Cellcom Israel Ltd.

11/20/2022 | Press release | Distributed by Public on 11/21/2022 02:05

Cellcom Financial and Operational Results Q223

TOC

For further information:
Cellcom Israel Investor Relations
Phone +972 52 9989735
Email [email protected]
Websites investors.cellcom.co.il
www.cellcom.co.il
Facts & Figures
Table of Contents
Sheet I - Income Statement
Sheet II - Cash Flows
Sheet III - Operational Metrics
Sheet IV - Footnotes & Glossary
All data contained in this file should be reviewed in conjunction with our financial statements and the description of our business, results of operations and the risks that we face, which may be found in our Annual Report for the year 2020 filed with the SEC on Form 6-K dated March 17, 2021 and for the year 2021 filed with the Israeli Autority Site ("Magna") on March 10, 2022 ,respectively, and for the first quarter of 2022 filed with the Israeli Autority Site ("Magna") on May 18, 2022.
Please note the red remarks within the cells
Sheet I - Income Statement
Sheet IV - Footnotes & Glossary
Sheet II - Cash Flows
Sheet III - Operational Metrics

Income Statement

Income Statement 2020 2021 2022
NIS millions Q1'20 Q2'20 Q3'20 Q4'20 FY'20 Q1'21 Q2'21 Q3'21 Q4'21 FY'21 Q1'22 Q2'22 Q3'22 Q4'22 FY'22
Revenues 892 855 956 973 3,676 1,033 1,003 994 1,069 4,100 1,055 1,069 1,115
Cost of revenues 644 664 744 748 2,800 769 727 705 763 2,963 756 746 790
Gross profit 248 191 212 225 876 264 276 289 306 1,137 299 323 325
Gross margin 27.8% 22.3% 22.2% 23.1% 23.8% 25.6% 27.5% 29.1% 28.7% 27.7% 28.3% 30.2% 29.1%
YoY change 6.4% -20.7% -21.2% -6.3% -10.9% 6.6% 44.7% 36.5% 36.2% 29.8% 13.1% 16.9% 12.3%
Selling and marketing expenses 145 119 147 169 580 168 159 164 175 666 165 156 166
General and administrative expenses 79 90 76 85 330 74 74 78 75 301 68 74 73
Credit Loses 11 11 4 1 27 0 0 6 -1 5 1 2
Other expenses (income), net -5 -7 -9 -17 -38 -28 10 -17 -9 -44 -8 -4 -9
Operating profit (loss) 18 -22 -6 -13 -23 50 33 58 67 209 73 95 95
Operating margin 2.0% n.a. n.a. n.a. n.a. 4.9% 3.3% 5.8% 6.3% 5.1% 6.9% 8.9% 8.5%
YoY change 100.0% n.a. n.a. n.a. n.a. 180.0% n.a. n.a. n.a. n.a. 44.8% 184.4% 63.8%
Financing expenses (income), net 64 34 32 42 172 38 49 39 39 165 35 43 39
Share of profit of equity accounted investees 5 2 2 5 14 2 0 2 1 5 3 -2 1
Profit before taxes on income (loss) -51 -58 -40 -60 -209 10 -16 17 28 39 35 54 55
Taxes on income (tax benefit) -8 -12 -3 -16 -39 3 -2 4 7 12 7 15 14
Profit for the period (loss) -43 -46 -37 -44 -170 7 -14 13 21 27 28 39 41
Net profit margin n.a. n.a. n.a. n.a. n.a. 0.7% -1.3% 1.3% 2.0% 0.7% 2.7% 3.6% 3.7%
YoY change n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 300.0% 215.4%
Key Income Statement Metrics
Consolidated
Service revenues 682 683 695 738 2,798 721 728 739 751 2,939 758 769 804
YoY change 0.6% -1.7% -2.0% 6.3% 0.8% 5.7% 6.6% 6.3% 1.8% 5.0% 5.1% 5.6% 8.8%
Equipment revenues 210 172 261 235 878 312 275 255 318 1,161 297 300 311
YoY change -16.0% -23.6% 19.2% -1.3% -5.8% 48.6% 59.9% -2.3% 35.3% 32.2% -4.8% 9.1% 22.0%
Total revenues 892 855 956 973 3,676 1,033 1,003 994 1,070 4,100 1,055 1,069 1,115
YoY change -3.9% -7.1% 3.0% 4.4% -0.9% 15.8% 17.3% 4.0% 10.0% 11.5% 2.1% 6.6% 12.2%
