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1Q2021 Financial Results Briefing Presentation

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1Q2021 Financial Results Briefing Presentation Meeting Reminders • Please mute your microphones during the presentation. • Questions will be entertained during the Q&A portion. You may send your questions through the Zoom Chat feature. Please introduce yourself along with your affiliated company/research house. • The session will be recorded. 2 Today’s Speakers Mr. Dennis Anthony H. Uy Ms. Grace Y. Uy CEO and Co-Founder President and Co-Founder Mr. Matthias Vukovich Mr. Jesus C. Romero Mr. Benjamin B. Azada Chief Financial Office Advisor Chief Operations Officer Chief Strategy Officer 1Q2021 Results Key Takeaways Maintained industry-leading trifecta in 1Q2021 (vs. 1Q2020) with ✓ 83.6% revenue growth, 55.0% EBITDA margin and 23.1% ROIC Continued strong EBITDA growth in 1Q2021 with 101.6% YoY growth ✓ (vs. 1Q2020) 500k new ports and 182k gross residential subscribers added in ✓ 1Q2021. Converge captured 48% of Fixed Broadband Net Adds Improved our residential blended ARPU from P1,284 in 1Q2020 to ✓ P1,390 during 1Q2021 Residential business delivered 110% YoY revenue growth in 1Q2021, ✓ driven by strong subscriber additions and slightly improved ARPU ✓ Enterprise business grew 2% YoY in 1Q2021 6 Added ~500k FTTH Ports during 1Q2021 Extensive and Fast-growing Network Homes Passed (MM) (1)(2)(3) 13% 25% 14% 28% 55% More than 7.1MM homes passed as of March 2021, almost 190 350 128 331 15.1 ✓ double from March 2020 ~2x 7.1 6.2 0.8 ~28% household coverage nationwide as of December 2020 3.2 0.8 3.6 ✓ (~50% in Luzon) 0.8 5.3 0.8 2.4 2.8 6.3 (6) 2019 2020 1Q2020 1Q2021 2021E 2025E Targeting 55% household coverage (~15MM homes passed) by FTTH Homes Passed HFC Homes Passed ✓ 2025 Monthly Addition Run-rate (‘000s) (4) Household Coverage (5) (for last month in the period) Number of Ports (MM) (1)(2) 100 177 66 165 ~4.0MM ports as of March 2021, 82% increase from March 7.5-8.0 ✓ 2020. Target 7.5-8MM ports by 2025 ~2x 4.0 3.5 0.8 ✓ ~165k port additions in March 2021 2.0 0.8 2.2 0.8 0.8 2.7 3.2 1.4 1.2 FTTH accounted for over 94% of port additions since 1Q2019 2019 2020 1Q2020 1Q2021 2021E 2025E ✓ and comprises ~79% of total ports as of March 2021 FTTH HFC Monthly Addition Run-rate (‘000s) (4) (for last month in the period) Notes: 1. FTTH homes passed is derived from the number of homes within a 300 meter radius from a network access point (“NAP”) that we have installed in a coverage area. Each NAP has eight or 16 ports, and one port serves one home 2. HFC homes passed refers to the number of homes and other residential units that are within a 200 meter radius from our HFC ports, and can be connected to our network 3. For FTTH, ratio of 1 port = 2 home passed; for HFC, ratio of 1 port = 1 homes passed 4. Run-rate based on additions in last month of each period (i.e. March for 1Q) 5. Household coverage is calculated as total homes passed over total number of homes, which is 25.3 million 8 6. Based on 2025E total households of 27.5 million according to MPA Quarterly Gross Adds at ~182k with Improved ARPU during 1Q2021 Number of Subscribers (‘000) 1.18MM subscribers as of March 2021, net 292 617 ✓ subscriber adds of ~143k in 1Q2021 ~2x 2x 1,182 Total gross subscriber adds of ~182k in Subscribers 1,038 217 1Q2021 representing 97% growth vs. 1Q2020 Since 2019 216 ✓ 530 616 199 823 210 965 331 406 Over 95% of gross adds are first-time fixed 2019 2020 1Q2020 1Q2021 ✓ broadband users in 1Q2021 FTTH HFC Yearly Gross Adds Blended ARPU PHP (US$) (1) (2) Improved our 1Q2021 residential blended ✓ ARPU from 1Q2020 ($29) Steady ($27) ($27) ($27) ARPU 1,293 1,298 1,284 1,390 Expect stable ARPUs going forward, with ✓ fiber broadband viewed as a necessity in post- COVID new normal 2019 2020 1Q2020 1Q2021 Churn Rate 1.63 (%) 1.35 1.08 1.16 Churn Rate Monthly Churn decreasing to 1.16% in 1Q2021 Decline 0.39 ✓ 1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 Note: 1. Based on an FX rate of 1 US$ to 48.41 PHP 9 2. Monthly ARPU for our Residential Business is calculated by dividing (i) the revenue generated during a period by (ii) the average number of subscribers during that period, then dividing the quotient by the number of months during that period 1Q2021 Financial Update: Continuing to Achieve Trifecta of ~83.6% Growth, 55.0% Margin, ~23.1% ROIC Revenue EBITDA (2) (1) ($324) (1) PHP MM PHP MM ($170) 15,652 8,218 3,024 ($189) ($97) 9,139 4,665 ($105) 2,786 ($115) ($53) ($63) 5,055 12,628 5,547 3,052 ($61) ($62) 750 ($30) 2,549 ($31) ($39) ($19) 2,940 1,904 3,021 1,460 1,514 1,894 6,354 1,421 734 4,797 894 1,033 3,151 2,287 862 1,520 2016 2017 2018 2019 2020 1Q20 1Q21 2016 2017 2018 2019 2020 1Q20 1Q21 Residential Enterprise ROIC (3) EBITDA Margin (2) 55.0% Annualized 23% 52.5% 50.4% 51.0% 49.7% 50.1% 47.2% 12% 11% 8% 2016 2017 2018 2019 2020 1Q20 1Q21 APAC Broadband(4) Phils Telco (4) Global Broadband (4) Notes: 1. Based on an FX rate of 1 US$ to 48.41 PHP 2. 