GREENPOWER MOTOR Co INC. Q3 FY2023 Earnings Call

Good morning, everyone. Welcome to Grameenphone's earnings disclosure for the third quarter of 2023. My name is Aleef Pasha, and I'm the Head of Investor Relations. And with me today are our CEO, Mr. Yasir Azman, and our CFO, Mr. Jens Becker. Please note that the presentation we are sharing today financial statements, along with other additional documents are available on our Investor Relations website. You can start by posting questions and we shall address them at the end of the presentation. In case you are unable to post your questions due to technical reasons, please send them to me via e-mail or text. I will now welcome our CEO, Mr. Yasir Azman, to start our presentation.

Thank you, Mr. Aleef Pasha, and good morning, everyone. I'm Yasir Azman, Chief Executive Officer of Grameenphone, and I appreciate you all joining us for our Q3 2023 earnings call. As reported by our regulator, until August 2023, the telecommunications industry recorded 188.6 million subscribers, an increase of 3.5 million from May 2023. During the same period, mobile data users saw a rise of 4.2 million, reaching 119.8 million in August 2023. Now, I will highlight some key business achievements for the quarter. Our ongoing efforts to simplify our data offerings have not only improved customer convenience but also enabled effective pricing strategies, leading to an 8.5% year-on-year growth in average revenue per user this quarter. Moreover, our pioneering initiatives demonstrate our innovation and leadership in a competitive market, which I will detail shortly. We have made significant advancements in enhancing user experiences with artificial intelligence and machine learning. By providing AI/ML personalization for our customers, we are customizing services to cater to their unique needs and preferences. This approach not only boosts customer satisfaction but also ensures that our services evolve with leading-edge technology. While this initiative helps us craft personalized offers for various customer lifestyles and life cycles, it has resulted in an additional 2 days of revenue generation for our customers each month and a 13% higher ARPU for those utilizing MyGP, our main app distribution channel. Our reports of network expansion and investment have strengthened our 4G subscriber base, which grew 16.5% year-on-year, playing a crucial role in driving growth. On the regulatory side, since Q2 this year, Grameenphone has engaged in productive discussions with BTRC regarding the reconciliation of payments related to dispute settlements. Despite challenges from the macroeconomic environment, we have continued to achieve top-line and EBITDA growth, reaffirming our commitment to providing value to our stakeholders and ensuring business sustainability. A few key macroeconomic factors to note are that inflation has reached its highest point in a decade, currently exceeding 9.5%. Foreign exchange reserves have been decreasing by nearly BDT 1 billion monthly, and recently there have been challenges regarding the opening and settlement of letters of credit. Furthermore, the IMF has downgraded its GDP growth forecast for 2023 by 0.5 points to 6%, down from 6.5% projected earlier in April. Now, let me expand on the business aspects. Our focus on network investment has resulted in significant progress via spectrum deployment, site rollout, and adding cells to enhance capacity. We've increased fiber connectivity from 17% at the end of 2021 to 41% and have launched over 21,000 sites across the country. Grameenphone is diversifying its B2B portfolio by developing a new IoT platform and ICT-based products that leverage ICT, IoT, and cloud machine learning capabilities to meet B2B demands and open new revenue streams beyond our core services. We've established strategic local and global partnerships that are essential in advancing our digital and tech initiatives to gain a competitive edge and cater to advanced customer needs. MyGP remains the leading local app in Bangladesh with 16.4 million users, and our total self-care app user base has reached 18.3 million, showcasing our successful efforts to create a seamless digital experience. We continue to enhance MyGP's features, including a recent operator-agnostic login solution for secure access for all mobile users. Now everyone in Bangladesh can enjoy entertainment and sports on MyGP, and we plan to add more content to the platform. We've also broadened payment options, allowing users to select their preferred methods, ensuring a seamless customer journey and reinforcing our commitment to a robust and scalable platform. By leveraging artificial intelligence and machine learning, we aim to enhance personalization for our customers, providing an engaging experience for both telecom and non-telecom offers. These capabilities are designed not just to improve customer experience but also to increase ARPU generation and overall monthly revenue through our digital platforms. Our subscriber base continued to grow in the third quarter, up by 0.8 million, totaling 82 million. As we highlight some significant achievements at Grameenphone, we are dedicated to delivering customer-centric digital solutions and pioneering initiatives, keeping customer demands at the forefront. We take pride in being the number one network, enhancing experiences such as gaming and redefining connectivity standards. To alleviate customer pain points, we launched the first-ever kiosk dedicated to international roaming subscribers before the departure gate at the airport, facilitating last-minute international roaming and access to solutions right before boarding. This effort underscores our commitment to customer convenience and accessibility. Our loyalty program, GPStar, has experienced remarkable growth, with more than 5,000 partner outlets and a notable 60% year-on-year engagement increase, which strengthens customer relationships. We've made accessing movies easier, emphasizing content delivery to our subscribers through a subscription-based video-on-demand feature that began with the movie Priyotoma, resulting in a 48% increase in sales on Bioscope, our entertainment OTT platform, compared to traditional cinemas. All these varied services, coupled with our data connectivity and innovative technological capabilities, have enhanced customer interaction, improved retention in our network, and increased average revenue for our customers. Shifting focus to our social responsibilities, at Grameenphone, we recognize that our duty extends beyond business operations. We are committed to promoting social impact and making a positive difference in the communities we serve. For our social initiatives, we have been accelerating the nation's economic growth by enhancing youth skills and potential. We've launched an AI-powered youth upskill platform as part of a national program in collaboration with UNDP and BIDA, empowering young individuals in creating smart series, conducting employability assessments, and improving their skills. Our GP Academy, a free upskilling platform, has certified over 400,750 students, with 39% being female. We've involved industry leaders and policymakers in upskilling through GP Academy. Additionally, we trained over 110,000 school children and youth from vulnerable communities in online safety and digital skills, including training teachers at more than 600 schools during the quarter. Grameenphone played a significant role at the regional Climate Summit 2023, emphasizing our commitment to climate action and the importance of renewable energy accessibility for the private sector in Bangladesh. We've also set targets to increase our annual spending with suppliers who contribute to carbon emission reduction, currently reaching 32.6%. During the recent major floods in the Chittogram division, we supported 10,000 families with food relief and deployed 5 water treatment plants to provide safe drinking water to affected communities. These initiatives enhance our regular programs focused on empowering society, particularly in digital skill development and online safety. With this, I will now hand over to our CFO, Jens Becker, who will provide insights into our financial performance for the quarter, Q3 2023.