Adjusted EBITDA 244 222 231 221 918 271 297 277 288 1,133 286 303 311
Margin 27.4% 26.0% 24.2% 22.7% 25.0% 26.2% 29.6% 27.9% 26.9% 27.6% 27.1% 28.3% 27.9%
YoY change 8.9% -4.7% -14.8% 4.2% -2.3% 11.1% 33.8% 19.9% 30.3% 23.4% 5.5% 2.0% 12.3%
Cellular
Service revenues 396 385 414 465 1,660 457 461 474 474 1,867 475 489 510
YoY change -2.0% -8.3% -5.7% 11.8% -1.1% 15.4% 19.7% 14.5% 1.9% 12.5% 3.9% 6.1% 7.6%
Equipment revenues 156 147 223 178 704 239 223 211 242 915 229 239 246
YoY change -1.3% -9.3% 29.7% 5.3% 6.5% 53.2% 51.7% -5.4% 36.0% 30.0% -4.2% 7.2% 16.6%
Total revenues 552 532 637 643 2,364 697 684 685 716 2,782 704 728 756
YoY change -1.8% -8.6% 4.3% 9.9% 1.0% 26.3% 28.6% 7.5% 11.4% 17.7% 1.0% 6.4% 10.4%
Adjusted EBITDA 131 125 114 155 525 161 175 168 180 684 175 191 205
Margin 23.7% 23.5% 17.9% 24.1% 22.2% 23.1% 25.6% 24.5% 25.1% 24.6% 24.9% 26.2% 27.1%
YoY change -10.3% -23.3% -38.4% 16.5% -16.3% 22.9% 40.0% 47.4% 16.1% 30.3% 8.7% 9.1% 22.0%
Fixed - Line
Service revenues 327 339 327 313 1,306 303 305 304 315 1,226 323 317 333
YoY change 3.2% 8.7% 5.1% -1.6% 3.8% -7.3% -10.0% -7.0% 0.6% -6.1% 6.6% 3.9% 9.5%
Equipment revenues 54 25 38 57 174 73 52 44 77 246 67 62 65
YoY change -41.3% -60.3% -19.1% -17.4% -35.8% 35.2% 108.0% 15.8% 35.1% 41.4% -8.2% 19.2% 47.7%
Total revenues 381 364 365 370 1,480 375 357 348 392 1,472 390 379 398
YoY change -6.8% -2.9% 2.0% -4.4% -3.2% -1.6% -1.9% -4.7% 5.9% -0.5% 4.0% 6.2% 14.4%
Adjusted EBITDA 113 97 117 66 393 110 122 109 108 449 111 112 106
Margin 29.7% 26.6% 32.1% 17.8% 26.6% 29.3% 34.2% 31.3% 27.6% 30.5% 28.5% 29.6% 26.6%
YoY change 44.9% 38.6% 36.0% -16.5% 25.6% -2.7% 25.8% -6.8% 63.6% 14.2% 0.9% -8.2% -2.8%
Consolidation adjustments (41) (37) (46) (44) (168) (39) (38) (39) (38) (154) (39) (38) (39)
EBITDA for Q1'20 includes a decrease in the costs related to the internet services in the fixed line segment as a result of retrospective update of wholesale services tariffs by the MOC which resulted in one time expenses in amount of NIS 28 million
EBITDA for Q1'20 includes a decrease in the costs related to the internet services in the fixed line segment as a result of retrospective update of wholesale services tariffs by the MOC which resulted in one time expenses in amount of NIS 28 million
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
including a significant one-time profit of NIS 14 million which resulted from the consummation of HOT-Company-IBC Israel Broadband Company (2013) Ltd. ("IBC") transaction, and a decrease in the Company's holdings in IBC. In addition, the Company recorded revenues in the amount of NIS 13 million in respect of fiber deployment for IBC. These revenues are expected to significantly decline as of the second half of 2021 in light of the completion of such transaction
Consolidated results with Golan as of acquisition date
The loss in the second quarter totaled to 14 million NIS from a registration of a one-time provision of NIS 32 million as a result of a judgment given against the Company in a class action lawsuit. The Company recorded other income of NIS 15 million in respect of fiber deployment for IBC Israel Broadband (2013) Ltd. ("IBC").
Consolidated results with Golan as of acquisition date
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)