2020 EBITDA shown as reported EBITDA. 2016-2019 EBITDA shown as Pro Forma Adjusted EBITDA, where historical EBITDA is adjusted for Pro Forma Events and provision for contingencies, loss on direct write off of network materials and supplies and loss on fire 3. Return on Invested Capital is tax-adjusted (25% assumed effective tax rate) pro forma profit from operations divided by average invested capital. Invested Capital is the sum of our total equity and total debt (comprising loans payable (non-current and current portions)), less cash and cash equivalents and capital expenditures in progress 4. APAC broadband players includes Link Net, HKBN, and Time dotCom; Phils Telco includes PLDT, and Globe; Global broadband players include Telenet, Altice, Charter Communications and Liberty Global; Link Net and Time dotcom; ROIC refers to 10 LTM as of 1Q2021 P&L Highlights Consolidated P&L PHP Key Highlights For the three months ended March 31 2021 2020 ❖ Bandwidth and leased line costs (in millions) Revenue 5,547 3,021 accounting for 5.0% of 1Q2021 Cost of Services (2,330) (1,440) revenues vs. 10.0% of 1Q2020 Depreciation and amortization 779 444 Network materials and supplies used 460 230 revenues resulting in increased Amortization of deferred contract costs 350 148 Gross Profit margin of 58.0% in Bandwidth and leased line costs 277 303 Service fees 167 147 1Q2021 Personnel costs 127 57 Others 170 111 ❖ Provision for impairment of trade Gross profit 3,217 1,580 Gross profit margin 58.0% 52.3% and other receivables of PHP251 General and administrative expenses (935) (522) million in 1Q2021, representing Personnel costs 295 247 Commission expense 120 36 4.5% of total revenues Outside services 86 30 Taxes and licenses 71 18 ❖ EBITDA Margin expanding to Others 363 191 Provision for impairment of trade and other receivables (251) (152) 55.0% Other income and expenses, net 66 58 Profit from operations 2,096 965 ❖ Net income almost tripled YoY to Finance costs (133) (145) Income taxes (414) (246) P1,549 million in 1Q2021 Profit after income tax for the year/ period 1,549 574 Net income after tax margin 27.9% 19.0% Reported EBITDA 3,052 1,514 Reported EBITDA margin 55.0% 50.1% 11 Well Funded CAPEX Plan US$ (PHP)(1) Fully Funded Capex Plan in 2021 Well-Funded between 2022-25 PHP230MM US$599MM Net Debt (PHP29Bn) as of Mar 2021 Sufficiently funded 1Q2021 CAPEX: with current funding PHP5.3Bn (vs. 1Q2020 – PHP2.4Bn) Sufficiently funded US$414MM with US$207MM (PHP20Bn) current (PHP10Bn) funding US$311MM 27% (PHP16Bn)(2) 22% 52% 56% 22% 21% Available Undrawn Funding Undrawn 2020 Actual 2021 Operating 2022-25 Operating Funding Cash Debt Available Debt Cash Flow Capex Plan Cash Flow Available Capex Capex Plan Facilities Facilities • Strong cash • PHP10Bn of • Current • PHP10Bn of • 5 Year Vision: • We expect to fund most of capex flow cash as of funding financial debt Reach 55% of from 2022 to 2025 from operating Backbone Access Others generation Mar 2021 largely as of Mar the Philippine cash flows due to focus sufficient 2021 households by on high for 2021 2025 ROIC • PHP29Bn capex undrawn term-loans as of Mar 2021 Notes: 1. Based on an FX rate of 1 US$ to 48.41 PHP (ave) for 1Q2021 2. Includes paid and accrued capital expenditures relating to property, plant, and equipment, right-of-use assets, and intangibles 12 Completed Connecting Visayas and Mindanao to Backbone VisMin Backbone Expansion Substantially Completed • Added c. 9,600 kilometers of fiber in 1Q2021, resulting to Converge’s nationwide backbone network of 64,600 kilometers(1) (69,000 kilometers by April 2021) • Domestic fiber backbone connected to Visayas and Mindanao last April 2021 • Ongoing links to Panay, Negros, Leyte, and Bohol • Target of full commercial launch by 2H2021 still on track Note: 1. Total nationwide fiber network length includes Converge’s backbone and distribution network, it does not include cables deployed in the last mile network. Submarine Cable Completed Planned Ongoing Areas of Service as of March 2021 14 Completed Connecting Visayas and Mindanao to Backbone Masbate Cebu Cagayan De Oro 15 International Trans-Pacific Bandwidth Investment: “Bifrost” 16 Consistent Fiber Broadband Experience for Everyone 100% PURE FIBER NETWORK #1 CONVERGE JANUARY 2021 FEBRUARY 2021 MARCH 2021 35 FOR P1,500, C.
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