Thank you, Azman, and good morning, everyone. Let me start with a short overview of the key financial KPIs. Grameenphone continued its solid financial performance in Q3 with continued growth in top line and EBITDA amidst rising inflation and other macroeconomic challenges. Continuous network coverage expansion and spectrum deployment to improve the network experience, along with customer-focused market activity, resulted in a 6% year-on-year growth in subscription and traffic revenue after a 5.3% growth in the previous quarter. In addition, Grameenphone continues to drive operational excellence alongside top line growth, resulting in a year-on-year 5.7% EBITDA growth in Q3 while maintaining an EBITDA margin of 61.9%, compared to 61.1% in the previous quarter. With our continuous investment efforts, Grameenphone's CapEx to sales ratio, excluding licenses and leases for the quarter, stood at 14% based on the fourth quarter moving average. For the quarter, EPS stood at BDT 5.53 with an 18.2% NPAT margin. Turning to the subscriber base, our subscriber growth continued with 0.8 million net additions during the quarter, bringing the reported subscriber base at the end of the quarter to 82 million with a 0.9% growth from the previous quarter and a 0.3% growth from last year. On the other hand, data subscriber growth continued with 1.4 million data subscriber additions during Q3, bringing the total to 47.5 million with a quarter-on-quarter 3% growth and a year-on-year 4.3% growth. With our continued efforts to improve 4G network performance, Grameenphone's 4G data subscribers reached 37.2 million with a year-on-year 16.5% growth. According to BTRC published information, as of August, GP's subscription market share stood at 43.5%, which is 0.2 percentage points lower compared to the last quarter. We have delivered 10 consecutive quarters of growth in total revenue and daily subscription and traffic revenue. During the quarter, total revenue year-on-year grew by 6.3% after 5.6% growth in the previous quarter. The growth in total revenue was mainly driven by the 6% growth in subscription and traffic revenue, which was 5.3% in the last quarter. Continued, and improved double-digit growth in data revenue remains the main contributor to accelerated top line growth. In Q3, Grameenphone delivered year-on-year 26.2% growth in data revenue, up from 17.1% growth in the previous quarter. This improved growth momentum in data revenue was the outcome of relentless efforts to improve network experience and customer-centric offerings and digital experiences. On the other hand, year-on-year degrowth in bundle revenue was primarily caused by the introduction of personalized offers in our product portfolio to meet the evolving needs of our customers. During the quarter, the service ARPU increased by 8.5% compared to last year and 1.4% compared to last quarter. The year-on-year growth in service ARPU was mainly driven by higher contributions from the data segment. In Q3, Grameenphone maintained average megabytes per user at around 7 gigabytes, which was 22.1% higher than last year. The growth in data usage was supported by continuous deployment of new spectrum and increased fiber connectivity. For this quarter, Grameenphone's reported operating expenses stood at BDT 13.2 billion, with a year-on-year 10.2% growth, contributed mainly by increased energy costs due to the price hike impact and network expansion. However, despite various challenges, Grameenphone delivered consecutive 10 quarters of growth in EBITDA. During the quarter, Grameenphone registered a year-on-year 5.7% EBITDA growth while maintaining the EBITDA margin at 61.9% amidst energy price hikes, inflation, and other macroeconomic challenges. The growth in EBITDA performance was mainly driven by top line growth and operational efficiencies. On the CapEx side, during the quarter, Grameenphone invested BDT 2.8 billion CapEx, excluding licenses, leasing, and RO, focusing mainly on 4G network coverage expansion and 2,600 megahertz spectrum deployment. We rolled out over 1,800 new 4G sites and 1,700-plus new coverage sites in the last 12 months. At the end of Q3, the number of 4G sites reached 21,000, achieving 97.9% 4G population coverage. Turning to the bottom line, net profit for the quarter stood at BDT 7.5 billion with an 18.2% margin, with a year-on-year degrowth of 17.7% impacted by higher tax provisions and higher depreciation due to network expansion and last year's 2,600 megahertz spectrum acquisition. The operating cash flow for the quarter stood at BDT 22.7 billion. This year-on-year BDT 1.4 billion growth in operating cash flow was mainly generated by the BDT 1.4 billion higher EBITDA. On the other hand, as of Q3, net debt stood at BDT 0.6 billion, which combines a BDT 7.6 billion short-term bank loan and a BDT 7 billion cash balance, excluding restricted cash. As of Q3, Grameenphone contributed BDT 95 billion to the national exchequer, equating to 80% of total revenue in the form of taxes, VAT, duties, licenses, and spectrum assignment fees. Since inception, Grameenphone has contributed BDT 1,156 billion to the national exchequer. With this, I will now hand back to Azman to summarize and wrap up.