Cash Flow

Cash Flow 2020 2021 2022
NIS millions Q1'20 Q2'20 Q3'20 Q4'20 FY'20 Q1'21 Q2'21 Q3'21 Q4'21 FY'21 Q1'22 Q2'22 Q3'22 Q4'22 FY'22
Net income (loss) (43) (46) (37) (44) (170) 7 (14) 13 21 27 28 39 41
Tax benefit (tax on income) income (8) (12) (3) (16) (39) 3 (2) 4 7 12 7 15 14
Financing expense, net 64 34 32 42 172 38 49 39 39 165 35 43 39
Other expenses (income),net 2 0 1 (6) (3) (11) 32 (5) (3) 13 1 (2) 0
Losses of equity 5 2 2 5 14 2 0 2 0 5 3 (2) 1
Depreciation and amortization 220 240 230 234 924 226 227 220 223 896 208 203 209
Share based payments 4 4 6 6 20 6 5 4 0 15 4 7 7
Adjusted EBITDA 244 222 231 221 918 271 297 277 288 1,133 286 303 311
Changes in Working Capital 10 (6) (42) 157 119 (47) (5) 12 63 23 (60) (13) 53
Income Tax Paid, net (2) (4) 2 (5) (9) (1) (5) (2) 0 (8) (1) (3) (3)
Other expenses (income) (12) (16) 11 (18) (35) (23) (42) (11) (20) (96) (21) (15) (11)
Operating Cash Flow 240 196 202 355 993 200 245 276 331 1,052 204 272 350
Lease payments and related expenses* (75) (56) (65) (57) (253) (66) (52) (59) (81) (258) (53) (76) (64)
Capex (118) (114) (108) (159) (499) (104) (128) (165) (201) (598) (99) (135) (250)
Other 10 (2) 15 (14) 9 19 (3) 58 (3) 71 0 3 2
Free Cash Flow 57 24 44 125 250 49 62 110 46 267 52 64 38
*Including the effects of exchange rate fluctuations in cash and cash equivalents and lease payments.
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
The loss in the second quarter totaled to 14 million NIS from a registration of a one-time provision of NIS 32 million as a result of a judgment given against the Company in a class action lawsuit. The Company recorded other income of NIS 15 million in respect of fiber deployment for IBC Israel Broadband (2013) Ltd. ("IBC").
Consolidated results with Golan as of acquisition date

