Mail & Media side. There are no plans to sell Mail & Media in the 1&1 like we did it with Versatel. For time being, just to add.
Great. Thank you.
Thank you. There are currently no further questions. I will now hand the call back to Dominic Großmann for closing remarks.
Thank you. Before the call ends, Carsten, many thanks for your parting words, and also thank you from my side and the team as well for the excellent cooperation. Now we are happy to welcome you, André. I wish you a great start and all the best for your new role too. Also for the audience, thank you everyone for attending the call today. Please feel free to contact us for any follow-up questions. We wish you a nice day. Stay safe and goodbye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.