Thank you, Jens, to summarize and reinforce Q3 2023. We registered continued growth momentum in both revenue and EBITDA supported by the data segment. It is, of course, a very challenging macroeconomic environment. Contributors mainly included growing ARPU of our subscriber base due to higher data usage and new services, besides our strong execution in the market. Our efforts in network expansion, investment, and transforming the user experience have strengthened our position as the #1 network in the country. We continue to focus on meeting our customers' unique needs to simplify our data portfolio, which has been a key focus area for the year, personalized offers, where we have built cutting-edge advancements and enhanced digital capabilities that have driven higher data usage and customer retention within our network, particularly through digital channels. Ensuring customer health, safety, and security remains a priority for us throughout the year and along the value chain in Grameenphone. Thank you, everyone, once again. I will now hand it back to Aleef for a Q&A session. Thank you.

Thank you, Azman bhai. We have a couple of questions that have come in. The first one I will pass to Azman bhai. The subscriber base has finally returned to growth. Have you recovered from the SIM ban?

Yes, indeed, the subscriber base has finally returned to growth, as far as the exit of Q3 last year is concerned. However, as you understand, the SIM ban started at the end of Q2 last year, which means we have a higher base. We have not yet reached that base of 84.6 million. However, considering the exit of Q3 last year, we are now experiencing growth in our subscriber base.

Thank you, Azman bhai. The next question is for Jens. Why is bundle revenue falling?

Yes, I have briefly touched on this in my speech as well, but focusing on specific revenue streams, our specific focus is on customer evolving needs and the products designed based on those needs. Consequently, the revenue is generated from that stream. During the quarter, Grameenphone introduced personalized bundle offers in both the physical and digital channels, which focused on specific customer demands.

Okay, we have a couple of questions. I'll summarize them together. They're based on data usage. We've seen data usage grow significantly over the quarters, but now in Q3, it seems to be stagnant compared to Q2. What is the reason?

Yes, let me take this, Aleef. The 7-gigabyte data usage per user is considered a milestone for the industry, and GP achieved this in the last quarter. This is the highest data usage observed in the industry, based on Q2 published information. In Q3, GP's data users are still maintaining this usage at 7 gigabytes, which is supported by our continuous efforts to improve the data network experience.

Okay. Thank you, Jens. Finally, we have another question for you, Jens. After three quarters of high CapEx, why is it so low this quarter? I believe it must be two quarters, but why is it low this quarter? Is this related to Forex?

I think this is basically a timing variance. In 2022, GP invested BDT 17.3 billion for CapEx, whereas we have already invested BDT 16.8 billion for CapEx as of Q3. In 2023, there was higher CapEx spending in the first half to improve the network performance through coverage expansion and the deployment of new spectrum.

Okay. Thank you, Jens. We have a very generic question that probably Jens can address and maybe Azman bhai can add as well. Could you please explain the reasons that caused the difference between Q2 and Q3 earnings?

Q2 and Q3 earnings? I believe the question is very generic. This is pretty much covered in our entire Q3 earnings call, but to give an overview, the difference is driven by several factors. One is the higher depreciation, particularly from the spectrum that we initiated in Q4 last year. Additionally, we have taken some tax provisions due to a lack of clarity on the new Income Tax Act 2023, and we are currently waiting for clarification from NBR regarding this matter. These are the basic differences between the earnings.

I believe that's all for this quarter. So Jens, Azman bhai, thank you very much. And to everyone who has joined, thank you as well. Since there are no further questions, we will close for today. Please feel free to reach out to me later if required via e-mail or text. Thank you, and goodbye.

Thank you, everyone.

Thank you, everyone.