Operational Metrics

Operational Metrics 2020 2021 2022
Thousand Q1'20 Q2'20 Q3'20 Q4'20 FY'20 Q1'21 Q2'21 Q3'21 Q4'21 FY'21 Q1'22 Q2'22 Q3'22 Q4'22 FY'22
Cellular
Cellular subscribers 2,747 2,734 3,641 3,204 3,204 3,232 3,226 3,246 3,275 3,275 3,306 3,346 3,410
YoY Change -3.7% -0.4% 31.6% 16.8% 16.8% 17.7% 18.0% -10.8% 2.2% 2.2% 2.3% 3.7% 5.1%
Net adds 3 -13 907 -437 460 28 -6 20 29 71 31 40 64
ARPU (in NIS) 48.1 46.9 45.7 48.6 47.3 47.4 47.7 48.6 48.4 48.0 47.7 49.0 50.3
YoY Change 1.9% -9.6% -14.1% -3.8% -6.7% -1.5% 1.7% 6.4% -0.4% 1.5% 0.6% 2.7% 3.4%
Churn rate (%) 8.8% 8.7% 8.7% 8.4% 40.2% 7.8% 8.6% 7.2% 7.4% 31.0% 7.5% 7.0% 7.0%
Fixed - Line
Internet infrastructure field subscribers 279 283 289 293 293 297 296 300 305 305 311 316 319
Fiber Optic Subs 80 93 93 106 113 123 135 135 150 162 175
Net adds 1 4 6 4 15 4 -1 4 5 12 6 5 3
TV subscribers 246 245 251 252 252 254 250 250 252 252 254 255 256
YoY Change 8.4% 2.5% 1.6% -2.5% -2.5% 3.3% 2.0% -0.4% 0.2% 0.2% 0.0% 2.0% 2.4%
Net adds -12 -1 6 1 -6 2 -4 0 2 0 2 1 1
As of the first quarter of 2020, the churn rate includes only the negative net churn of M2M subscribers, in order to eliminate changes that do not change the amount of lines held by the customers.
As of the first quarter of 2020, the Company changed the counting method in the way that does not include subscribers who own the Cellcom tv light application who did not activate the service. As a result, the company erased 14 thousands subscribers from its active customer base.
The decrease in the subscriber base in the TV field was due to a change in the counting method. During this quarter, the Company changed the way of counting TV subscribers by advancing the date of withdrawal from its subscriber base, from the date of returning the equipment to the Company to the date in which the subscriber's request to disconnect from the service was received. The Company applied the change retroactively and as a result deleted approximately 5,000 subscribers.
Cellular subscriber base of the company at the end of the third quarter of 2020 stands at 3.641 million subscribers. As a result of completion of Golan's acquisition during the third quarter of 2020, a 927 thousands subscribers added to the subscribers base.
Cellular subscriber base of the company at the end of the fourth quarter of 2020 stands at 3.204 million subscribers. The number of subscribers decreased following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
Consolidated results with Golan as of acquisition date
The number of subscribers decreased in 2020 following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers
The number of subscribers decreased in 2020 following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers
The number of subscribers decreased in 2020 following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers
The number of subscribers decreased in 2020 following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers
The number of subscribers decreased in 2020 following a change in the counting mechanizem which led to a write-off of approximately 427,000 data subscribers

Glossary

Glossary and calculations
Adjusted EBITDA = Represents the net profit before: net financing costs, taxes, other income (expenses) that are not part of the Company's current activity (including provisions of lawsuits that are included in other expenses), depreciation and amortization, profits (losses) equity accounted investees and share-based payments. In addition, including other income (expenses) that are part of the Company's current activity, such as interest income in respect of sale transactions in installments and costs in respect of voluntary retirement plan.
Free cash flow = Free cash flow is defined as the net cash provided by operating activities including proceesd from sale of property, plant and equipment, intangible assets and others , minus the net cash used in investing activities in intangible assets and others and minus lease payments
Cellular ARPU = Average monthly revenue per cellular subscriber (ARPU) is calculated by dividing average revenues from cellular services for the period by the average number of cellular subscribers during the period. Revenues from inbound roaming services and hosting and network sharing services and repair services are included. Repair services carried out on a random basis and revenues from user aquipment are not included.
Cellular Churn rate = Churn rate is calculated as the ratio between the total number of voluntary and involuntary permanent deactivations, plus the number of subscribers that became unactive, and the number of active subscribers in the beginnig of the period. The Churn rate does not include the write-of of subscribers in the years 2019-2020
Voluntary change in accounting policy Voluntary change in accounting policy - In 2019, the management has updated the accounting policy as follows: revenues from long-term credit arrangements (more than 12 monthly payments) are recognized on the basis of the present value of future cash flows, discounted according to market interest rates at the time of the transaction. The difference between the original credit and its present value over the credit period, is recorded from 2019 as other income (previously was recorded as interest income). The application of the change in the new accounting policy was applied retrospectively.
IFRS 15 As of the first quarter of 2017 the Company applies International Financial Reporting Standard (IFRS 15) and capitalizes part of the salaries expenses and commissions related to customer acquisition costs.
IFRS 16 As of first quarter of 2019 the Company is applying International Financial Reporting Standard IFRS 16, Leases.